The impact of asset-light strategy on efficiency and core business focus – ET HospitalityWorld

In the highly competitive hospitality industry, where traveller expectations are constantly increasing, the key to success lies in embracing innovation. The asset-light strategy has become a transformative approach that enhances efficiency and sharpens the core business focus of hospitality companies. This strategy, which has been growing in popularity, has had a major impact on the sector and is poised to shape its future.

The asset-light strategy disrupts the conventional approach of owning the property and the brand. According to BCG, asset-light models can deliver a better return on assets, lower profit volatility, greater flexibility, and higher scale-driven cost savings than asset-heavy models. Further, real estate assets are usually in the hands of external investors or development firms, allowing hospitality companies to concentrate on tasks such as management, marketing, and branding. This division of responsibilities minimises the need for substantial capital investments, lowers risks, and enables swift expansion.

Efficiency enhancement
The asset-light approach significantly improves efficiency in the hospitality industry. By divesting real estate assets, companies can allocate resources to critical areas such as guest services, marketing, and technology. Centralised operations streamline processes, reduce redundancy, and lower operational costs. This leads to superior guest experiences and a competitive edge.

Additionally, the asset-light strategy simplifies global expansion. Businesses can enter new markets swiftly and adapt to emerging trends without the burden of real estate investments. This flexibility allows companies to respond quickly to changing market demands while maintaining consistent quality and service standards.

Core business focus
By relinquishing ownership of physical properties, hospitality companies can concentrate on their core business: delivering outstanding hospitality experiences. This includes brand development and guest services. This heightened focus on core aspects can lead to the creation of more attractive and memorable guest experiences, driving customer satisfaction and brand loyalty.

The asset-light strategy also allows for increased investment in staff. Well-trained employees are the backbone of successful hospitality operations. With fewer capital constraints, companies can allocate more resources to staff training and development, creating a workforce better equipped to provide exceptional service and create lasting guest memories.

Adaptability in a changing world
The hospitality industry faces numerous challenges, from economic downturns to global crises. The asset-light strategy aids in adapting to these changes. During economic downturns, companies can pivot more effectively, temporarily closing underperforming properties without the heavy financial burden of ownership. This adaptability helps businesses weather economic storms and rebound more quickly when conditions improve.

In times of crisis, the asset-light approach fosters innovation. By focusing on core activities and having more resources, companies can invest in technology, health, and safety measures to meet evolving guest expectations. This adaptability has been crucial during the COVID-19 pandemic, where health and safety concerns reshaped traveller behaviour.

The investor perspective
Investors benefit from the asset-light strategy as well. Owning and operating hotel properties can be capital-intensive and risky. By investing in real estate rather than running the hospitality operation, investors diversify their portfolios and reduce exposure to market fluctuations. Collaborating with experienced hospitality brands provides investors with opportunities to leverage expertise, brand recognition, and marketing prowess, enhancing the value of the real estate asset and providing a reliable income stream.

The asset-light strategy is revolutionising the hospitality industry, and this distinct approach benefits not only the hospitality brands but also investors seeking diversified opportunities in the real estate sector. As the industry evolves, the asset-light strategy is poised to play an increasingly pivotal role in shaping its future, offering a roadmap to success in a dynamic and competitive landscape.

Kahraman Yigit is co-founder and CEO – Olive by Embassy.