Glossary of Hotel Asset Management Terms07th December 2017
Getting to grips with hospitality asset management jargon can often be challenging.
In many cases, it may be the first time you’ve considered using a hotel asset management company, which can make finding the right partners a difficult task. Thanks to our team of experts at Michels & Taylor, we’ve put together a list of essential hotel asset management terminology to help you find your feet and keep your search moving forward.
Capital expenditures are the funds used to purchase or upgrade your hotel’s assets. This includes things such as buildings and equipment to develop its capacity to generate more profits.
Commercial Health Check
A commercial health check is a report that gives hotel owners, operators and managers a detailed picture of the sales, marketing, PR and revenue management departments. It is achieved by analysing every source of your hotel’s revenue and combining it together to maximise the revenue generated.
Due diligence is an audit conducted prior to an acquisition to ensure that all the financial aspects of the prospective product are correct. It is highly recommended to conduct an audit before the future purchase of a new hotel or merger as it will uncover any potential aspects that may affect the operation.
Conducting a feasibility study helps the hotel estimate how successful the future project is going to be. It takes into consideration several factors such as law, economics and technology to determine the outcome of a project, whether positive or negative.
A hotel asset manager is in charge of optimising the revenue produced by the hotel, whilst ensuring its capacity to generate profits. By analysing the revenue made by the different departments of the hotel, the manager has a clear picture of the overall revenue and can adapt the strategy to maximise profits.
Arguably the most calculated data in business, the return on investment (ROI) helps evaluate the profitability of an investment by confronting the gains and the costs related to this investment. ROI is calculated by subtracting the cost of an investment by its gain and dividing this total by its cost.
The average daily rate (ADR) is the average price for each room sold on a specific night and is calculated by dividing the room revenue by the number of rooms sold. It is key to assessing your hotel’s performance.
The revenue per available room (RevPar) is the revenue generated by the sale of rooms over a certain period. It is gained by multiplying the ADR by the occupancy rate for this period and assesses your hotel’s capacity to fill its bedrooms at an average rate.
As a hotel asset manager, the total revenue per available room (TRevPar) helps you get a clearer picture of the revenue generated by the hotel as it combines revenue generated via rooms and the restaurant and/or bar, the breakfast, the spa or golf facilities. TRevPar is obtained by dividing the total revenue by the number of available rooms over a certain time.
Ensuring that our hotel managers fully comprehend the different aspects of this terminology is fundamental. During each stage of the managers’ training, Michels & Taylor ensure that these terms are not only understood but put into practice efficiently.
Kathy Shortman, Commercial Director
Whether it’s a specialist term or a technical abbreviation, it is important to ensure that your managers are fully aware of the meaning of the above vocabulary as they will face it in their everyday work. It is also important for hotel managers to keep up to date with the evolution of some of the terms; many are adapted to suit the introduction of new practises like technology.
For more information on Michels & Taylor’s hospitality asset management services, call us on 020 8905 2500 or contact us directly.