The role of assets in hotel management
Title: Critically analyses the Asset Management Cycle and Planning highlighting the role of the asset manager in the different stages of the cycle.
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The role of assets in hotel management
According to Campbell, Jardine and McGlynn (2016) Asset Management is the method of maintaining and effectively utilization of assets of the company. The primary role of assets in hotel management is all about earning revenue and proper utilization of the assets. Where tangible assets usually has a bigger impact on the working of the hotel industry, intangible assets often plays crucial factors in determining the operations of the hotel. Certain intangible items are like goodwill, patent, etc. Hotel industry is one of the dynamic income producer of assets. Every asset has a life cycle from procurement to disposal the stages in the asset management cycle in the hotel industry is important because of the cost and investments linked to it (Kahn and Lemmon 2016).
According to Love et al. (2015), Hotels have a less complicated leasing structure as the rooms are allocated on a per day basis, which includes rent for all utilities provided. The less complicated leasing structure or the assets of the company should be utilized and manage effectively by the hotel industry. Every assets of the company’s must be strategically used and utilized by the hotels to generate positive returns. Efficient asset management is a process where asset cycle plays a crucial role. Planning, acquisition, operation and scrapping an asset are some of the asset management cycle (Council 2016).
According to Gordon, Sharp and Martin (2018) planning stage is the first stage in the assets management cycle. Verification of the assets requirement is the planning stage. The asset should be viewed from different management strategies and ways in which the asset requirement can meet the daily-required services of the hotel industry. The hotel industry should carry effective planning in the asset management cycle, as it will allow recognizing key assets and underperforming assets of the hotels, availability of resources, maintenance of assets and provisioning of assets. The second stage of the cycle comes the acquisition of the asset, which is the further expansion of planning. The hotel should prepare budgetary analysis for the same the cost to benefit analysis they will provide. The operations of the hotel industry is a key factor assets should be able to render services which in turn will generate revenue for the hotel. The operation and maintenance of the assets comes as the third stage of the asset management cycle. Every asset of the hotel should be able to produce service or benefit it via directly or indirectly. It is necessary to check the efficient and optimum utilization of these assets in the industry. Finally, if the assets usage are for a prolonged period or has completed the lifecycle there comes the final stage of the asset management cycle the disposal stage. Proper reallocation and replacement of assets in the right place and at the right time will help the hotel industry compete better in terms of service and products it caters (Michel and Martin 2018).
According to Gârleanu and Pedersen, (2015) Asset management strategies is applied in order to enhance the efficiency in the operations of the company. Property management deals with the critical assessment of public areas, food and beverages sections and the guest rooms. Every asset of the hotel should be carefully analyzed whether the asset is able to render services and deliver better output. Certain changes must be done periodically to include and align with changing taste and preferences of the people like the food and beverages section and the guest room. Hotel should move there focus from cost controlling techniques to revenue generation strategies. Hotel should focus less on cutting there operational costs as these can hamper the services of the hotel rather the hotel should focus on driving more volume and occupancy rates in the hotel. Market share of a hotel plays an important role in the hotel industry it shows the perception of the consumers about the products or services offered to them. Hotel usually having high market share shows that the assets of the hotel are used and managed efficiently and actively. Asset managers tend to focus much on these factors as it comes as the outcome of all strategies deployed. Cost management and profit management are some of the primary roles while evaluating the contribution of the assets. Asset utilization and asset financing are some of the key role the asset should play. Asset utilization understands assets capability in terms of the output of assets. Asset utilization in hotel industry differs from those traditional financial approach where the banquet rooms should not be always looked at the per square feet of revenue generated rather it should be looked as the occupancy and the extra revenue it provides from other hotel services like the food and beverages section, organizing and conducting different events. The other key aspect in the asset management is about the financing of these assets in the hotel industry. The hotel industry operates in the hospitality sector where the business risk is quite high. It should not always opt for debt financing of assets if debt forms a major part of its liabilities and when the majority of the assets is financed through debt. Generally, the company should go for debt financing of its assets if the company is in high tax bracket. Stable operations and minimum exposure to debt significantly less than the industry average is good for a company (Maleti?, et al. 2017).
Hotel are special type of asset class, which requires continuous oversight and active management. The hotel industry should identify the key aspects of the asset management and the strategies, which they can apply for efficient and active utilization of assets. Hotel assets management are a high-risk investment project, where the cash flows are uncertain and volatile due to the non-static industry. Thus, it is important to understand they importance, role and functions of the asset management.
Campbell, J.D., Jardine, A.K. and McGlynn, J. eds., 2016. Asset management excellence: optimizing equipment life-cycle decisions. CRC Press.
Council, G.T.C., 2016. Strategic Asset Management Plan.
Gârleanu, N. and Pedersen, L.H., 2015. Efficiently inefficient markets for assets and asset management. The Journal of Finance.
Gordon, M., Sharp, K. and Martin, T., 2018. Guide to asset management-processes part 3: scope of asset management (No. AGAM03-18).
Kahn, R.N. and Lemmon, M., 2016. The asset manager’s dilemma: How smart beta is disrupting the investment management industry. Financial Analysts Journal, 72(1), pp.15-20.
Love, P.E., Liu, J., Matthews, J., Sing, C.P. and Smith, J., 2015. Future proofing PPPs: Life-cycle performance measurement and building information modelling. Automation in Construction, 56, pp.26-35..
Maleti?, D., Maleti?, M., Al-Najjar, B. and Gomiš?ek, B., 2017. Asset life cycle management: towards improving operational performance. In 20th QMOD-ICQSS Conference 2017 (pp. 1-7). Lund University Library Press.
Michel, N. and Martin, T., 2018. Guide to asset management-processes part 9: asset management information systems and data (No. AGAM09-18).
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