Hotels run on thin margins! Hotels are not easy to start operating, and it’s not easy to become profitable quickly because of numerous factors – the need to establish brand recall, standardization, and the innate need to grow faster and become an established global chain. However, profitability can never suffer and it is this underlying need that makes hoteliers, management companies and everyone else involved scout for better ways to grow and reap the dividends faster, be it cash profits or an expanding chain. Out of this grew the new approach in hotel growth, the “asset light approach”.
What is an asset light approach?
True to the phrase, an asset light approach is adopted when a hotelier looks to reduce capital expenses while growing. This ensures that they can expand quicker because they have surplus funds to invest in other activities like building the brand, or in the worst case close the project without taking a beating on the balance sheets. The various facets where such an approach is for the land of the new hotel. This approach enables them to either undertake an existing hotel under lease and manage it themselves or go even further when they undertake the hotel but the management team remains untouched. This does sound like an easy option for growth doesn’t it? One thing to be wary of is that standardisation might take a hit because all of your management team isn’t in on the same vision as you! Standardization is something that helps business travellers especially so they like to know that if they get into a hotel of a particular chain they know what they can and what they can’t expect. There are many studies that examine this in detail.
Another facet is that hotels have been trying to lighten off late is working with suppliers, PMS vendors in particular. A PMS is as critical to a hotel as is the backbone to a human, because with it lies customer data which helps them serve guests better.
So how exactly do we make a PMS light?
For starters, with the advent of cloud and SAAS based systems there no longer a need to house a huge server in your hotel. No longer would do you need to cough up a fixed cost for its installation or pay the high AMCs as many of these Cloud PMSs actually demand only a fraction of the AMC that hotels pay up every year. No longer do you need your service rep to visit your hotel if there is a technical snag. It even helps reduce the problems that arise because of non-standardization as they can be centrally accessed across any of your properties. Best of all, because it is cloud based, the PMS can be accessed anywhere and anytime. You can even wipe out small fixed costs in setting up your front desk and computer because you could access it in your mobile and check-in a guest while you chat them up in the lift. The only requisite for doing any of this is a basic internet connection.
Many chains like IntelliStay in India were born out of this approach and global chains like Starwood’s and Hotel Leela Venture are seeing it as their accelerator of growth and a way to shed their corporate weight. Soon this might just become a norm, after all hoteliers are best known for being hospitable and not economies of scale in construction – true there are the those who seem to be good at both, but when you can grow and become profitable faster, why not?
– Joseph Christopher
"Shedding Corporate Weight – Becoming Asset Light Hotels",