BLOG POST Beyond Underperformance: Why Asset Alignment Matters More Than Ever
By J.D. DeRosa, Chief Business Officer, Reside, A Wyndham Residence
Executive Summary
For decades, commercial real estate performance has been evaluated through familiar lenses—income, occupancy, cap rates, debt service coverage ratio (DSCR), and debt yield metrics. When those metrics falter, we call it what it looks like: "underperforming."
Yet today’s market presents a different question: what if many assets aren't underperforming because they are mismanaged, but because they are no longer aligned with how people live, work, and travel?
As global hospitality and residential sectors evolve, terms like extended living, co-living, flexible housing, short-term work stays, and lifestyle travel overlap, blurring traditional boundaries. What was once clear—a hotel is for short stays, an apartment is for long stays—is shifting. White-label and flex-use solutions are quietly filling this space, creating a bridge between traditional hospitality and full-time residential leases.
For asset owners, this suggests that the challenge may be less about general market demand and more about aligning property function with changing consumer needs.
Rethinking "Underperformance"
Historically, real estate has intentionally operated in specialized silos—commercial, office, residential, extended-stay, and traditional hospitality—each structured to serve a particular consumer profile. Today, an asset-class shift is under way, driven by changing consumer expectations.
Rather than building structure in a linear, forward pattern—in vectors like technology—real estate operates in response to broader shift: shifting demographics, remote/hybrid work models, flexible schedules, and evolving travel behavior. Deloitte's 2024 Corporate Travel Study highlights a growing emphasis on flexible accommodation options among enterprise travelers, with blended work-leisure trips becoming standard for many professionals. The report notes that double-digit growth in "bleisure" stay requests is "no longer an exception, but a baseline expectation for young professionals."
At the same time, U.S. Census Bureau data from the Current Population Survey (CPS) shows flexible work patterns "here to stay," remaining stable, ranging from 15% to 20% of total workdays spent away from the office. Operational response has varied: real estate platforms are adapting to this shift, re-engineering spaces and operations to capture demand from flexible business and leisure travel, and expanding long-term stay options. These changes are influencing everything from unit layout to amenity mix, service intensity, and lease flexibility. Demand hasn't vanished—it has moved into flexible operations.
Taken together, these trends suggest that the challenge facing many operational real estate assets isn't a lack of demand, but of alignment. Demand continues to evolve, while many assets remain configured for operating structures designed for a very different market era.
Demand is Becoming More Dynamic
For decades, accommodation was built around a basic model of discrete categories, shaped by strict lease structure rules: long-term residential, business travel, transient customer base, and short-term stay model.
Whether traveling for work, leading project teams, relocating for work, or combining business travel with personal time, corporate travelers, digital nomads, and leisure guests alike prefer space that blends home-like comfort with hotel-like services. This evolution creates opportunities for owners to rethink how their space operates, aligning facilities with how today's guests actually live and work.
This evolution reveals a growing gap between how spaces are traditionally managed and how customers increasingly use them:
Traditional Operating Model | Evolving Customer Behavior |
Designed specifically for rigid try-use | Seeking options for stays falling between transient and lease |
Fixed lease terms or night-only rates | Increasing preference for flexible options combining standard services and local feel |
Clearly defined operational segments | Growing interest in blended options, mixed use, extended stays, and combined models |
Fixed operating structures | Need operating systems that flex policy and terms with seasonality |
The issue is not that demand has disappeared; rather, demand is expressed in new ways, creating opportunity for properties capable of responding to greater flexibility.
From Performance to Alignment
When occupancy dips or revenues decline, the immediate response is often tactical: adjust pricing, increase marketing, or cut operating costs. While these responses may address short-term performance, they miss a fundamental question:
Does the asset still match how people interact with it today?
Viewed through this lens, subtle shifts emerge: Ultimately, the question is simple: Is it an alignment issue or operational performance?
Traditional Viewpoint | Alignment Perspective |
Occupancy is declining | Asset class is under-leveraged |
Demand has weakened | Demand has shifted to alternative accommodation forms |
Marketing strategy needs updating | Operations design or programming is out of alignment with market needs |
Revenue management strategy needs adjustment | Lease structure and property model need adjustment to market demand |
For owners, this represents an important analytical distinction: performance can be repositioned for room rates and operations, if the picture step back to whether an asset's underlying operating model still reflects human behaviors.
Flexibility as a Strategic Capability
Location will always remain one of real estate's primary advantages, pathing accessibility, "walkability," and access to key amenities.
Commercial property owners looking to remain competitive, maintain yield, and secure long-term value, are responding to changing market conditions. CBRE's 2024 Commercial Real Estate Outlook notes that property owners are placing greater emphasis on operational resilience, efficiency, and occupancy optimization, as they navigate a more complex investment landscape—specifically calling out the benefit of flexible operational structures as a key differentiator to maintain high yields.
Within this context, flexibility should not be viewed simply as an amenity or a structural option, but as the underlying capability: an operational capacity that enables assets to respond to changing patterns of residential living, dynamic business travel, and extended stay preferences.
Looking Beyond Traditional Asset Categories
The next generation of successful real estate assets may not be classified strictly by traditional criteria, but by operating model.
Residential capability allows properties to accommodate long-term residents, hospitality features allow them to serve short-term and business stay guests, and rather than competing directly with hotels or residential housing, these operations serve the growing spectrum of accommodation that sits between these traditional categories.
More broadly, it indicates an increasing people-first view across commercial real estate, centering on how people move and live today.
For developers, investors, and operators, the question is no longer solely what an asset was built for, but how well it is configured, operated, and aligned with current market expectations.
About the Author
Author J.D. DeRosa is Chief Business Officer of Reside, A Wyndham Residence, leading the company's growth strategy across operations, global distribution, and strategic property positioning with Wyndham Hotels & Resorts, a portfolio of over 9,200 hotels across 95+ countries including icons like Trademark Collection, Ramada, Days Inn, Wyndham Garden, and Trademark Collection.
Sources:
Urban Land Institute, Emerging Trends in Real Estate 2024 (with PwC)
JLL, Global Real Estate Outlook 2024
CBRE, Global Living Report
Deloitte, 2024 Commercial Real Estate Outlook