‘Alpha’ investment theories will drive hotel values

Hotel investors need to embrace ‘alpha’ investment theories to find and drive value in their hotels, according to Colliers International.

Nigel Greenaway, the head of Asset Management at Colliers, says that data analytics and technology need to be embraced and employed to find alpha; a component that is in excess of what the market will deliver.

Subsequently, investors often buy on the basis that value-add strategies, which will deliver enhanced returns above market movements, can be run and are viable.

“Alpha can take many practical forms in the hotel investment world,” said Nigel Greenaway, National Director, Hotels at Colliers International.

“For example; investors and operators use their combined knowledge and experience to strategically deploy capital to reposition a hotel for increased revenue and ultimately profit uplift.

“Another example occurs when management outsource overhead functions that have traditionally been resourced in- house, to deliver improved levels of profitability.

“Now more than ever, data analytics needs to be embraced by investors and operators alike in their pursuit of Alpha. For example, modern Property Management Systems time stamp all transaction and payroll systems house granular detail of resourcing. Analysing the combined information from these two systems can yield opportunities to fine tune labour costs.

“If investors harness a long time series of a single expense, they can use detailed data analytics to find where particular costs in the business have performed more efficiently; this can be used to provide blue prints within a hotel as to where alpha can be found.”

By harnessing the accumulation of cost efficiencies found through data analytics, a 4/5 star hotel in Australia’s major markets with a capitalisation rate of 6.5% could see valuation uplift by around $1.5 million, from a $100,000 cost saving.

Alpha also speaks of the analysis of operating and capital expenditure, by creating analytics and life cycle plans. If owners are able to understand the cycle plans of their capital expenditure commensurate with maintenance operating expenses, then these two major costs can be managed more efficiently within the hotel.

Jessica Morey, Analyst of Hotels at Colliers International says “My role is to help investment managers find alpha through a range of theories.”

“Some examples include analysis of expenses, room rates and market forecasts. Due to the nature of the hotel asset class, granularity serves great importance in the investment management world as investors seek to ‘squeeze the juice’.”

Ian Pert, National Director of Project Leaders at Colliers International says “In order to deliver a hotel development that performs above market, the developer needs to understand the local market trends and guest profile; drive and control the building economics as well as minimising recurrent and operational costs through design.” 

However, due to the maturing and growth of the Hotels asset class, finding Alpha opportunities can be challenging, as investors and operators continue to reshape the hotel business and find new levels of efficiency.

“Sophisticated hotel investors have long-sought the “low hanging fruit” in hotels they acquire to generate either revenue uplift or improved cost control, that can then deliver the alpha factor” said Gus Moors, Head of Hotels for Colliers International. 

“Historically, this low hanging fruit could be plucked through the use of technology, in areas such as hotel yield management software, housekeeping productivity tablets and guest self check-in terminals.”

“With the adoption of this technology becoming increasingly widespread, investors are now looking to data analytics to create a competitive edge that will unlock future alpha opportunities.”


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Nigel Greenaway

National Director

Sydney CBD

For over 27 years, Nigel’s career in the hotel industry has spanned hotel operations and finance, working for leading hotel operators and more recently, heading two of Australia’s leading wholesale hotel investment funds.

Prior to joining Colliers, Nigel spent 10 years as the Fund Manager of Eureka Fund Managements First Core Fund. The fund comprised hotel investment in branded hotels such as InterContinental, Four Seasons, Crowne Plaza and Holiday Inn. He led the fund team in establishing an investment in over $1.0bn of hotels in Australia and New Zealand. Nigel was responsible for the entire fund strategy of acquisition, repositioning, asset management, equity and debt capital strategies and exit strategy.

Nigel commenced the hotel investment stage of his career with Colonial First State Property as an Asset Manager for the portfolio of Marriott hotels in Australia before taking the funds lead role as Fund Manager.

In the early part of Nigel’s career, he held a number of Finance Director roles for Southern Pacific Hotels Corporation (now IHG) in Australia and the Pacific. After a period, as Regional Director of Finance for the Northern half of Australia he established his own hotel finance consulting group which provided accounting and financial related services to hotel operators and owners in Australia, New Zealand, Vanuatu and Fiji.

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Gus Moors

Head of Hotels | Australia

Sydney CBD

Having joined Colliers in early 2014, I have subsequently sold over $180 million of hotel assets across Victoria and NSW, including the largest hotel transaction in Victoria since 2008, being Bell City Preston for $143 million.

Prior to joining Colliers, I was Director of Asset Management for Tourism Asset Holdings Limited (TAHL), Australia's largest hotel owner and responsible for selling down this portfolio totalling over $1.5 billion.

Before TAHL, I was with Jones Lang LaSalle Hotels for 7 years, as Head of Asset Management and Chief Operating Officer for the Hotels group across Asia Pacific.

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Ian Pert

National Director, QLD

Brisbane CBD

Ian has over 36 years’ experience in the development industry and has a strong financial focus in property projects.Ian started his career in Scotland before working in Qatar and Sydney before moving to Queensland in 1990.  Ian's experience covers numerous sectors including  hotels,  high rise residential, retail, retirement and hospitality projects.  A well known and respected industry figure in S.E Qld, Ian specialises in Development and Project Management Services.  Ian’s early involvement in projects with strategic advice helps ensure the overall project success,  with a particular particular focus on tourism, hotel consultancy and residential projects.

Ian is a National Director of Colliers International Project Leaders which acquired GMP Management in 2018.  Under Ian’s stewardship, GMP grew to be the largest Project Management Consultancy on the Gold Coast and expanded into Brisbane  and Darwin.

Ian heads up our Queensland division,  but is very much a hands on director,  working out of both our Brisbane and Gold Coast offices.  He has delivered some of S.E. Qld most notable projects including Westin Hotel and Mary Lane Residences, Pullman and Ibis Hotels Brisbane Airport, Novotel Southbank and Twin Towns Services Club.

 

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Jessica Morey

Analyst

Sydney CBD

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