Hotel ownership has always demanded a careful balance of optimism and discipline. Today, that balance is being tested more intensely and more frequently than at any point in recent memory.
Owners are navigating an environment defined by rising operating costs, moderating demand growth, evolving brand standards and increasing capital constraints. While hotels continue to offer an attractive long-term investment profile, it’s imperative that ownership protects profit margins in the face of the expense-revenue growth imbalance to hold asset value. Success hinges on disciplined oversight, informed leadership and the ability to adapt strategically to changing conditions.
In this environment, many owners are reevaluating how their assets are governed and whether they are equipped for the complexity ahead. Increasingly, that reassessment is leading to an interest in third-party asset management.
Increasing Complexity in Operations
Recent performance trends underscore the challenge. In many markets, occupancy has peaked, and even regressed, while rising expenses continue to outpace revenue gains. Labor costs, insurance, energy and construction expenses remain elevated, shrinking margins even for well-positioned properties.
At the same time, ownership decisions have become more complex. Brand-mandated property improvement plans require increasing investment while the cost of capital remains elevated and asset values remain stagnant. Guest expectations continue to evolve, driving demand for technology, personalization and wellness initiatives.
Leadership in this environment extends well beyond reviewing financials. It requires the ability to evaluate trade-offs, prioritize effectively and make long-term decisions amid uncertainty.
The Limits of the Traditional Owner-Operator Model
Most hotel owners rely on management companies to operate properties and execute agreed-upon business plans. That relationship remains essential, but it’s not always sufficient.
Management companies and brands are often incentivized around revenue growth, emphasizing occupancy and rate performance. These metrics don’t fully align with ownership priorities such as margin optimization, capital efficiency and long-term asset value. Decisions related to expense control, capital deployment and projects that deliver the highest investment returns can receive less scrutiny than they warrant.
Additionally, the allure of hospitality investments often attracts non-traditional hotel owners, increasing the need for partners that represent their interests. Without dedicated expertise, it can be difficult to objectively evaluate whether a property is maximizing its potential and aligning with long-term goals. This is where third-party asset management plays a critical role.
The Leadership Function
Third-party asset managers serve as stewards of ownership interests, providing independent oversight and strategy that complements day-to-day operations.
Asset managers bring clarity to complex decisions. They look beyond revenue performance indicators to assess profitability, cost structure, market positioning and competitive dynamics. They evaluate whether capital investments are necessary, properly scoped and timed to support long-term value creation. They also help owners navigate brand negotiations, management agreements and strategic planning.
In environments where swift action is often required, their role is to ensure decisions are grounded in data, context and long-term impact—not just urgency or pressure from brands.
A Heightened Need for Oversight
In stronger cycles, inefficiencies are often hidden by rising demand. In more challenging conditions, issues become more visible and impactful.
As revenue growth moderates, margin management becomes key. Labor productivity, procurement practices and operational efficiency can determine whether a hotel outperforms its competitors or falls behind. Asset managers work collaboratively with operators to identify opportunities without undermining service standards or brand integrity.
Capital discipline also becomes more critical. Renovations, technology investments and amenity enhancements must be evaluated for ROI. Effective asset management helps owners prioritize investments that protect long-term value while avoiding unnecessary or poorly timed expenditures.
Collaboration, Not Conflict
One common misconception is that asset management introduces friction between owners and operators. In practice, the opposite is often true. When responsibilities are clearly defined, asset management enhances transparency and alignment.
Effective asset managers act as intermediaries among owners, management teams and brand partners. They help translate objectives, clarify expectations and ensure decisions are informed. This structure allows operators to focus on execution while giving owners confidence that their interests are actively represented.
Fostering a strong, mutually trusting relationship with brands and operators unlocks hidden value. For example, if a brand is underperforming, they may be open to temporarily lowering fees and having strong relationships makes these conversations easier. Brands are also incorporating performance-based fee reductions contingent on meeting performance hurdles that asset managers can monitor and steer management toward achieving. These initiatives yield real value: a $50,000 annual reduction in fees at an 8% cap rate effectively adds $625,000 in asset value.
A Strategic Imperative
Hotel leaders today need to anticipate market shifts. As volatility becomes constant, owners need governance models that support informed, timely decision-making.
Third-party asset management provides that framework. It delivers independent perspective, industry expertise and disciplined oversight to an increasingly complex business.
For hotel owners committed to resilience, accountability and long-term value creation, the question is no longer whether asset management adds value: the question is whether operating without it is a risk they are willing to accept.
Story contributed by Walter Peseski, SVP asset management of Garfield Public/Private, LLC, a public/private commercial real estate developer in the U.S. specializing in complex hospitality and mixed-use projects.
