Superstar Hotel Asset Managers: Are You Working With One?

In almost three decades of working in hotel commercial optimization, I’ve been fortunate to work with some of the world’s greatest asset managers (AMs). I’ve had a front-row seat while they launched new hotel brands, rebranded legacy properties, and turned around struggling hotel assets. They made impossible real estate transactions seem easy and turned completely lost hotels into profit-making machines.

On the flip side, I also encountered a few well-intentioned asset managers who inadvertently sabotaged the hotels they were meant to optimize. Of course, it is the disaster hotel projects that have taught me the most. Nothing teaches like failure: you employ the same winning strategies and work just as hard, but unfortunately end up with a completely different outcome.

In the hotel real estate game, an asset manager either drives exceptional value or becomes the biggest obstacle to success. They’re the critical link between operations, commercial efforts, finance, brands, banks, and owners. Heavy is the head that wears the asset management crown.

Let’s start with two hard facts.

Hotel Operations Are Getting More Expensive

Labor, insurance, and utilities are skyrocketing globally and drastically changing the economics of running a hotel. Labor costs have increased 20% to 30% since 2019, while insurance premiums have gone up 2X or even 3X for properties in some regions. Energy costs remain volatile, and tariff/supply disruptions have driven up the cost of everything from linens to cleaning supplies.

Chasing top-line revenue these days, while ignoring acquisition costs and the expense of servicing those newly acquired guests, is a race to the bottom. Every guest comes with incremental costs (housekeeping, utilities, amenities, wear and tear, etc). Then there are acquisition costs (paid media ads, OTA commissions, etc) that were needed to compete and capture demand in the first place. Margins are eroding top-line growth so much that even when revenue is up, it feels like you are building a sandcastle on the beach at high tide.

NOI Is King

I learned this lesson early from one of the industry’s asset management legends. Back then, I was obsessed with revenue growth, outpacing the competition, and celebrating top-line wins. During one project, we replaced a prominent brand at a major city-center asset and executed it perfectly. Revenues soared! I was flying high and then the AM told me something life-altering:

“Vikram, this business is all about NOI. Nothing else matters.”

The best asset managers understand that Net Operating Income is the only metric that truly counts. Vanity metrics like ADR (Average Daily Rate) and RevPAR (Revenue Per Available Room) mean nothing if they don’t flow to the bottom line. It’s like bragging about your gym session while eating a sleeve of Oreos.

Even EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) can be massaged through accounting tricks. NOI hits differently. It’s the unvarnished truth of operating performance; it dictates cap rate and terminal value. Rational buyers don’t pay for good vibes, top-line revenue, market share, or five-star reviews. They buy cash flow. Period.

Top 6 Traits of Great Asset Managers

Great asset managers operate differently. They are exceptional because they are:

1. Chief Troubleshooting Officers

When crisis hits (and in hotels, it always does), great asset managers don’t panic, deflect, or wait for someone else to fix it. They step in and make the right calls.

I’ve watched them operate during natural disasters, lender meltdowns, team implosions, and other crises that would paralyze lesser mortals. No finger-pointing. No useless committee meetings or elaborate emails…just clear-headed decision-making under pressure.

When the proverbial “s*itstorm” hits,  they manage the crisis, fix problems, and then position the property to emerge stronger on the other side.

2. Messengers of Reality

Great asset managers tell owners the truth about their asset. No “glazing,” as the kids say these days! They definitely do not fuel “we’re the greatest hotel in the world and there is nobody like us” delusions.

If the elevators sound like they’re auditioning for a horror movie and the carpet hasn’t been replaced since the Obama administration, they’re not going to be presenting a luxury hotel budget. They explain to the owners that you can’t charge $500 a night for a property that smells like a mix of wet dog, nostalgia, and teen spirit.

They keep post renovation expectations grounded. An asset refresh does not equate to the discovery of the lost city of Atlantis when you’re writing press releases.

When major capital investment is genuinely needed, they fight for it with data and realistic projections that make owners reach for their checkbooks. When capital investment is not feasible, they right-size expectations and find creative ways to compete within the asset’s current reality.

3. Protecting Margins Like Their Life Depends on It

Great asset managers obsess over the unglamorous details that others ignore: laundry contracts, valet costs, energy procurement, insurance renewals, technology stack efficiency, and vendor consolidation.They know small line items can quietly erode profitability like termites in the foundation. A outdated/bloated tech stack here, an auto-renewed contract there—death by a thousand small cuts.

While everyone else is hypnotized by top-line revenue, great AMs are in the weeds ensuring that the bottom line doesn’t hemorrhage cash. These days, effective cost management is key to delivering NOI. 

4. Empowering, Not Micromanaging

Great AMs trust their operators to operate and their commercial teams to drive revenue. They set clear KPIs, remove barriers, provide resources, and then do something amazing: get out of the way.

They understand their job is to create conditions for success, not to cosplay as the GM, revenue manager, or marketing director. They don’t need to approve every decision, be cc’d on every email, or weigh in on whether the lobby should have red or yellow flowers on Tuesdays.

They hire smart people, give them the tools and autonomy to succeed, and hold them accountable to outcomes, not processes. When wins happen, they amplify rather than claim credit. In return, the hotel teams move faster, innovate more, and stick around longer.

5. Making Hard Decisions

This is where great asset managers truly separate themselves: they make the painful calls everyone else wants to avoid.

When the numbers say it’s time to exit a failing management contract, they don’t kick the can down the road for another quarter. Instead, they pull the trigger, own the decision, and manage the transition. When a vendor relationship has turned toxic or a key team member isn’t performing despite multiple chances, they don’t hope the problem fixes itself. They act.

Likewise, when they have to deliver bad news to ownership (ex: market reality has shifted, renovations are needed), they never throw the team under the bus to save face. They take ownership, explain what changed, present a clear path forward. They protect their team’s credibility while solving the problem.

6. Catalysts, Not Oversight Overlords

Great asset managers create energy in the room. When they walk into a strategy session, the team doesn’t reach for excuses—they reach for their best ideas. People lean in instead of checking out.

They show up to catch people doing things right and amplify it. They celebrate wins genuinely (no cringe-worthy “yay team” stuff).  They dissect losses without blame, and constantly ask: “What can I do to help?”

This isn’t some soft-skills fluff…it’s strategic leadership that directly impacts NOI. Engaged teams will innovate. Empowered revenue managers deliver stronger yields. Empowered sales directors close more business. Operations teams that feel trusted take ownership of problems instead of hiding them until they metastasize into mega disasters.

Micromanaged, anxious employees deliver the minimum to avoid getting yelled at. Great AMs know you can’t fake genuine hospitality, and you cannot terrorize people into excellence.

Top 6 Traits of Mediocre Asset Managers

For every great asset manager driving real NOI growth, there are many others who live for reports, set too many meetings, and somehow leave the property worse off than when they arrived. They are what Bill Murray would call “mediocre talent.” Mediocre AMs:

1. Over-Promise and Under-Deliver

This is the most dangerous trait: they create a fantasy for ownership that has zero basis in reality.

They specialize in building budgets designed to make owners swoon during the approval meeting. They end up promising things like 20% or 30% revenue growth in a year when the hotel is undergoing renovations or when the economy is softer than the hotel pillows!

When reality inevitably arrives, they blame everyone but themselves: the GM didn’t execute, the commercial team underperformed, rates were either too aggressive or not aggressive enough, the weather didn’t cooperate, Jupiter wasn’t aligned, Mercury was in retrograde, etc.

The result? Ownership loses faith in the entire team, team morale fizzles out, capital allocation gets frozen, and the property falls further behind because no one knows what numbers to trust anymore. It’s that “Highway To Hell” that ACDC talks about, filled with Excel spreadsheets of broken dreams.

2. Obsess Over Meetings

Some asset managers believe progress is measured in hours spent in meetings. Their calendars look like Tetris on expert mode: daily stand-ups, weekly syncs, bi-weekly deep dives, monthly reviews, quarterly planning sessions, and the dreaded “quick touch-base” that is never quick.

The problem: If your commercial/sales/ops team spends all day in meetings explaining what they’re doing, when are they actually doing it? Every hour spent building custom reports for yet another status update is an hour not spent optimizing rates or analyzing competitor positioning or making that group sale. As I have said in detail here, meetings don’t generate revenue. They cost a lot!

3. Miss the Forest for the Trees

They don’t see the big picture. They spend site visits checking for dust on baseboards or critiquing the breakfast buffet presentation. Meanwhile, food and energy costs have spiked 15% over last year!

They’ll spot a crooked picture frame from 50 feet away, but somehow miss that the PMS crashes twice daily and the night auditor has been running reports on a calculator since the last Winter Olympics.

Mediocre asset managers confuse activity with impact, visibility with value, and being present with being helpful. They return from site visits with a list of cosmetic fixes, while the property continues to hemorrhage cash due to core issues that need urgent attention.

4. Use Data as a Weapon Instead of a Tool

Mediocre asset managers wield data like a weapon, but not for good…they just need to be right at all costs.

Every variance report becomes an inquisition, and every monthly review feels like a deposition. This doesn’t inspire excellence; it inspires self-preservation or what the youth call “quiet quitting.” Hotel teams stop taking smart risks and start building defensive documentation trails. Energy shifts from “how do we win?” to “how do I prove this wasn’t my fault?” The best people leave first. The rest quietly disengage, doing the minimum to avoid being the next target. Data should illuminate the path forward, not persecute the people walking on it.

5. Dodge Decisions

Mediocre AMs are constitutionally incapable of making hard decisions. They can spot a problem from a mile away, analyze it across seventeen pivot tables, and discuss it in nine consecutive meetings — but actually do something about it? That’s where their courage evaporates.

Underperforming employees are put on a performance improvement plan for months. Everyone knows it’s theater at this point, but the hard decision keeps getting delayed. The management contract is bleeding money and destroying morale, but “let’s give it another quarter.” The director of sales hasn’t closed a meaningful piece of business in six months, but “everybody likes him, he deserves another chance.” You get the picture.

Meanwhile, these problems compound. Good employees watch bad ones get coddled and update their LinkedIn profiles accordingly. When the inevitable disaster finally strikes, these AMs blame the property team with breathtaking hypocrisy. The “Why didn’t you tell me it was this bad?” email arrives like clockwork, conveniently ignoring the ten messages flagging that exact issue. But nobody made the hard call.

6. Destroy Hotel Morale and Profitability

The average cost to replace a hotel GM or department head at a 4-star property is roughly 150% of their annual salary when you factor in recruiting, training, lost productivity, and local market knowledge walking out the door. If an asset manager is driving turnover every 6 to 12 months in key roles, they’re not managing the asset…they are incinerating ownership’s capital.

Fear-based cultures don’t innovate. As noted above, team members who don’t feel supported stop taking smart risks and eventually start leaving. The hotel industry is shockingly small and well connected. Word travels fast about AMs who burn people to make themselves look good. Bad asset management doesn’t just hurt current performance, but also limits future potential. Once a property becomes known as a revolving door run by a toxic asset manager, top talent won’t touch it. 

Conclusion

Working with great asset managers has been transformational for me, both personally and professionally. When the right asset manager takes over a hotel, there’s a palpable shift in energy and momentum. They don’t sell fairy tales or rely on wishful thinking. They build strategies rooted in reality and execute them through empowered teams they genuinely trust.

If you’re an owner, demand better! Your capital investment deserves an asset manager who treats NOI like a religion, not a suggestion. If you’re an asset manager, aspire to be the person hotel teams are excited to see. If you’re a team member or vendor, take note of which kind of AM you’re working with before taking on a new project. It’s one of the best predictors of the asset’s potential for success…and your potential job satisfaction.

The General Manager Drives a Hotel’s Commercial Success

Almost every hotel today has access to or can easily get access to sophisticated pricing algorithms, innovative marketing campaigns, and revenue management tools. The barrier to entry is lower than it has ever been, and there are smart people available for hire to help you utilize these tools. So why are we seeing so many hotels struggle to maintain sustainable commercial success?

The answer lies in hotel operations. Specifically, I want to single out General Managers. It’s time to acknowledge that the right GM plays a crucial role in making sure your hotel revenue goals are achieved. In fact, you can’t really  succeed today without a good one.

Operational excellence is now the holy grail of hotel commercial optimization. Finding and retaining a great hotel General Manager is more crucial today than every before. They are the bridge between commercial ambition and operational execution. Yes, they are the ones who can make all your dreams of commercial success come true. But only if you involve them in your decision-making and empower them to help with implementation.

GM = Hotel Profit Symphony Conductor

Commercial optimization encompasses the entire guest journey. Revenue generation is not an isolated function that some nerds will make happen for you using Microsoft Excel. It has to be backed by a great product, which is the guest experience. Every touchpoint influences both immediate revenue and long-term profitability. 

This article is for any hotel owners or asset managers who are struggling today and wondering why their commercial optimization efforts are not delivering the stellar growth they were seeing in years past. The first question to ask yourself is…who is leading your hotel team? 

Your GM is the conductor of your hotel profit orchestra. No matter how good the individual artists are, a conductor brings them all together into a perfect symphony. Short-term commercial success is a flash in the pan. For profits to be sustainable, there needs to be a balance among guest satisfaction, operational efficiency, and overall financial performance.

After decades in commercial optimization, I have learned this important lesson:

The right GM can make even a mediocre commercial strategy deliver stellar results.
The wrong GM can turn a brilliant commercial strategy into a revenue nightmare.

I am very fortunate to have worked with great GM’s who have made my commercial optimization work incredibly successful.

The Revenue Management Reality Check

I am old enough to remember when Revenue Management was something new and shiny, that only a few elites had access to. It is now more sophisticated and accessible than ever. Hotels today have amazing access to incredible tools capable of processing vast amounts of market data, competitor intelligence, historical performance metrics, etc. Oh, and let’s not forget that everyone’s software is powered by a magical AI unicorn, churning out rate recommendations and insights with rainbows, sparkles and sunshine! But, your magical RM system, with the best RM team behind it, is only going to be as effective as your hotel operations team’s ability to deliver on the value proposition you have sold to your guests. 

Let’s look at a typical scenario where the RM system/team has identified an opportunity to increase rates during a high-demand period. Here is how it typically unfolds:

  1. Revenue Management System calculates the optimal price point based on market conditions and competitive positioning.
  2. Recommendations are approved and implemented.
  3. Hotel expects solid revenue performance.

Unfortunately, the outcome is not based on revenue management magic, but on operational implications. Here are some specific issues that can quickly derail the price increase:

  • Housekeeping department is understaffed and cannot maintain room quality standards.
  • Front desk lacks the training to handle higher guest expectations.
  • Food and beverage operations cannot accommodate higher service levels.

Revenue opportunity + Operational Issues = Reputational Liability

This is the trap a lot of hotels fell into post pandemic. For a while, no matter what hotels did, traveler demand and appetites seemed to be unlimited. But those days are now behind us. Current and future demand forecasts are not looking so hot right now. There is no room for operational error in today’s marketplace. Let’s look at some examples.

Case Study: March 2025 Compression Event

The Revenue Strategy:
A 185-room urban hotel’s revenue management team identified increased demand during a citywide event in March 2025. The system recommended increasing rates from $189 to $279 per night—a 48% premium justified by competitive analysis and historical patterns. The revenue team executed the strategy, and occupancy remained strong at 94%.

The Problem:
The operations team wasn’t properly briefed about readiness requirements.

The Fallout:

  1. Housekeeping (already at capacity) couldn’t handle increased turnover.
  2. Room cleaning times jumped from 28 to 42 minutes, creating a cascade of late check-ins.
  3. By 3pm on compression day, over 40 guests waited in the lobby for unavailable rooms.
  4. The front desk, unprepared for the volume of upset, premium-paying guests, struggled to manage expectations, handle bags, etc.
  5. Within 48 hours, 14 scathing negative reviews appeared, many from repeat business travelers vowing never to return.
  6. The $84 RevPAR increase quickly eroded. There was a 15% decline in repeat bookings over the following quarter, plus 20% higher customer acquisition costs to replace lost guests.

As you can see, a hotel operations disconnect triggers a vicious cycle of declining satisfaction, reduced pricing power, and diminished revenue performance. Only hotels with empowered GMs can count on operational support for the elevated expectations that come with premium pricing. Owners and asset managers who fail to involve their GMs in pricing strategy create the conditions for the really painful meetings that destroy team morale and productivity.

The Marketing Mirage

Marketing’s role in driving hotel revenue has expanded dramatically with the proliferation of digital channels and sophisticated targeting capabilities. As with revenue management, the access to marketing tools and talent is pretty democratic today. Why are so many hotel marketing campaigns falling flat?

Failure is usually a result of guest experiences in the real world not matching the hype that was created online. Marketing effectiveness ultimately depends on the property’s ability to deliver on its promises. Every marketing message creates expectations in the minds of potential guests. When the operational reality fails to match these expectations, marketing becomes counterproductive.

A beautiful website showcasing luxurious amenities means nothing if those amenities are poorly maintained. Social media campaigns highlighting exceptional service fall flat when staff members are inadequately trained or overwhelmed due to staffing issues. Let’s look at another real-world example.

Case Study: The Craft Cocktail & Artisanal Breakfast Catastrophe

The Campaign:
A boutique hotel invested in a comprehensive digital marketing campaign emphasizing its craft cocktail lounge and artisanal breakfast experience, featuring stunning photography, influencer partnerships, and targeted advertising.

The Problem:
The GM was not consulted on the hotel’s operational capabilities in F&B.

The Breakdown:

  1. The “cocktail lounge” was a small bar that only had room for one bartender.
  2. The bar staff knew just five specialty drinks and became overwhelmed during peak hours, creating 20-minute waits for simple drink orders.
  3. The “artisanal breakfast” relied on one pastry chef, who called in sick twice in the campaign’s first week, forcing the kitchen to serve pre-packaged pastries that looked nothing like the photograhpy in the campaign.
  4. Guests who booked for these specific amenities left scathing reviews.
  5. One viral TikTok showing a croissant with the caption “expectation vs reality” garnered 340,000 views, triggering immediate booking cancellations.
  6. Online ratings dropped from 4.7 to 3.8 stars within two weeks, requiring six months of operational improvements and expensive reputation management to recover.

The most sophisticated marketing campaigns cannot overcome operational inconsistencies. Effective marketing can actually exacerbate operational problems by creating false expectations and attracting guests who might otherwise choose properties better aligned with what they are looking for. This situation creates an insidious problem where marketing success leads to operational failure, ultimately damaging reputation and long-term commercial prospects.

Good General Managers serve as the crucial link between marketing promises and operational delivery. They understand their operational capabilities and limitations, and must be consulted to ensure that marketing messages align with realistic service levels. Even better, they can elevate operational standards to support ambitious marketing positioning that drives better commercial results.

Operational Excellence Is Your Commercial Foundation

Operational excellence in hospitality extends far beyond basic service delivery. It encompasses the systematic optimization of processes, the consistent execution of standards, and the continuous improvement of guest experience touchpoints. When achieved, operational excellence becomes a powerful commercial differentiator enabling hotels to command premium pricing, generate positive word-of-mouth marketing, and build the kind of guest loyalty that drives long-term profitability.

The hotel GM orchestrates all the components of operational excellence, laying the foundation for your hotel’s commercial success. Here is a great example of a GM driving revenues for an airport hotel.

Success Story: Airport Hotel Transformation

The Strategy:
A full-service airport hotel’s GM implemented a comprehensive operational excellence program focusing on three areas: housekeeping quality, food service consistency, and front desk efficiency.

Actions Taken:

  • Housekeeping: Introduced a 30-point inspection checklist and improved supervisor ratio from 1:22 to 1:15, ensuring consistent room presentation
  • Food Service: Standardized recipes, implemented prep schedules, and cross-trained staff to handle volume fluctuations
  • Front Desk: Created a training program and implemented a “green light” system during peak check-ins, incentivizing upgrades and empowering staff to offer compensation when issues arose

The Investment:

  • Six months for implementation
  • $180,000 for training, additional labor, and process refinement

The Results:

  • Online review score increased from 3.9 to 4.5 stars, placing the hotel in the top 15% of its competitive set.
  • Improved reputation enabled a $22 ADR increase, generating an additional $1.4 million in annual revenue.
  • Direct booking conversion rates jumped from 2.8% to 4.1% as potential guests gained confidence from reviews.
  • Corporate negotiated rates improved 8% during renewals as satisfaction scores exceeded contractual thresholds.
  • Repeat guest percentage increased from 24% to 37%, reducing customer acquisition costs by approximately $120,000 annually.

The operational excellence investment paid for itself within six weeks!

Operational excellence directly enables commercial flexibility. Properties with strong operational foundations can quickly capitalize on revenue opportunities—whether adjusting service levels to support premium pricing, or rapidly scaling to accommodate increased demand. This flexibility proves particularly valuable in dynamic market conditions where rapid adaptation will provide a significant competitive advantage.

The GM’s Indispensable Role

Great GMs align diverse teams to meet common objectives, while maintaining focus on both short-term performance and long-term sustainability. I have seen the greats in action as they set clear performance expectations, create accountability systems, and foster a culture of commercial awareness throughout the hotel organization. They develop team members who understand the connection between daily responsibilities and commercial outcomes.

A great GM once shared that she wanted her key departments to understand and join the revenue mission. For example:

  • Housekeeping staff should understand how room presentation affects pricing power, and how their work drives guest satisfaction and revenue.
  • Front Desk should appreciate the revenue impact of upselling and fixing problems before they escalate. As the first point of contact, their enthusiasm sets the tone for the entire hotel experience.
  • Food service teams should recognize how much their performance influences guest satisfaction and repeat business.

Artificial intelligence, machine learning, and automation promise to revolutionize everything from pricing strategies to guest service delivery. However, even the most sophisticated technology implementations will require human expertise to achieve optimal results. General managers play a crucial role in this technology-human synthesis by ensuring technological tools enhance rather than replace human judgment. Good GMs already understand automated systems’ limitations and can intervene when circumstances require flexibility beyond programmed parameters.

Conclusion

The hotel industry stands at a crossroads. Technology has democratized access to sophisticated revenue management and marketing tools. Operational excellence has once again become the top competitive differentiator—and gives the general manager the power to achieve the ultimate competitive advantage.

The uncomfortable truth is this: You can hire the best revenue managers, deploy cutting-edge technology, and craft brilliant marketing campaigns. But without an empowered GM driving operational excellence, you’re building a commercial strategy on quicksand. Hotels today don’t fail because they lack access to technology or market data. They fail because operational execution can’t support their commercial ambition.  

Why Are Hotel Property Management Companies Struggling?

Hotel Property Management Groups (PMGs) have been a pillar of the hospitality business for decades. They bring expertise, operational efficiencies, and the greatest gift of all — taking on the day-to-day operational challenges of running a hotel.

However, if you have been reading the headlines, you can sense that trouble is brewing in the PMG world. Some of the largest hotel management firms are struggling to stay afloat and cannot seem to hold on to the assets in their portfolio. There are internal and external conflicts, and even lawsuits being filed over things like intellectual property. These issues highlight how fragile the hotel-PMG relationship has become.

Disappointed owners and investment groups are firing and replacing PMGs at a pace we have never seen before. What’s going on here? Let’s start by looking where trouble usually starts: poor decisions coming from the top. The consequences of decisions made by PMG execs trickle all the way down to the frontline staff of a hotel and end up reflecting in the guest experience. 

Specifically, PMGs are failing to meet expectations on two fronts:

Guests: Service and Experience
Owners: Revenue and Profits

A perfect storm has been brewing for a while, making it harder for PMGs to be effective and profitable. The key components of this storm are:

  • The Modern Traveler
  • Economic Pressures
  • Commercial Optimization Challenges


The Modern Traveler

Post pandemic, we saw a big shift in how people travel and how they use their discretionary income. The loyalty point chasers are still out there, but most people are looking for a seamless digital experience, a local connection and a memorable stay. Hotels that integrate local/neighborhood activities and culture into their marketing and operations are doing very well. The traditional PMG model of standardizing services and rolling them out across a diverse hotel portfolio is not working as well. This disconnect is hitting PMGs the hardest. The practice of “boutique washing” a hotel is not connecting with guests. Industry legend Bashar Wali’s article about “Faux Tique” hotels is a must-read.  

Today’s guests want:

  1. Personalization: They want to be recognized as individuals. Personalization requires sophisticated guest data management and tailored service delivery, which (to further complicate things) varies by location and guest type. This kind of approach is very resource-intensive and hard to implement on a large scale, especially if you are managing hotels in different locations.
  2. Digital Experiences: Guests expect seamless integration of technology, from the beginning of their booking process to the end of their hotel stay. They want to use smart devices and phones to book online, manage their reservations, check-in/out, manage their smart room controls, etc. They feel the need…the need for speed. However, unlike Tom Cruise in Top Gun, their need for speed is all about their WiFi connection.
  3. Unique Experiences: The rise of lifestyle/boutique hotels and alternative accommodations has shifted consumer preferences toward unique, localized experiences. PMGs will have to innovate and diversify their offerings to compete, making their standardized service models obsolete.

Economic Pressures

Economic factors also threaten the profitability of PMGs and their managed hotel assets. Here are the top three external elements affecting PMGs.

  1. Global Economic Fluctuations: The hospitality industry is highly sensitive to economic cycles, and there have been some big ones: the global pandemic shutdown, global reopening, revenge travel, election year, armed conflicts, and now the current softness. This has all happened in just five years! PMGs are facing these challenges across a collection of hotels in multiple geo locations, and sometime even in international markets.
  2. Rising Operational Costs: The costs of labor, utilities, and supplies are rapidly increasing. In addition, the need to invest in new technologies and upgrade facilities to meet modern standards is further adding to the financial burden.
  3. Increasing Competition: The proliferation of alternative accommodation options, such as vacation rentals, soft brands and home-sharing platforms, has intensified competition in the hospitality industry. Professionally self-managed hotels are providing value and experiences at a much lower cost and stealing market share from mass-managed assets. There was a time when a PMG offered cost advantages. Today, with all the new affordable technology, an independent hotel can run circles around a hotel management company in terms of cost by using tools that don’t have participation hurdles. Service levels may be lower, but a P&L with reduced cost is always a thing of beauty.

Commercial Optimization Challenges

This is the area where I have personally seen the biggest change in the past few years. Revenue Management and Digital Marketing have been democratized. They no longer belong to the elite and well-connected. Any independent hotel in the world can now gain access to information, tools and talent that replace what a PMG can offer. It’s amazing how quickly a hotel asset can take off once dedicated revenue management and digital marketing support are provided.

There are still some big challenges to consider. These are the top items that will damage your hotel’s commercial strategy when you scale but forget to innovate:

  1. The Silo Problem: The silos of Revenue, Sales, and Marketing not only exist, but are in fact getting taller in some hotel management companies. I started talking about breaking the hotel silos at industry events back in 2016. That was over seven years ago! It is a little depressing to see so many PMGs still running their commercial teams in silos. Big brands were never expected to change, but it’s surprising to see that some of the the younger PMGs are still not embracing integrated commercial operations.
  2. The RMS Problem: Brand hotels don’t have Revenue Management Software (RMS) options; they are trapped in long-term contracts with preferred vendors. However, an independent hotel sticking with outdated revenue systems is like a tourist going to Spain and exclusively dining at McDonald’s. There are some fantastic companies out there selling revenue and marketing software that was not designed in the early 90s. It’s worth taking the time to find out which system is the best match for your property and location.
  3. The Digital Problem: Same as above: you cannot optimize your digital experience using an outdated tech stack. If your booking engine has not upgraded its mobile booking experience in 8+ years, you should not be using it. Likewise, your online marketing budgets, spending strategy and goals need to be customized for your location and not limited to an MSA you have signed with an agency to save costs. The ROI-obsessed PMG models are tanking hotels located in super-competitive markets. Owners are cheating themselves out of market share because nobody has taken the time to evaluate their digital marketing needs. Add to this a one size fits all vendor to cut costs, and the result is nothing short of a disaster. It is so much easier to complain about the OTAs… who are actually striving to offer guests a seamless experience across screens and locations.
  4. The Meeting Problem: If you have not read this, then please do! Find out how meetings are ruining the hotel business. I’ve seen hotels managed by PMGs that are dying in the market but still having a daily revenue meeting…it happens more than you think!

In the end, Revenue, Sales, and Marketing all end up doing their thing using their old timey corporate tools. They have endless meetings with zero positive output. When the hotel does not meet its revenue targets, they have another meeting to assign blame. In the end, nothing really changes, and just like that another year starts again.

Owners and investors are starting to realize there are better options out there. Mediocrity can thrive as long as nobody notices. Once you see it, you have to do something about it.

One Metric to Rule Them All

Owners are waking up to a new P&L reality. Even when revenue is up, so is the cost of doing business. You can analyze STR reports all day and night, but at the end of the day, you don’t deposit ADRs and Rev Par’s into the bank. It is all about the Net Operating Income, and that metric is really under pressure these days… you know, the kind of pressure Queen and Bowie would write a song about.

Net Operating Income (NOI) shows the profitability of income-generating real estate investments like hotels:
NOI = Total Revenue – Necessary Operating Expenses

NOI is a before-income-tax figure on a property’s income and cash flow statement that excludes principal and interest payments on loans, capital expenditures, depreciation, and amortization. Hotels are a real estate business. Yes, hospitality involves a lot of passion and creativity; but at the end of the day, you have to generate NOI. This is where owners are catching a lot of PMGs asleep at the wheel. So if I had to pick one thing that is sinking the property management party boat, it has to be failure to generate a suitable NOI for the asset.

Conclusion

Hotel management companies are navigating a complex and rapidly evolving landscape. While the challenges are significant, they also present opportunities for innovation, differentiation, and growth. By embracing technology, creating personalized and unique experiences for guests, and customizing commercial strategy for individual hotels, PMGs can overcome these challenges and begin to thrive again. The future of hotel management will be defined by those companies that can effectively balance these demands. They must continuously evolve to meet the needs of the modern traveler, while providing the necessary income to keep assets profitable.