Can Proptech Remedy the Asset-heavy/ Asset-light Dilemma?
Can Proptech Remedy the Asset-heavy/ Asset-light Dilemma?

Written by: Victoria Loing

In a globalized world and really aggressive setting, lodges are preventing to stay leaders of their market. Which manufacturers to develop? How one can retain clients? Which modern expertise to implement? Which enterprise mannequin technique to observe? These are a non-exhaustive checklist of questions resort teams ask themselves to carry out in a continually evolving setting. This weblog will concentrate on the asset-heavy/asset-light technique difficulty and the way innovation akin to property expertise (proptech) can clear up the issue.

Let’s begin with the context: actual property is an asset in hospitality but additionally a legal responsibility.

Resorts have an operations part on one aspect and actual property part on the opposite. The latter shouldn’t be the least vital concern for the resort’s chains. Up to now, resort teams owned and operated properties. The asset-heavy technique permits complete management over enterprise growth administration and is an assurance of reliability for third events. Nevertheless, it’s a capital guzzler and implies a considerable supply of debt.

So, what did resort chains do? They went for an asset-light technique. Marriott and IHG had been the pioneers on this regard. They had been adopted by different huge chains akin to Hilton and, extra just lately, Accor and Hyatt. To present an concept, practically 99 p.c of Marriott’s complete rooms had been managed underneath a administration contract or franchise settlement as of 2020 (Search engine optimization, 2021). The important thing motive for this shift from asset-heavy to asset-light: the pliability. Additional cash flows turn into accessible due to franchising and administration contracts. It ends in new funding alternatives like buyer loyalty packages, expertise and quicker model growth throughout the globe. (Kwok, 2017)

Flexibility – however at what value?

The principal-agent downside: asset-light lodges are giving up management. Lack of consistency can seem throughout the chains concerning requirements and protocols. The house owners don’t all the time assist venture growth concepts and improvements. With 100% possession, these issues wouldn’t be on the desk. However, how can lodges obtain complete possession and management with out going again to the asset-leverage legal responsibility?

The answer: A shared proptech app.

The reply could lie in a property expertise platform based mostly on the shared economic system system just like the Bricks firm in France or BrickX in Australia. The precept of those corporations is to supply easy financing for house owners and easy accessibility to funding in actual property for the final inhabitants, due to a mobile-friendly web site.

As an example somebody desires to purchase a property: 50 p.c might be financed by a financial institution mortgage, and the opposite 50 p.c is split into 1000’s of bricks. Every particular person should buy a brick on-line for as little as $10 USD; there isn’t any possession, however they’re entitled to common royalties based mostly on the renting of the house and might count on an ROI of 10-12 p.c. (Forbes France, 2021)

Think about if this device was utilized to the hospitality sector!

Within the method of Airbnb generalizing peer-to-peer house rental and Uber generalizing rideshare, a shared proptech app could make the resort actual property funding accessible to all. Thanks for an important UX UI design and based mostly on the sharing economic system development, lodges can regain possession with out its drawbacks.

What are some great benefits of such a device?

On the patron aspect:

  • Common royalty is earned, or night time gratuity is given within the corresponding resort based mostly on the resort worth appreciation.
  • Low danger associated to low funding.
  • Simple and new saving alternative device for the patron.
  • Involvement of the group within the lifetime of the hospitality asset.

On the resort aspect:

  • The brick crowdfunding system results in a decrease debt protection ratio through banks.
  • Regain flexibility due to faster liquidity entry.
  • Management and possession, resolving the principal-agent downside.
  • New loyalty device: consumer loyalty and retention are a classy problem for hoteliers. Suppose somebody can simply spend money on a resort property simply by clicking on an app. It sounds engaging, no?

So, can proptech resolve the principle challenges of the twenty first century for resort teams?

It’s digital, social and inclusive, and aggressive. Higher regulate this modern expertise sooner or later!

This weblog put up tied for Second Place within the Spring 2022 HFTP/MS International Hospitality Enterprise Graduate Scholar Weblog Competitors introduced by the HFTP Basis. Contributors are college students collaborating within the Grasp of Science in International Hospitality Enterprise, a partnership between the Conrad N. Hilton School of International Hospitality Management on the College of Houston, the Faculty of Lodge and Tourism Administration at Hong Kong Polytechnic College and EHL. The weblog posts that obtained the highest scores will likely be revealed on HFTP Join via July 2022. Study extra at HFTP Information.

Victoria Loing is a graduate scholar pursuing the Grasp of Science in International Hospitality Enterprise program, which is in partnership of three colleges: EHL, the Hong Kong Polytechnic College, and College of Houston.