Master asset tagging | know what you own

MASTER ASSET TAGGING | KNOW WHAT YOU OWN

June 27, 2017 by in Uncategorized
Are you surprised at how much you spend on replacing items that are damaged, have been stolen, or have gone missing? Do you face recurring guest complaints due to constant equipment failures? Here are a few figures for you to consider:
  • An average 200 room hotel reports around 1,500 equipment failures a month (Infraspeak.com)
  • Employee theft in the US across all industries amounts to c. USD 200bn per year (Niehoff & Paul)
  • Up to 65% of fixed assets are incomplete, inaccurate, or missing, while up to 30% of fixed assets are no longer owned (FMIS.co.uk)
At any given time, there can be hundreds of guests and employees inside a property, so naturally items will go missing or equipment will get damaged, and this doesn’t always get reported in a timely manner. This is exacerbated by the principal-agent problem – given the FF&E reserve mechanism and HMA fees being partially linked to revenues, an operating team is not fully incentivised to minimize damage to, or loss of, FF&E and fixed assets.
As a hotel or resort owner you should be able to quantify the current value of fixed assets on your balance sheet, which is done by having an accurate and up-to-date asset register and asset management system in place. This will allow for the better forecasting of expenses, asset maintenance and even fiscal optimization through depreciation.

What is asset tagging and why is it so useful?

Asset tagging is one of the key components of an asset management system – a process used by a company to effectively keep track of its fixed or high-value assets, including but not limited to FF&E, IT hardware and higher value OSE items. If implemented properly, asset tagging will be able to significantly reduce the impact of theft, human error, unreported damage, and the lack of asset maintenance.
Asset tags are labels typically printed on vinyl or polyester which are stuck on equipment (“the asset”) that needs to be tagged. Each tag contains a barcode and a unique ID number. When the barcode is scanned, the end user can pull up key information related to the asset, including but not limited to:

Location

Condition

Value

Value

Model

Scheduled Maintenance

Warranty Expiration

There are several types of asset tags available on the market, each with slightly different features and advantages. The choice of which tag to use will depend on multiple factors such as the value of the asset, the amount of information that needs to be stored, the physical environment where the asset is located, and whether the asset is portable or fixed.
Asset Tag Description Advantages & Uses Unit Price
Polyester Metallized polyester tags – logos and asset ids can be printed on them Durable, versatile, and cheap. Can be used both indoors and outdoors $0.10
Barcode Barcodes which are printed on the tag, which allow for easy scanning Easy to access asset information by scanning $0.24
Aluminium Typically used as nameplates, for product identification and equipment tags Long-lasting and durable – immune to chemical and weather exposure $0.50
Tamper-proof Any tampering becomes evident, as it leaves a mark on the equipment when the tag is removed Useful for assets that are prone to theft – used to track evidence of tampering $0.20
RFID Electromagnetic fields are programmed with asset information. RFID readers read the information from electromagnetic waves that are generated by the RFID chips Less need for manual intervention, thus saving on time and effort Up to $1.00
Bluetooth Active tags are tracked using Bluetoothbased relays which transmit signals to a central server Provide the ability to track assets in real-time Up to $15
While we would not consider this to be a typical ROI project, the advantages associated with asset tagging as part of a wider asset management system are far-reaching and long-term in nature. Here are a few tangible reasons to consider tagging assets within your portfolio:

Key steps for an asset tagging project

STEP 1: IDENTIFY STAKEHOLDERS AND PROJECT OBJECTIVES

  • Meet with Asset Owners and End Users to identify the key stakeholders.
  • Determine project objectives to secure buy-in and ensure project delivery is in line with expectations. Objectives include audit compliance, risk management, loss prevention, improved reporting.

STEP 2: ESTABLISH ASSET TAGGING CRITERIA

  • Establish criteria used to identify which assets will be tagged – this could be a monetary threshold or specific categories of items.
  • Note that there will be a trade-off between the threshold value and the complexity of the project.

STEP 3: CREATE ASSET REGISTER

  • This will contain the company’s fixed assets/assets that need to be tagged plus data that needs to be embedded in the Tag. (e.g. unique identifier, description, serial number, purchase price, location, warranty expiry date).
  • Asset Register will be uploaded to Asset Tagging software ahead of physical tagging process.

STEP 4: PHYSICAL TAGGING PROCESS

  • Identify type of label required for each asset, with consideration given asset value, location, size, and print tags.
  • Coordinate with End User to ensure access is provided to the Tagging team and minimize business interruption.
  • Fix tags to each asset and bring the asset live

STEP 5: END USER ADOPTION

There will be 2 groups of end users:
  • The Finance team is concerned with financial tracking of assets for reporting, audit, and risk management.
  • The Operations team (Owner or 3rd party operator) will use the software for preventive maintenance and physical inventory.
Which assets to tag and which tag to use?

Points for consideration

Thought should be given to identify which assets need to be physically tagged – to a certain extent this will depend on the business’ key objective. If the primary objective is loss prevention, high value items which are easily misplaced and/or contain sensitive information should be prioritized. Setting a sensible monetary threshold will ensure that the cost of the tagging project remains reasonable.

Earlier in this article we provided an overview of the different tags that are available on the market. Clearly there are cost implications of choosing a more sophisticated tagging technology and therefore these should only be chosen for certain high-value items that are fragile, can easily be stolen or misplaced.

How to secure end user buy-in

In many instances the owner of the assets being tagged will not be the same entity or department as the operator of said assets:
  • Typically, the owner’s finance department will be responsible for the financial tracking of assets for reporting, audit and risk management purposes. They will manage the property’s asset register, organize the initial asset tagging exercise, and carry out periodic audits or stock-taking exercises.
  • The Operations team (Owner or 3rd Party Operator) will primarily use the asset tagging software for preventive maintenance and physical inventory taking.
The Operations team/Operator will be the primary user of the assets on a day-to-day basis. Engaging with them from the outset will ensure that the setup is complementary to their existing preventive maintenance software and that they are effectively reporting missing or damaged assets in a timely manner.

Conclusion

To conclude, asset tagging is a relatively complex undertaking, and it doesn’t come cheap, and the ROI of this process needs to be estimated. We estimate that asset tagging a 250 key property would cost upwards of USD 20K, depending on the number and type of tags being used. Nonetheless the advantages are numerous. With proper planning and the assistance of your asset manager or specialized consultant, you will benefit both operationally and financially. To learn more about our asset management services, please visit our services page, or email sv@stirlinghospitality.com.

    Stirling Hospitality Advisors is a hospitality asset management and advisory firm with a portfolio of more than 6,000 keys. The company offers their clients robust asset management, development and advisory services backed by years of hands-on experience.

    ADDRESS

    Stirling Hospitality Advisors
    Ras Al Khaimah, UAE

    PHONE

    +971 (0) 7 2036022

    EMAIL

    db@stirlinghospitality.com