Hotels are the most complex asset class there is. So complex, that they weren’t even an asset class until very recently, when they were broken up into their many constituent parts and those parts addressed individually.
Before that, many investors stayed away, horrified and unable to see the benefits compared to, say, a lovely office building. So, like building the Death Star out of Lego, or reading Infinite Jest, hotels had to be divided into bite-sized chunks or they can’t be done at all.
And that’s fine if you’re one of the chunks. And we have seen great expertise grow up in those chunks and turn them into whole industries. Asset management, branding, technology, the chunks pile up and run the risk of spilling out over the floor and doing you an injury if they get underfoot.
To be an owner of a hotel is to need to possess a knowledge about knowledge. The Greeks probably have a term for it and you can bet rolling rocks up hills features, but outside the classics it can be viewed purely as a right hassle. The skill is to know enough to trust your individual chunks to be working in your best interests.
Pre-pandemic, this relationship was commonly structured around power. Who had it, who was wielding it, where it was shifting to. It most commonly went to the newest chunk on the block – say, the OTAs – and they held it until the rest of the stack could educate themselves as to what was happening.
This led to lots of fighting, some fun panels at conferences and some bizarre attempts to get the power back before a sort of equilibrium was regained and hotels could get on with hoteling. Fans of the 1990s will remember that Dilbert had a term for this: Battling Business Units, with companies being eaten by competing divisions within them. It wasn’t great for profitability.
But before we start working out who in the sector is the Pointy-Haired Boss, back to the stack.
During the pandemic, owners had to get stuck into the detail of their hotels. This we know and it has worked out in their favour and to the good of the hotel. We are all looking at more efficient assets and the sector will be the better for it and a more attractive investment target.
But education is still required. All those different chunks are far from being fully known, the question is, how to deepen that wisdom?
Back to the Death Star. A daunting task, but remember that Darth Vader managed to build it twice and while he certainly had a vicious streak, would you describe him as one of the universe’s great thinkers? No. Admittedly he wasn’t in the hanger with a toolbox, but then owners aren’t at the front desk unless it’s Back To The Floor week.
Take technology. We have all of us sat through PowerPoints about what each shiny new piece of hotel technology does. Some more gripping than others. But they all merge into one and all you’re left with is a sense of confusion and a commemorative mouse mat.
What about, instead of looking at the technology – or whatever other chunk – the focus was on what the benefits were and where it fit in the rest of the stack? Car advertisers have, in the main, moved on from chat about pistons. Now it’s all lifestyle and how the car enhances it.
It didn’t work out for Vader in the end, but it was a blast while it lasted. As for Infinite Jest, go ahead if you must, but skip the tennis game.