Owning It—Selectively
More firms that used to be “asset light” are putting a premium on owning physical assets, especially those that provide unique human experiences. What’s behind the shift?
It used to be that owning too many hard assets was a liability for firms. Now, it’s an asset.
As AI eats its way through the world, leaders and investors are rethinking the value of having control over real, tangible assets as a business hedge, with an emphasis on assets that are experiential. The shift is occurring in the form of major buyouts of casinos, investments in theme parks, and the opening of new physical stores by luxury retailers. “The importance of physical places and human experiences to people is making owning these assets more attractive,” says Alison Harrigan, head of the travel, hospitality, and leisure practice at Korn Ferry.
The shift began earlier this year, after investors began punishing “asset-light” firms. The damage was most evident in the software sector, when the so-called “SaaSpocalyse” shaved $2 trillion in market capitalization from these firms amid rising concerns about AI. “Investors are retreating from asset-light technology businesses because of uncertainty about whether AI can recreate them more cheaply,” says Chad Astmann, co-head of global investment management at Korn Ferry.
The retreat is spilling over into other industries with asset-light business models. Advertising, information services, business and professional services, and other areas that are more exposed to AI have struggled because of the perception that the tech can easily replicate their services. And even though asset-light firms that are adjacent to AI or experience-based—such as those in travel and hospitality—are holding up better, leaders and investors are starting to feel that owning some things is better than owning none.
The shift doesn’t qualify as tectonic or seismic. The dominant model in the hotel and restaurant industries is still licensing and franchising, for instance. But leaders are subtly shifting portfolios to gain ownership over assets that are strategically important for customer experience and too valuable to risk outsourcing to others. “For companies where the experience is the brand, owning the touchpoints where quality, service, culture, and loyalty are built is becoming more valuable,” says Chris Von Der Ahe, a senior client partner in the consumer markets practice at Korn Ferry.
Owning strategically important assets helps travel and leisure operators create experience ecosystems, says Harrigan. Increasingly, cruise-ship operators are vertically integrating—for instance, buying private islands and beach clubs so they can control the entire customer journey. Entertainment conglomerates are shifting investment to theme parks at the expense of other parts of the business. Luxury retailers are opening more physical stores to provide “white glove” service to customers. “With people spending more on travel and entertainment, operators are viewing human-delivered experiences as a moat,” says Harrigan.
Leaders of other asset-light firms are taking notice. Stephanie Davis, a senior client partner in the private equity and technology practices in North America for Korn Ferry, says some clients are looking for ways to shift their business mix—and even looking for transformational leaders to help. “A lot of asset-light firms need help working their way out of the disruption,” says Davis.
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