In Parts 1 -3, the focus was on creating cohesive linkages from vision and mission right down to specific activities in the annual plan. The final part this series will explore the question, how will we know we are getting there? in relation to achieving your goals and ultimately your vision and mission. The answer to this question can of course only come from measuring progress, analysing the implications of the results you get and taking action to continuously improve.
Continuous improvement is a feature of all excellent companies and is only possible within a culture where there is genuine concern, dedication and a willingness among managers and employees to constantly get better at what they do. Hence, everyone in your hotel will have a role to play in the process, but you must naturally take the lead here. Five basic Steps can be taken to manage continuous improvement:
Monday, May 31, 2010
Hotel Price Changes in Past Cycles—Part I: The Early ‘80s
The future for hotel prices remains hazy, but past cycles of recession and revival reveal some enlightening trends. Part I in a series examining the dynamics of hotel prices over the past 30 years.
Transactions of full-service hotels are springing up again after a long drought. But is now the time to buy? What are the possible gains in hotel prices between now and the next peak?
Financing is scarce, and what’s available carries a high price tag or comes only with a conservative, in-place debt coverage ratio. Trailing twelve-month performance stats are at all time lows for many properties. These conditions have kept owners from rushing to sell their hotels. Even as a competitive market for high-quality assets once again drives discount rates below 12%, we’re still a far cry from the sub-10 rates the market dictated in the prior upturn. Moreover, cash flows are expected to remain relatively sluggish over the next 12 to 24 months due to depressed average rates, which are not likely to begin a recovery until later this year.
Though sales volume remains relatively low, 1Q 2010 saw 13 transactions above $10 million—up from 8 from recorded during the same period last year. These included a three-hotel, limited-service portfolio in New York City; the $112-million sale of the Hyatt Regency Boston; and the $63-million sale of the Marriott Los Angeles. The Marriott Los Angeles is of special note: the price at which it most recently sold fell roughly 55% from its sale price in March of 2007. Two hotels, the Sheraton Pleasanton and the Sea Crest resort, sold in 2010 on an individual, non-portfolio basis at higher prices than their sales in the 1990s. Nevertheless, recent hotel prices have overwhelmingly moved downward.
Given the recent uptick in sales, it’s prudent to look at how hotel prices fared in past recessions to form an outlook for opportune buyers. Many buyers purchased full-service hotels in past market troughs and sold four to eight years later—how did they fare? Did they see a windfall or just a fall? This article focuses on hotels that transacted during the 1980s recession and again years later. Future installments will review the cycles that followed.
Major Hotel Transactions and Prices in the Early 1980s Recession
The recession of the early 1980s impacted the U.S. hotel industry in multiple ways. Four straight years of demand declines, compounded by supply increases, caused occupancy to fall from a peak of nearly 72% in 1979 to just over 60% by 1984. High interest rates and a low availability of financing also contributed to a lack of new hotel builds during this time. Transactions activity declined as well. HVS recorded 293 hotel transactions between 1980 and 1982. In contrast, 1,583 transactions were recorded during the revival period from 1983 to 1990.
According to HVS research, 45 hotels that sold between 1980 and 1982 transacted again in the following eight years. Out of the 45 properties, 20 were full-service. Eighteen of these full-service hotels sold at levels 3% to 183% higher than their previous sales prices, an average appreciation of 50%
Transactions of full-service hotels are springing up again after a long drought. But is now the time to buy? What are the possible gains in hotel prices between now and the next peak?
Financing is scarce, and what’s available carries a high price tag or comes only with a conservative, in-place debt coverage ratio. Trailing twelve-month performance stats are at all time lows for many properties. These conditions have kept owners from rushing to sell their hotels. Even as a competitive market for high-quality assets once again drives discount rates below 12%, we’re still a far cry from the sub-10 rates the market dictated in the prior upturn. Moreover, cash flows are expected to remain relatively sluggish over the next 12 to 24 months due to depressed average rates, which are not likely to begin a recovery until later this year.
Though sales volume remains relatively low, 1Q 2010 saw 13 transactions above $10 million—up from 8 from recorded during the same period last year. These included a three-hotel, limited-service portfolio in New York City; the $112-million sale of the Hyatt Regency Boston; and the $63-million sale of the Marriott Los Angeles. The Marriott Los Angeles is of special note: the price at which it most recently sold fell roughly 55% from its sale price in March of 2007. Two hotels, the Sheraton Pleasanton and the Sea Crest resort, sold in 2010 on an individual, non-portfolio basis at higher prices than their sales in the 1990s. Nevertheless, recent hotel prices have overwhelmingly moved downward.
Given the recent uptick in sales, it’s prudent to look at how hotel prices fared in past recessions to form an outlook for opportune buyers. Many buyers purchased full-service hotels in past market troughs and sold four to eight years later—how did they fare? Did they see a windfall or just a fall? This article focuses on hotels that transacted during the 1980s recession and again years later. Future installments will review the cycles that followed.
Major Hotel Transactions and Prices in the Early 1980s Recession
The recession of the early 1980s impacted the U.S. hotel industry in multiple ways. Four straight years of demand declines, compounded by supply increases, caused occupancy to fall from a peak of nearly 72% in 1979 to just over 60% by 1984. High interest rates and a low availability of financing also contributed to a lack of new hotel builds during this time. Transactions activity declined as well. HVS recorded 293 hotel transactions between 1980 and 1982. In contrast, 1,583 transactions were recorded during the revival period from 1983 to 1990.
According to HVS research, 45 hotels that sold between 1980 and 1982 transacted again in the following eight years. Out of the 45 properties, 20 were full-service. Eighteen of these full-service hotels sold at levels 3% to 183% higher than their previous sales prices, an average appreciation of 50%
Friday, May 28, 2010
Hotel toiletries - the new green battleground
Hotel amenity kits are quickly becoming the latest battleground for hotels looking to assert their green credentials.
Cornell Marketing Roundtable Focuses on Implications of Social Media
Old-fashioned listening to the customer remains important, regardless of technology............
The hospitality industry continues to grapple with the effects of social media—both in terms of how customers use these media and how hospitality organizations can interact with their customers. Participants in the spring 2010 Marketing Roundtable, sponsored by Cornell's Center for Hospitality Research (CHR), addressed both ends of that question. Regardless of the media channel, they agreed that hospitality operators should carefully listen to their customers and adapt their offerings and messages accordingly. Chaired by Cornell's Lisa Klein Pearo, the roundtable combined discussions by CHR partners, invited participants, and researchers.
Looking at the social media strategies used by Tennessee's Department of Tourism, Hannah Paramore, of French Quarter Holdings, concluded that regardless of the social media venue, speaking in the brand's voice is a critical component of engaging both visitors and local residents. Participants observed that the specific voice might be slightly different for various sites, but the brand personality must resonate.
Bill Carroll, senior lecturer at the Cornell School of Hotel Administration, presented data from PhoCusWright's most recent research on the use of social media. The results indicated that over 80 percent of online travelers use social media, with the most prominent use being the posting of reviews on online travel agent sites and peer-to-peer review sites, like Trip Advisor and IgoUgo. A second major result was that there was a correlation between positive comments (sentiment) and the hotel quality level.
The hospitality industry continues to grapple with the effects of social media—both in terms of how customers use these media and how hospitality organizations can interact with their customers. Participants in the spring 2010 Marketing Roundtable, sponsored by Cornell's Center for Hospitality Research (CHR), addressed both ends of that question. Regardless of the media channel, they agreed that hospitality operators should carefully listen to their customers and adapt their offerings and messages accordingly. Chaired by Cornell's Lisa Klein Pearo, the roundtable combined discussions by CHR partners, invited participants, and researchers.
Looking at the social media strategies used by Tennessee's Department of Tourism, Hannah Paramore, of French Quarter Holdings, concluded that regardless of the social media venue, speaking in the brand's voice is a critical component of engaging both visitors and local residents. Participants observed that the specific voice might be slightly different for various sites, but the brand personality must resonate.
Bill Carroll, senior lecturer at the Cornell School of Hotel Administration, presented data from PhoCusWright's most recent research on the use of social media. The results indicated that over 80 percent of online travelers use social media, with the most prominent use being the posting of reviews on online travel agent sites and peer-to-peer review sites, like Trip Advisor and IgoUgo. A second major result was that there was a correlation between positive comments (sentiment) and the hotel quality level.
How To Maintain A Happy And Motivated Team
Remember that there are 3 Key Elements....
Having a happy, motivated and productive team is key to customer service, maintaining sales and controlling costs. Conversely unenthusiastic or discontented staff will not only affect the quality of service, your sales and the day-to-day running of the operation, but will also rub off on everyone else, and ultimately lead to high labour turnover.
Having a happy, motivated and productive team is key to customer service, maintaining sales and controlling costs. Conversely unenthusiastic or discontented staff will not only affect the quality of service, your sales and the day-to-day running of the operation, but will also rub off on everyone else, and ultimately lead to high labour turnover.
Thursday, May 27, 2010
Making Sense of Strategic Planning - Part 3
In continuation of his four part series, Enda Larkin explores how to makes sense of the strategic planning process, particularly in the context of small and medium sized operations. Part 2 examined how to develop Vision and Mission statements for the business. Part 3 will explore how to translate these statements into goals, strategies and plans, so that they actually add real value to the business. View Part 1 here
View Part 2 here
Living your Vision and Mission
In Part 2, the focus was on capturing broad aspirations for the business through the development of the Vision and Mission. But how can these statements be lived in practice so that they add value? An obvious first step is to ensure that all primary stakeholders actually know about them by communicating your vision and mission widely and frequently. However, to actually become a true driving force these statements must first be translated into measurable goals.
View Part 2 here
Living your Vision and Mission
In Part 2, the focus was on capturing broad aspirations for the business through the development of the Vision and Mission. But how can these statements be lived in practice so that they add value? An obvious first step is to ensure that all primary stakeholders actually know about them by communicating your vision and mission widely and frequently. However, to actually become a true driving force these statements must first be translated into measurable goals.
PricewaterhouseCoopers' Lodging Industry Forecast Anticipates Pricing Power to Return in 2011
PricewaterhouseCoopers' updated US lodging forecast expects continued recovery of demand, with the ability to increase room rates returning in 2011, after two consecutive years of decline. The initial months of 2010 suggest that a sustainable recovery of lodging demand has begun. As businesses and consumers gain further confidence in the strength of economic recovery, discretionary spending is expected to continue to increase, contributing to progressive increases in lodging demand through the remainder of 2010, though the pace of recovery is expected to moderate.
With lodging supply growth expected to lag demand growth for the first time since 2006, PricewaterhouseCoopers expects hotel occupancy levels in 2010 to increase. Average daily rates (ADR) are not expected to increase until early next year, resulting in a moderate occupancy-driven increase in revenue per available room (RevPAR) in 2010, with a more substantial, rate-driven recovery in RevPAR expected in 2011.
With lodging supply growth expected to lag demand growth for the first time since 2006, PricewaterhouseCoopers expects hotel occupancy levels in 2010 to increase. Average daily rates (ADR) are not expected to increase until early next year, resulting in a moderate occupancy-driven increase in revenue per available room (RevPAR) in 2010, with a more substantial, rate-driven recovery in RevPAR expected in 2011.
Wednesday, May 26, 2010
Kimpton Hotels & Restaurants pursues brand-wide Green Seal Certification in 2010
May 25, 2010 – San Francisco-based Kimpton Hotels & Restaurants announced its pursuit of an aggressive milestone for environmental responsibility. Kimpton, with 50 hotels in 22 major metropolitan cities, is in process to become the first lifestyle boutique hotel company in the U.S. to attain 100 percent Green Seal certification at the Silver level.
At present, 46 of 50 hotels have completed the rigorous application process for Green Seal certification, which includes an on-site audit. Half of those have already received certification. The rest are anticipated to be awarded certification within the next 90 days. The remaining four, including two opening this spring, will begin the certification process this year.
Green Seal certification is an important third-party validation of Kimpton’s more than 80 environmentally responsible operational practices under the company’s EarthCare program, and allows Kimpton to more effectively measure its nationwide reductions in waste, energy and water consumption. For example, at Kimpton’s Hotel Monaco in Chicago, which earned Green Seal certification in 2009 along with Kimpton’s Hotel Burnham and Hotel Allegro in the same city, tracking methods required for certification revealed that 116 tons, or 45 percent, of all of recyclables were diverted from landfill last year. This effort equates to the preservation of 1,977 trees, 477,042 kilowatts of electricity, 44,192 gallons of oil, 814,065 gallons of water and 349 yards of space diverted from landfill.
To qualify for GS-33 Green Seal certification, a hotel must demonstrate sustainable practices in the following areas:
■Waste minimization, reuse and recycling
■Energy efficiency, conservation and management
■Management of fresh water resources
■Waste water management
■Hazardous substances
■Environmentally sensitive purchasing
Certification requires an initial evaluation by Green Seal, including an extensive on-site audit of the property, and annual monitoring to ensure ongoing compliance. The GS-33 standard recognizes three levels of environmental achievement:
■Bronze: Entry level, meets essential environmental leadership elements
■Silver: Meets a more comprehensive level of required leadership operations
■Gold: Meets additional criteria demonstrating hotel is at the forefront of environmental leadership
“We congratulate the Kimpton hotels on committing to such an ambitious goal,” said Dr. Arthur Weissman, President & CEO of Green Seal. “As their certified properties in Chicago alone have already prevented an estimated 1,500 tons of greenhouse gasses, Kimpton is helping to create a more sustainable world.”
Since it was first published in 1999, the Green Seal Environmental Standard for Lodging Properties, GS-33, has represented leadership in the industry. The standard focuses on waste minimization, energy conservation and management, management of fresh water resources, waste water management, pollution prevention, and organizational commitment such as environmentally sensitive purchasing. The standard can serve as a tool to help operations begin to take action to improve their operation and is available for Green Seal certification.
Kimpton’s innovative EarthCare initiatives date back to the company’s inception in 1981 and include several industry firsts such as in-room recycling bins and the use of non-toxic cleaners brand-wide. Through a new brand-wide Wines That CareTM program led by master sommelier Emily Wines, guests enjoy many featured environmentally preferable wines at the hosted evening wine hour at all Kimpton hotels. Diners at Kimpton Restaurants have access to increased sustainably produced wine selections on menus, can take advantage of in-house purified water through a national partnership with Natura® and enjoy sustainable seafood dishes in accordance with Monterey Bay Aquarium’s Seafood Watch program. Kimpton is a partner of The Nature Conservancy to support its “Plant a Billion Trees” campaign.
At present, 46 of 50 hotels have completed the rigorous application process for Green Seal certification, which includes an on-site audit. Half of those have already received certification. The rest are anticipated to be awarded certification within the next 90 days. The remaining four, including two opening this spring, will begin the certification process this year.
Green Seal certification is an important third-party validation of Kimpton’s more than 80 environmentally responsible operational practices under the company’s EarthCare program, and allows Kimpton to more effectively measure its nationwide reductions in waste, energy and water consumption. For example, at Kimpton’s Hotel Monaco in Chicago, which earned Green Seal certification in 2009 along with Kimpton’s Hotel Burnham and Hotel Allegro in the same city, tracking methods required for certification revealed that 116 tons, or 45 percent, of all of recyclables were diverted from landfill last year. This effort equates to the preservation of 1,977 trees, 477,042 kilowatts of electricity, 44,192 gallons of oil, 814,065 gallons of water and 349 yards of space diverted from landfill.
To qualify for GS-33 Green Seal certification, a hotel must demonstrate sustainable practices in the following areas:
■Waste minimization, reuse and recycling
■Energy efficiency, conservation and management
■Management of fresh water resources
■Waste water management
■Hazardous substances
■Environmentally sensitive purchasing
Certification requires an initial evaluation by Green Seal, including an extensive on-site audit of the property, and annual monitoring to ensure ongoing compliance. The GS-33 standard recognizes three levels of environmental achievement:
■Bronze: Entry level, meets essential environmental leadership elements
■Silver: Meets a more comprehensive level of required leadership operations
■Gold: Meets additional criteria demonstrating hotel is at the forefront of environmental leadership
“We congratulate the Kimpton hotels on committing to such an ambitious goal,” said Dr. Arthur Weissman, President & CEO of Green Seal. “As their certified properties in Chicago alone have already prevented an estimated 1,500 tons of greenhouse gasses, Kimpton is helping to create a more sustainable world.”
Since it was first published in 1999, the Green Seal Environmental Standard for Lodging Properties, GS-33, has represented leadership in the industry. The standard focuses on waste minimization, energy conservation and management, management of fresh water resources, waste water management, pollution prevention, and organizational commitment such as environmentally sensitive purchasing. The standard can serve as a tool to help operations begin to take action to improve their operation and is available for Green Seal certification.
Kimpton’s innovative EarthCare initiatives date back to the company’s inception in 1981 and include several industry firsts such as in-room recycling bins and the use of non-toxic cleaners brand-wide. Through a new brand-wide Wines That CareTM program led by master sommelier Emily Wines, guests enjoy many featured environmentally preferable wines at the hosted evening wine hour at all Kimpton hotels. Diners at Kimpton Restaurants have access to increased sustainably produced wine selections on menus, can take advantage of in-house purified water through a national partnership with Natura® and enjoy sustainable seafood dishes in accordance with Monterey Bay Aquarium’s Seafood Watch program. Kimpton is a partner of The Nature Conservancy to support its “Plant a Billion Trees” campaign.
20 important revelations for hotels
One of the fun perks that goes along with this gig is sitting on planning committees for industry conferences. Last week I was in Atlanta with a group of industry movers and shakers to discuss the 2011 Hunter Hotel Investment Conference. I left with 20 thoughts that helped reaffirm my feeling the hotel industry is only beginning to see a recovery unfolding.
Good Ideas are a Dime a Dozen… But, Success or Failure is in the Execution
Knowing that the hotel business is often sensitive to nickels and dimes, not just dollars, it really pains me to see people throw money away without thinking things through. So many people have the energy to generate ideas, but too few have enough energy to think them through. Could it be because the responsibility for success or failure is in the planning and not in generating the idea? Stephen Covey, in his book “Seven Habits of Highly Effective People”, identifies one of those valuable habits as “Begin with the end in mind”.
Tuesday, May 25, 2010
Why We Can't Nickle and Dime Our Guests...
The brewing controversy over extra fees imposed on hotel guests is not going away, nor should it. A startling (perhaps not?) new survey from D.K. Shifflet shows quite convincingly that the worst thing the hotel industry could do is follow the path taken by the airlines and begin to nickel and dime their guests.
In a survey of 500-plus consumers who’ve stayed in lodging properties the past three months, three of the top five annoyances for hotel guests are items that involve added fees: charging for Internet access, hidden fees at checkout and charging for parking. The other two annoyances in the top five were uncomfortable beds and thin walls between rooms.
The hotel industry has a rare opportunity to shift its strategy before it’s too late. Bundling all reasonable fees into the room rate makes the most sense and will be most appreciated by guests. I know room rates and by extension, revenues are a problem for nearly every hotel, but all signs signal a turnaround. Occupancy is improving, and rates are sure to follow. Don’t be stupid enough to trade short-term revenues for long-term disgust by your customers
In a survey of 500-plus consumers who’ve stayed in lodging properties the past three months, three of the top five annoyances for hotel guests are items that involve added fees: charging for Internet access, hidden fees at checkout and charging for parking. The other two annoyances in the top five were uncomfortable beds and thin walls between rooms.
The hotel industry has a rare opportunity to shift its strategy before it’s too late. Bundling all reasonable fees into the room rate makes the most sense and will be most appreciated by guests. I know room rates and by extension, revenues are a problem for nearly every hotel, but all signs signal a turnaround. Occupancy is improving, and rates are sure to follow. Don’t be stupid enough to trade short-term revenues for long-term disgust by your customers
PKF-HR Updates Forecast to Show RevPAR Growth in 2010 While Profits Lag
PKF Hospitality Research (PKF-HR) today announced that, according to the May 2010 edition of Hotel Horizons®, U.S. hotels should enjoy a 1.7 percent growth in RevPAR in 2010, but bottom-line profits (NOI) will contract another 1.4 percent. The projection of growth in RevPAR for 2010 marks a very positive change in the outlook for the U.S. lodging industry since PKF-HR's last forecast published in March of 2010.
"We believe the first quarter surge in occupied rooms foretells the start of a strong comeback in the demand for lodging accommodations," said R. Mark Woodworth president of PKF-HR. "As early as September of 2008, we anticipated the inflection point for hotel demand to occur in the first quarter of 2010, but quite frankly, the magnitude of the turnaround was a very pleasant surprise. Such a large increase in lodging demand suggests a return of pent up travel that did not occur in 2009 because of budget constraints, plus the real hotel demand growth attributable to improvements in the long-term economic outlook." According to Smith Travel Research (STR), lodging demand in the first quarter of 2010 increased 5.3 percent over the first quarter of 2009. This is the largest quarterly increase in hotel demand since the second quarter of 1989, and surpassed PKF-HR's forecast of a 2.6 percent gain.
"Forecasting turning points in hotel market performance is a tricky proposition, largely because of the complications on the supply side of the hotel market," said John B. Corgel Ph.D., the Robert C. Baker professor of real estate at the Cornell University School of Hotel Administration and senior advisor to PKF-HR. "The hotel cycle is a hybrid of the business cycle on the demand side and an endemic cyclical pattern of the real estate market on the supply side. The shape of hotel market movements over time begins with the connection to the business cycle, but then takes its final form as the result of the considerable time required to construct new hotels to be built in response to increases in hospitality demand. Therefore, the market tends to 'hang' for a lengthy period at the peak until construction accelerates. Conversely, the market 'hangs' in the trough because hotels are not demolished simply because demand is weak."
While news of growth on the top-line is encouraging, a series of factors contribute to a projection of continued declines in unit-level profits. PKF-HR forecasts U.S. hotel occupancy levels to increase 3.4 percent in 2010, but average daily room rates (ADR) are projected to drop 1.6 percent. The increased number of guests will require hotels to incur additional operating costs, such as housekeeping staff, laundry, guest supplies and energy consumption. Meanwhile, on average, guests will be paying less to rent their rooms.
"Unfortunately, the composition of hotel revenue growth we forecast for 2010 is not very profitable," Woodworth said. "This is consistent with the pattern we have seen coming out of past industry recessions. Price increases lag demand growth. Greater profits lag increases in revenue."
Local Markets
Hoteliers in 49 of the 50 markets (Houston was the exception) covered within the PKF-HR Horizons® universe sold more rooms in the first quarter of 2010 than a year earlier, according to STR. "It's encouraging to see such widespread growth in hotel demand. This recovery is not just isolated to the major gateway markets," Woodworth observed.
Conversely, pricing remained weak as ADR levels in 49 of the 50 markets experienced a year-over-year decline during the first quarter of 2010. Miami, which hosted the Super Bowl in February, was the outlier. Given these declines in ADR, only 20 of the 50 cities achieved a RevPAR increase.
"For the entirety of 2010 we expect that 40 of our 50 key markets will realize occupancy increases, although continued downward pressure on pricing will limit annual ADR growth to just 14 markets," Woodworth projected. "The expectation that demand will outpace increases in hotel supply in so many communities will lead to RevPAR growth in 29 Horizons® cities."
Chain-Scales
Amongst the hotel chain scales, demand growth in 2010 will be strongest for luxury properties, followed closely by upscale hotels. While all chain scales are forecast to experience declines in ADR this year, four of seven should realize RevPAR gains. As expected, luxury hotels RevPAR forecast will be strongest, while midscale properties with food and beverage should lag all property types with a 3.3 percent RevPAR decline.
"Luxury properties historically have experienced the greatest declines in hotel performance during recessions, but tend to rebound relatively quickly. Our 6.0 percent increase in RevPAR for luxury hotels in 2010 is consistent with this trend," Woodworth said. Demand for luxury hotels is forecast to rise a very strong 11.1 percent in 2010, but the discounting needed to entice upscale travelers will result in a 2.5 percent decline in ADR.
Pick Up in 2011
Hotel NOI growth is expected to accelerate dramatically in 2011. PKF-HR forecasts RevPAR to grow 7.8 percent in 2011. "Our econometric forecast model is driven by macro economic variables provided by Moody's Economy.com, and their outlook for 2011 is very strong," said Corgel. "Moody's economic forecast developed in April of 2010 calls for a 3.3 percent increase in real personal income and a 1.6 percent rise in employment. We have translated these variables into a 3.4 percent increase in lodging demand and a 4.6 percent lift in ADR. Both of these lodging measures are well above their respective long-term averages."
Unlike 2010, the composition of hotel revenue growth in 2011 should yield strong gains in hotel profits. The 4.6 forecast rise in ADR, combined with a 3.1 gain in occupied rooms, will help drive unit-level profits up 18.3 percent.
"Clearly we are in the early stages of what should be a period of exceptional operating performance for the U.S. lodging industry. Our forecasts for lodging demand and ADR growth are very strong through 2014, while the threat of new competition is limited. However, one cannot ignore the depth of the 2009 recession and what was occurring in the real estate and financial markets. This is going to be an extended revival for hotel operators, and an even longer recovery for hotel owners," Woodworth concluded.
Hotel Horizons® is a series of econometrically derived forecast reports developed by PKF Hospitality Research. The reports cover 50 of the largest U.S. hotel markets, as well as the nation as a whole, six location attributes, and six chain scales. Economic forecasts by Moody's Economy.com and historic hotel performance data and future supply pipeline information from Smith Travel Research are used to construct the industry's most comprehensive forecasts of U.S. lodging market behavior.
"We believe the first quarter surge in occupied rooms foretells the start of a strong comeback in the demand for lodging accommodations," said R. Mark Woodworth president of PKF-HR. "As early as September of 2008, we anticipated the inflection point for hotel demand to occur in the first quarter of 2010, but quite frankly, the magnitude of the turnaround was a very pleasant surprise. Such a large increase in lodging demand suggests a return of pent up travel that did not occur in 2009 because of budget constraints, plus the real hotel demand growth attributable to improvements in the long-term economic outlook." According to Smith Travel Research (STR), lodging demand in the first quarter of 2010 increased 5.3 percent over the first quarter of 2009. This is the largest quarterly increase in hotel demand since the second quarter of 1989, and surpassed PKF-HR's forecast of a 2.6 percent gain.
"Forecasting turning points in hotel market performance is a tricky proposition, largely because of the complications on the supply side of the hotel market," said John B. Corgel Ph.D., the Robert C. Baker professor of real estate at the Cornell University School of Hotel Administration and senior advisor to PKF-HR. "The hotel cycle is a hybrid of the business cycle on the demand side and an endemic cyclical pattern of the real estate market on the supply side. The shape of hotel market movements over time begins with the connection to the business cycle, but then takes its final form as the result of the considerable time required to construct new hotels to be built in response to increases in hospitality demand. Therefore, the market tends to 'hang' for a lengthy period at the peak until construction accelerates. Conversely, the market 'hangs' in the trough because hotels are not demolished simply because demand is weak."
While news of growth on the top-line is encouraging, a series of factors contribute to a projection of continued declines in unit-level profits. PKF-HR forecasts U.S. hotel occupancy levels to increase 3.4 percent in 2010, but average daily room rates (ADR) are projected to drop 1.6 percent. The increased number of guests will require hotels to incur additional operating costs, such as housekeeping staff, laundry, guest supplies and energy consumption. Meanwhile, on average, guests will be paying less to rent their rooms.
"Unfortunately, the composition of hotel revenue growth we forecast for 2010 is not very profitable," Woodworth said. "This is consistent with the pattern we have seen coming out of past industry recessions. Price increases lag demand growth. Greater profits lag increases in revenue."
Local Markets
Hoteliers in 49 of the 50 markets (Houston was the exception) covered within the PKF-HR Horizons® universe sold more rooms in the first quarter of 2010 than a year earlier, according to STR. "It's encouraging to see such widespread growth in hotel demand. This recovery is not just isolated to the major gateway markets," Woodworth observed.
Conversely, pricing remained weak as ADR levels in 49 of the 50 markets experienced a year-over-year decline during the first quarter of 2010. Miami, which hosted the Super Bowl in February, was the outlier. Given these declines in ADR, only 20 of the 50 cities achieved a RevPAR increase.
"For the entirety of 2010 we expect that 40 of our 50 key markets will realize occupancy increases, although continued downward pressure on pricing will limit annual ADR growth to just 14 markets," Woodworth projected. "The expectation that demand will outpace increases in hotel supply in so many communities will lead to RevPAR growth in 29 Horizons® cities."
Chain-Scales
Amongst the hotel chain scales, demand growth in 2010 will be strongest for luxury properties, followed closely by upscale hotels. While all chain scales are forecast to experience declines in ADR this year, four of seven should realize RevPAR gains. As expected, luxury hotels RevPAR forecast will be strongest, while midscale properties with food and beverage should lag all property types with a 3.3 percent RevPAR decline.
"Luxury properties historically have experienced the greatest declines in hotel performance during recessions, but tend to rebound relatively quickly. Our 6.0 percent increase in RevPAR for luxury hotels in 2010 is consistent with this trend," Woodworth said. Demand for luxury hotels is forecast to rise a very strong 11.1 percent in 2010, but the discounting needed to entice upscale travelers will result in a 2.5 percent decline in ADR.
Pick Up in 2011
Hotel NOI growth is expected to accelerate dramatically in 2011. PKF-HR forecasts RevPAR to grow 7.8 percent in 2011. "Our econometric forecast model is driven by macro economic variables provided by Moody's Economy.com, and their outlook for 2011 is very strong," said Corgel. "Moody's economic forecast developed in April of 2010 calls for a 3.3 percent increase in real personal income and a 1.6 percent rise in employment. We have translated these variables into a 3.4 percent increase in lodging demand and a 4.6 percent lift in ADR. Both of these lodging measures are well above their respective long-term averages."
Unlike 2010, the composition of hotel revenue growth in 2011 should yield strong gains in hotel profits. The 4.6 forecast rise in ADR, combined with a 3.1 gain in occupied rooms, will help drive unit-level profits up 18.3 percent.
"Clearly we are in the early stages of what should be a period of exceptional operating performance for the U.S. lodging industry. Our forecasts for lodging demand and ADR growth are very strong through 2014, while the threat of new competition is limited. However, one cannot ignore the depth of the 2009 recession and what was occurring in the real estate and financial markets. This is going to be an extended revival for hotel operators, and an even longer recovery for hotel owners," Woodworth concluded.
Hotel Horizons® is a series of econometrically derived forecast reports developed by PKF Hospitality Research. The reports cover 50 of the largest U.S. hotel markets, as well as the nation as a whole, six location attributes, and six chain scales. Economic forecasts by Moody's Economy.com and historic hotel performance data and future supply pipeline information from Smith Travel Research are used to construct the industry's most comprehensive forecasts of U.S. lodging market behavior.
Monday, May 24, 2010
Hotel Restaurant Solutions - Turning a Headache into an Opportunity
Critical issues to consider when outsourcing a hotel’s restaurant operations to a professional restaurant brand/operator.
In this unprecedented economy where hotel occupancy and rates are significantly down, hotel owner/operators are forced to closely review EVERY aspect of their operation to squeeze out profitability opportunities. If approached correctly, an area of great opportunity can be that of outsourcing property restaurant operations to a professional restaurant brand/operator.
Currently there are over 50,000 hotel properties operating in the United States, most of which offer restaurant options to their guests. While most of these are profitable at a departmental level, when all of the hotel’s restaurant expenses are properly accounted for, a vast majority of venues are unprofitable. In addition, most lodging owners/operators consider the running of their hotel restaurant to be a necessary evil, as the operational and managerial demands far outweigh the related revenue streams. However, when done correctly, an effective hotel restaurant will generate greater restaurant sales and profitability, enhance RevPAR and increase asset value. The key is to retain the benefits of the restaurant operations, while outsourcing the headaches.
When evaluating a partnership with a restaurant brand/operator, the hotel owner must consider three key elements: deal structure, operational considerations and restaurant brand/operator selection. This article addresses these basic issues that influence both hotel owners and restaurant brands.
In this unprecedented economy where hotel occupancy and rates are significantly down, hotel owner/operators are forced to closely review EVERY aspect of their operation to squeeze out profitability opportunities. If approached correctly, an area of great opportunity can be that of outsourcing property restaurant operations to a professional restaurant brand/operator.
Currently there are over 50,000 hotel properties operating in the United States, most of which offer restaurant options to their guests. While most of these are profitable at a departmental level, when all of the hotel’s restaurant expenses are properly accounted for, a vast majority of venues are unprofitable. In addition, most lodging owners/operators consider the running of their hotel restaurant to be a necessary evil, as the operational and managerial demands far outweigh the related revenue streams. However, when done correctly, an effective hotel restaurant will generate greater restaurant sales and profitability, enhance RevPAR and increase asset value. The key is to retain the benefits of the restaurant operations, while outsourcing the headaches.
When evaluating a partnership with a restaurant brand/operator, the hotel owner must consider three key elements: deal structure, operational considerations and restaurant brand/operator selection. This article addresses these basic issues that influence both hotel owners and restaurant brands.
New Teaching Hotel Readies Students for Hospitality Careers
Before The Hotel at Kirkwood Center opens its doors to serve guests this summer, it will be serving the eastern Iowa economy. The Hotel will hire the equivalent of 75 full-time workers to staff it. The new employees will mostly be from the Cedar Rapids/Iowa City area, with a majority of the jobs full-time with benefits. About 15 management positions have been filled.
"The Hotel will need everything from guest room attendants and bell staff to managers and supervisors. Some of these positions will be entry-level while others will need to bring a lot of work experience to the table," said General Manager Lee Belfield.
Students in the Hospitality Arts department at Kirkwood Community College will also help staff The Hotel. In addition to classroom lectures, their days will be spent gaining real-world experience while working alongside the hired professional staff.
"Working in the hospitality field is unlike many others. Every employee will be the face of The Hotel," Belfield said. "From the first second you step foot out of your car our valet will greet you, then our bell person will help with your luggage as you go inside to be greeted by the front desk. Our guest room attendants will have readied your room, and others will make sure any food and meeting needs are taken care of. All of this will happen under the supervision and guidance of the staff we hire."
"The Hotel will need everything from guest room attendants and bell staff to managers and supervisors. Some of these positions will be entry-level while others will need to bring a lot of work experience to the table," said General Manager Lee Belfield.
Students in the Hospitality Arts department at Kirkwood Community College will also help staff The Hotel. In addition to classroom lectures, their days will be spent gaining real-world experience while working alongside the hired professional staff.
"Working in the hospitality field is unlike many others. Every employee will be the face of The Hotel," Belfield said. "From the first second you step foot out of your car our valet will greet you, then our bell person will help with your luggage as you go inside to be greeted by the front desk. Our guest room attendants will have readied your room, and others will make sure any food and meeting needs are taken care of. All of this will happen under the supervision and guidance of the staff we hire."
Friday, May 21, 2010
Tired of Hilton, Marriott or Starwood hotels? Start-up loyalty point program offers travelers new choices
Are you an indie-hotel kind of person but for business trips, you stick with Marriott Rewards, Hilton HHonors and Starwood Preferred Guest for the points? Well, now there's a just-launched program that might intrigue you.
(Barb DeLollis writes some good stuff for USA Today....)
(Barb DeLollis writes some good stuff for USA Today....)
How To Find The Right Manager To Effectively Lead Your Hotel
The Keys to Success / Working with Recruiters
I have worked with and still work swith Recruiters.
There are good ones and badones...I have some good ones...
The worlds of hospitality and tourism industry are part of a multi-billion dollar industry that frequently depends on the availability of leisure time and disposable income. A hospitality unit such as a restaurant, hotel, conference center and other segments consists of multiple groups such as facility maintenance, direct operations (servers, housekeeping service, kitchen professionals, beverage service, etc.), management, accounting and financial services, marketing, and human resources. The industry covers a wide range of organizations offering food service, entertainment and accommodation. Each segment has its own areas of expertise, with skill-sets required for the work involved and a clear need for effective leadership to successfully integrate the efforts.
The hospitality industry may seem to be a rather basic business to the outsider. At quick glance, the business of renting rooms, preparing and serving food and hosting meetings appears to be one that requires a fundamental understanding of the components of the industry. Yet, a realistic check shows the tremendous range of skills and competencies needed to succeed in one of the world’s largest and most cyclical industries. The hospitality industry consists of broad category of fields within the service field that includes lodging, food service, entertainment and theme parks, meetings and events, transportation (including cruise lines) and additional fields within the tourism industry.
I have worked with and still work swith Recruiters.
There are good ones and badones...I have some good ones...
The worlds of hospitality and tourism industry are part of a multi-billion dollar industry that frequently depends on the availability of leisure time and disposable income. A hospitality unit such as a restaurant, hotel, conference center and other segments consists of multiple groups such as facility maintenance, direct operations (servers, housekeeping service, kitchen professionals, beverage service, etc.), management, accounting and financial services, marketing, and human resources. The industry covers a wide range of organizations offering food service, entertainment and accommodation. Each segment has its own areas of expertise, with skill-sets required for the work involved and a clear need for effective leadership to successfully integrate the efforts.
The hospitality industry may seem to be a rather basic business to the outsider. At quick glance, the business of renting rooms, preparing and serving food and hosting meetings appears to be one that requires a fundamental understanding of the components of the industry. Yet, a realistic check shows the tremendous range of skills and competencies needed to succeed in one of the world’s largest and most cyclical industries. The hospitality industry consists of broad category of fields within the service field that includes lodging, food service, entertainment and theme parks, meetings and events, transportation (including cruise lines) and additional fields within the tourism industry.
Tuesday, May 18, 2010
Where does My Steak Come from ?
This is a great site, It cross sections the Cow so you can tell and explain where different Steaks come from.
Why is it a Vein In New York...Where is the Teres Major. ...There is a school which doesn't cover Meatcutting 101...They send out future Chefs who have never cut a steak. Let alone understand where it comes from. The school says that it is too costly...I have heard one Chef from a major resort ask a COP specialist...and actually look at a diagram, and ask.."Where does the Ground Beef come From ?
I hope that you find this helpful....and if you need any guidance...Drop me an email...Cheers...
Why is it a Vein In New York...Where is the Teres Major. ...There is a school which doesn't cover Meatcutting 101...They send out future Chefs who have never cut a steak. Let alone understand where it comes from. The school says that it is too costly...I have heard one Chef from a major resort ask a COP specialist...and actually look at a diagram, and ask.."Where does the Ground Beef come From ?
I hope that you find this helpful....and if you need any guidance...Drop me an email...Cheers...
Daniel Edward Craigs's Blog
(See the link..of Blogs I follow)..
Best Practices for Responding to Online Hotel Reviews, Part 2
It appears that hotels are finally waking up to the importance of monitoring and responding to online reviews. TripAdvisor reports a 203% increase in hotel responses to negative reviews last year. Unfortunately, this equates to a mere 4% response rate. As reviews become ubiquitous, playing an increasingly critical role in travel decisions, hoteliers can no longer afford to let complaints go unanswered. In the second installment of this two-part series, we share more tips for responding to negative online reviews.
What kind of tone should I use?
Some hotel managers write like it’s the Victorian era and they’re running Buckingham Palace. In social media you can be more informal and to the point, though always professional. Address the guest directly, but bear in mind you’re speaking to an entire community. As difficult as it may be at times, try not to take negative feedback personally. And don’t be dramatic, as in “I’m shocked and devastated by your comments”—it’s a guest complaint, not a death in the family. Avoid humor and especially sarcasm, and never be defensive, petty or condescending. You might think you’re concealing your true feelings, but travelers can read between the lines.
Best Practices for Responding to Online Hotel Reviews, Part 2
It appears that hotels are finally waking up to the importance of monitoring and responding to online reviews. TripAdvisor reports a 203% increase in hotel responses to negative reviews last year. Unfortunately, this equates to a mere 4% response rate. As reviews become ubiquitous, playing an increasingly critical role in travel decisions, hoteliers can no longer afford to let complaints go unanswered. In the second installment of this two-part series, we share more tips for responding to negative online reviews.
What kind of tone should I use?
Some hotel managers write like it’s the Victorian era and they’re running Buckingham Palace. In social media you can be more informal and to the point, though always professional. Address the guest directly, but bear in mind you’re speaking to an entire community. As difficult as it may be at times, try not to take negative feedback personally. And don’t be dramatic, as in “I’m shocked and devastated by your comments”—it’s a guest complaint, not a death in the family. Avoid humor and especially sarcasm, and never be defensive, petty or condescending. You might think you’re concealing your true feelings, but travelers can read between the lines.
Friday, May 14, 2010
Measuring The Business Interrupted By A Catestrophic Event
Immediately after a catastrophic event such as the Gulf Oil Spill or the floods in Nashville, the thoughts of hotel owners and operators go in many directions. First priority is the safety of the guests and employees. Once the human situation is secure, attention then turns to rebuilding the facilities and services of the hotel and getting “back to business.”
Gather Your Historical Lodging Data
What is frequently overlooked in the immediate turmoil is the need to secure important hotel data and documents. This information is especially vital for those owners that wish to recover lost business income from their insurance company. While the actual filing of claims and negotiations may not occur until a year or two after the horrific event, several pieces of data and documents need to be gathered in the short-term in order to achieve a favorable settlement later on.
After working with our clients to recoup business interruption benefits from their insurance companies, we have found certain pieces of hotel data and documents to be extremely useful in our calculations of lost revenues and profits. The following is a partial list of reports (effective the day of the catastrophic event) that should be gathered and preserved by management.
Once the historical performance data is gathered from the documents listed above, the next step is to estimate how the hotel would have performed if the catastrophic event had not occurred. To prepare this forecast, we utilize budget, marketing plan, reservation, and group booking information contained in the secured documents. In addition, we rely on the most recent forecast developed prior to the catastrophic event for the subject property’s market.
Using the market forecast as a baseline for future hotel supply, demand, and revenue conditions within the market for the projection period, we then estimate the market penetration of the subject property based on historical correlations to market performance. This provides us with estimates of the potential rooms revenue the subject property would have earned had the catastrophic event not occurred. From these estimates of hotel rooms revenue, we then prepare projections of net operating income (NOI) using historical hotel financial statements from the subject property, as well as data from our firm’s Trends® in the Hotel Industry database.
The calculation of lost business is derived from the difference between the performance of the subject property estimated under the “no catastrophic event” scenario, and the data from the actual performance of the hotel during the projection period. Estimates can be made for lost room nights, revenue, and hotel NOI.
Objectivity Is Key
A key to the lost business calculation is the ability to provide an objective estimate of the “no catastrophic event” scenario. The foundations of this estimate are the actual advanced booking data from the subject property and the hotel market forecast. Since the forecast was developed prior to the catastrophic event, it can be viewed as the prevailing outlook for future market conditions as of the day of the event.
PKF Hospitality Research prepares econometric forecasts of hotel supply, demand, occupancy, ADR, and RevPAR for 50 major markets across the nation. The forecast reports are entitled Hotel Horizons®. Each Hotel Horizons® report contains forecast performance data for both upper-price and lower-price hotels in a given market. The hotel forecasts are made for a five-year period, and are updated every three months. The Hotel Horizons® econometric models are based on data from Moody’s economy.com, Smith Travel Research and PKF Hospitality Research.
The Bottom Line Really Counts
It is important to note that, for most business interruption insurance claims, it is the lost net income that would be estimated. As mentioned before, the translation of revenue to hotel profit can be done based on the historical performance of the subject property, as well as industry wide financial benchmarks.
Receiving your business interruption insurance benefits never fully alleviates the emotional damage and pain caused by a catastrophic event. However, the funds do go a long way to help preserve “the business.”
Gather Your Historical Lodging Data
What is frequently overlooked in the immediate turmoil is the need to secure important hotel data and documents. This information is especially vital for those owners that wish to recover lost business income from their insurance company. While the actual filing of claims and negotiations may not occur until a year or two after the horrific event, several pieces of data and documents need to be gathered in the short-term in order to achieve a favorable settlement later on.
After working with our clients to recoup business interruption benefits from their insurance companies, we have found certain pieces of hotel data and documents to be extremely useful in our calculations of lost revenues and profits. The following is a partial list of reports (effective the day of the catastrophic event) that should be gathered and preserved by management.
- Five-year history of competitive position reports (i.e. STR report), including current year-to-date.
- Five-year history of your annual hotel financial statements, including current year-to-date.
- Budgeted performance for the remainder of the current year.
- Budgeted performance for the upcoming year.
- Marketing plan for the current year
- Marketing plan for the upcoming year
- Capital improvement plan – current and future years
- Guaranteed reservations and advance deposit activity.
- Group contracts
- Group booking pace for the next 10 years
Once the historical performance data is gathered from the documents listed above, the next step is to estimate how the hotel would have performed if the catastrophic event had not occurred. To prepare this forecast, we utilize budget, marketing plan, reservation, and group booking information contained in the secured documents. In addition, we rely on the most recent forecast developed prior to the catastrophic event for the subject property’s market.
Using the market forecast as a baseline for future hotel supply, demand, and revenue conditions within the market for the projection period, we then estimate the market penetration of the subject property based on historical correlations to market performance. This provides us with estimates of the potential rooms revenue the subject property would have earned had the catastrophic event not occurred. From these estimates of hotel rooms revenue, we then prepare projections of net operating income (NOI) using historical hotel financial statements from the subject property, as well as data from our firm’s Trends® in the Hotel Industry database.
The calculation of lost business is derived from the difference between the performance of the subject property estimated under the “no catastrophic event” scenario, and the data from the actual performance of the hotel during the projection period. Estimates can be made for lost room nights, revenue, and hotel NOI.
Objectivity Is Key
A key to the lost business calculation is the ability to provide an objective estimate of the “no catastrophic event” scenario. The foundations of this estimate are the actual advanced booking data from the subject property and the hotel market forecast. Since the forecast was developed prior to the catastrophic event, it can be viewed as the prevailing outlook for future market conditions as of the day of the event.
PKF Hospitality Research prepares econometric forecasts of hotel supply, demand, occupancy, ADR, and RevPAR for 50 major markets across the nation. The forecast reports are entitled Hotel Horizons®. Each Hotel Horizons® report contains forecast performance data for both upper-price and lower-price hotels in a given market. The hotel forecasts are made for a five-year period, and are updated every three months. The Hotel Horizons® econometric models are based on data from Moody’s economy.com, Smith Travel Research and PKF Hospitality Research.
The Bottom Line Really Counts
It is important to note that, for most business interruption insurance claims, it is the lost net income that would be estimated. As mentioned before, the translation of revenue to hotel profit can be done based on the historical performance of the subject property, as well as industry wide financial benchmarks.
Receiving your business interruption insurance benefits never fully alleviates the emotional damage and pain caused by a catastrophic event. However, the funds do go a long way to help preserve “the business.”
STR releases 2010 summer forecast
The U.S. hotel industry should expect to see mixed results in the three key performance metrics this summer, according to STR’s 2010 summer forecast.
The summer travel season comprises June, July and August. STR predicts summer occupancy will increase 2.2 percent from summer 2009 to 63.1 percent, average daily rate will decrease 1.9 percent to US$95.16, and revenue per available room will end the summer virtually flat with a 0.2-percent increase to US$60.03.
“While demand for hotels this summer will be brisk and will continue to provide positive recovery momentum, rate growth remains a concern,” said Brad Garner, VP at STR. “Conditioned and value conscious consumers will not be reaching as deep into their wallets as in previous summer seasons. We anticipate flat to slightly negative rate growth this summer.”
During summer 2009 occupancy fell 9.1 percent to 61.7 percent, ADR dropped 9.6 percent to US$97.04, and RevPAR was down 17.8 percent to US$59.90.
Demand is expected to rise 4.4 percent (compared with a 6.2-percent decrease during summer 2009), and supply is predicted to increase 2.1 percent (compared with a 3.2-percent increase during summer 2009).
Revenue for summer 2010 is forecasted to increase 2.3 percent to US$26.9 billion, compared with the 15.2-percent decrease to US$26.3 billion reported for summer 2009.
July 2010 is projected to post the highest occupancy (64.4 percent) and RevPAR (US$61.14) of the three summer months.
The summer travel season comprises June, July and August. STR predicts summer occupancy will increase 2.2 percent from summer 2009 to 63.1 percent, average daily rate will decrease 1.9 percent to US$95.16, and revenue per available room will end the summer virtually flat with a 0.2-percent increase to US$60.03.
“While demand for hotels this summer will be brisk and will continue to provide positive recovery momentum, rate growth remains a concern,” said Brad Garner, VP at STR. “Conditioned and value conscious consumers will not be reaching as deep into their wallets as in previous summer seasons. We anticipate flat to slightly negative rate growth this summer.”
During summer 2009 occupancy fell 9.1 percent to 61.7 percent, ADR dropped 9.6 percent to US$97.04, and RevPAR was down 17.8 percent to US$59.90.
Demand is expected to rise 4.4 percent (compared with a 6.2-percent decrease during summer 2009), and supply is predicted to increase 2.1 percent (compared with a 3.2-percent increase during summer 2009).
Revenue for summer 2010 is forecasted to increase 2.3 percent to US$26.9 billion, compared with the 15.2-percent decrease to US$26.3 billion reported for summer 2009.
July 2010 is projected to post the highest occupancy (64.4 percent) and RevPAR (US$61.14) of the three summer months.
Findings Of PKF's 2010 Hospitality Investment Survey
The following statements summarize the findings of PKF Consulting’s 2010 Hospitality Investment Survey.
Investment Criteria
Investment Criteria
- Overall hotel capitalization rates have declined 32 basis points from 2009 to 2010. We attribute the decline in hotel cap rates to the over-weighted influence of high-priced urban and luxury hotel transactions.
- Hotel cap rates are above 10 percent for extended-stay and select-service properties. While these property types are extremely popular with guests, they are also preferred by developers and run the risk of increased competition.
- Older limited- and full-service hotels are being traded at high cap rates because they are most vulnerable to the surge in newer mid-market properties.
- Cap rates are lowest for hotels in top-tier markets, indicating a belief that the greatest recoveries will occur in the nation’s urban areas.
- The holding periods for sellers dropped significantly indicating the presence of opportunistic buyers in search of bargains who in turn re-sell them quickly rather than hold as a long-term investment.
- Hotel debt coverage ratios have increased since 2009, indicating a further tightening of underwriting standards.
- Hotel loan to value ratios are at an all-time low, meaning investors must put up substantially more equity to get a deal done.
- For buyers that qualify for a loan, interest rates remain relatively low and the length of the loan has risen slightly.
- Hotel Cap Rate, Trailing 12 (NOI)
- Hotel Cap Rate, Forward 12 (NOI)
- Hotel Cap Rate, Terminal (NOI)
- Hotel IRR / Discount
- Hotel Equity Yield
- Hotel Cash-on-Cash Return
- Holding Period (years)
- Hotel Loan-to-Value Ratio
- Hotel Interest Rate
- Hotel Amortization Period (Years)
- Hotel Loan Term (year of balloon)
- Hotel Debt Coverage Ratio
Tuesday, May 11, 2010
Rescuing damsels in distress
( This is very good...reading for reference too.)
When an economic downturn brings about project failures and delays, and lenders, owners and investors suffer disappointments of various degree of odor and depth, legal consequences may not be far behind. ROBERT SCHLUP, Partner in the Zurich office of SONNENSCHEIN, NATH & ROSENTHAL LLP, kindly agreed to walk us step-by-step through the potential minefields out there in 2010.
When an economic downturn brings about project failures and delays, and lenders, owners and investors suffer disappointments of various degree of odor and depth, legal consequences may not be far behind. ROBERT SCHLUP, Partner in the Zurich office of SONNENSCHEIN, NATH & ROSENTHAL LLP, kindly agreed to walk us step-by-step through the potential minefields out there in 2010.
Monday, May 10, 2010
Where Customer Service Went..
I was in line to get some things from the Deli counter at a local grocery store. I waited, and the lady in front of me need to order sandwiches for the weekend..The clerk seemed flustered.First he tried to steer her towards the premade 12" sandwiches...she needed three 3' sandwiches...for a party of 15 people...he tried over and over to point out the premade sandiwches because they were "fresh" made every morning...He also told her that the 3' rolls were frozen and not fresh....he finally relented and then couldn't find a form to take her order...It's not the Ritz, but it definitely demonstrated that there was a need for some serious training..
California hotel defaults, foreclosures and sales -- weather vane for hotels everywhere? Atlas Hospitality Group's lastest survey
Hotel Lawyer with the latest information on hotel loan defaults, foreclosures, forebearances and distressed sales in California from the Atlas Hospitality Group.
Last week in Los Angeles, Alan Reay, CEO and founder of Atlas Hospitality Group, presented hotel industry executives with the latest information from the company's sales survey. Reay recounted Atlas Hospitality's 2009 projections, and showed how accurate they were wtih a comparison of forecast versus actual results. He also noted how the recent "Perfect Storm" of economic events had set four new (bad) records and a bracing forecast for distressed hotels in the near future . . .
Last week in Los Angeles, Alan Reay, CEO and founder of Atlas Hospitality Group, presented hotel industry executives with the latest information from the company's sales survey. Reay recounted Atlas Hospitality's 2009 projections, and showed how accurate they were wtih a comparison of forecast versus actual results. He also noted how the recent "Perfect Storm" of economic events had set four new (bad) records and a bracing forecast for distressed hotels in the near future . . .
Friday, May 7, 2010
The Recovery , How will the Hotel Industry Fare ?
What is really happening with the recovery and how will it affect the hotel industry? Insightful perspectives from the experts at Meet the Money
Keys To Success | "It's the Size of Your Idea, Not the Size of Your Budget"
(I took some hotel classes under John at MSU.)
Each year, I focus on creating new and updated learning experiences, whether it is in my columns, an academic or business classroom setting, an online seminar or a consulting assignment. The title of this column also represents a new 2010 workshop as well, and it addresses a fundamental approach to achieving success.
I have discovered in my career that too many people often create hotel-operating budgets to spend the amount of money available. Rather than focusing attention on ways to accomplish the desired outcome or goal, they create a document and a plan they hope or expect will win the approval of the owner or Management Company.
Each year, I focus on creating new and updated learning experiences, whether it is in my columns, an academic or business classroom setting, an online seminar or a consulting assignment. The title of this column also represents a new 2010 workshop as well, and it addresses a fundamental approach to achieving success.
I have discovered in my career that too many people often create hotel-operating budgets to spend the amount of money available. Rather than focusing attention on ways to accomplish the desired outcome or goal, they create a document and a plan they hope or expect will win the approval of the owner or Management Company.
Wednesday, May 5, 2010
Best Practices for Responding to Online Hotel Reviews, Part I | By Daniel Edward Craig
Best Practices for Responding to Online Hotel Reviews, Part I
By Daniel Edward Craig
(Daniel has a great Blog)
As a hotel manager, when a guest comes to the front desk to register a complaint, do you: 1) look busy; 2) skulk out the back door; or 3) handle the matter personally?
Not that difficult a question, is it? Then why do only 4% of negative reviews on TripAdvisor get a response? Does the fact that reviews are often anonymous and directed at travelers rather than hotels let us off the hook? Or are hoteliers even paying attention? Consumers certainly are. Reviews are playing an increasingly important role in booking decisions. Some would say that online reviews deserve even more time than internal surveys, as the feedback is just as (if not more) valuable, and the impact is public.
According to TripAdvisor, a property’s response to criticism can have more influence on traveler decisions than the criticism itself. Hoteliers have a chance to redeem themselves, yet the vast majority chooses to remain silent, willfully allowing reputation and business to suffer. Granted, not all review sites allow hotel responses. Online travel agencies posted three times as many hotel reviews than traveler review sites last year, yet whereas Expedia and Hotels.com allow responses, Priceline and Travelocity don’t, effectively shutting hotels out of the conversation.
By Daniel Edward Craig
(Daniel has a great Blog)
As a hotel manager, when a guest comes to the front desk to register a complaint, do you: 1) look busy; 2) skulk out the back door; or 3) handle the matter personally?
Not that difficult a question, is it? Then why do only 4% of negative reviews on TripAdvisor get a response? Does the fact that reviews are often anonymous and directed at travelers rather than hotels let us off the hook? Or are hoteliers even paying attention? Consumers certainly are. Reviews are playing an increasingly important role in booking decisions. Some would say that online reviews deserve even more time than internal surveys, as the feedback is just as (if not more) valuable, and the impact is public.
According to TripAdvisor, a property’s response to criticism can have more influence on traveler decisions than the criticism itself. Hoteliers have a chance to redeem themselves, yet the vast majority chooses to remain silent, willfully allowing reputation and business to suffer. Granted, not all review sites allow hotel responses. Online travel agencies posted three times as many hotel reviews than traveler review sites last year, yet whereas Expedia and Hotels.com allow responses, Priceline and Travelocity don’t, effectively shutting hotels out of the conversation.
Monday, May 3, 2010
Cornell Hospitality Reports Aimed at Building Hotel Revenues Earn Top Awards for Industry Relevance
Two reports have been named the winners of the 2010 Industry Relevance Award from Cornell's Center for Hospitality Research (CHR). The award is given to two reports issued in the prior three years, as chosen by members of the CHR Advisory Board and registered users of the CHR web site. The two winners both focused on the hotel industry's challenges in maintaining revenue flow during the recent recession, particularly in terms of the detrimental effects of discounting.
The two winners are "Competitive Hotel Pricing in Uncertain Times," by Cathy A. Enz, Linda Canina, and Mark Lomanno, and "Hotel Revenue Management in an Economic Downturn: Results from an International Study," by Sheryl E. Kimes. These and all other CHR reports, tools, and other publications are available for download at no charge, at www.hotelschool.cornell.edu/research/chr/pubs/.
The two winners are "Competitive Hotel Pricing in Uncertain Times," by Cathy A. Enz, Linda Canina, and Mark Lomanno, and "Hotel Revenue Management in an Economic Downturn: Results from an International Study," by Sheryl E. Kimes. These and all other CHR reports, tools, and other publications are available for download at no charge, at www.hotelschool.cornell.edu/research/chr/pubs/.
Current State of the Hospitality Workplace: Addressing Mistrust of Senior Management, Direct Supervisors
Throughout the Great Recession, companies have laid off thousands, cut workers’ salaries, and eliminated bonuses, leaving employees to wonder – what next? Some might speculate people still standing after workforce layoffs should be grateful and happy to simply have a job. But for those of us who have lived through it, we know this may not always be the case.
Maritz Research recently conducted its annual study on workplace attitudes within the hospitality industry, surveying 1,000 full-time employees on a wide variety of workplace issues. Consistent with other published studies on employee engagement, Maritz found that employee engagement is at an all-time low in a wide variety of areas. One major contributor to the decline in morale is the fact that one-third (31 percent) of respondents work for companies that have experienced significant workforce reductions in the past six months. This, along with other findings, paints a dire picture of what Hospitality companies face – lack of trust, threats of unionization, and poor customer service. So much for being grateful.
A major casualty of the past decade has been workplace trust. This includes mistrust of senior leaders, direct supervisors, and even co-workers. Maritz began observing this decline of trust in the early part of the decade, following the headlined corporate scandals that plagued companies like Enron, WorldCom, and Tyco. Employees became extremely skeptical of their leaders. In the past year, there has been a constant flow of stories of leaders continuing to draw high salaries, with lower level employees losing their jobs, or at least taking significant pay cuts. Currently, only 12 percent of those employed in the hospitality sector consider their company’s leaders to be completely ethical and honest. This is consistent with other business sectors that report similar percentages. Fewer than one-in-ten (nine percent) trust their management to make the right decisions in times of uncertainty, with nearly three times as many disagreeing. Only seven percent of hospitality employees ‘completely trust their employers to look out for their best interests’ and believe their senior leaders actions are ‘completely consistent’ with their words. More than five times as many hospitality employees actively disagree with those statements.
Maritz Research recently conducted its annual study on workplace attitudes within the hospitality industry, surveying 1,000 full-time employees on a wide variety of workplace issues. Consistent with other published studies on employee engagement, Maritz found that employee engagement is at an all-time low in a wide variety of areas. One major contributor to the decline in morale is the fact that one-third (31 percent) of respondents work for companies that have experienced significant workforce reductions in the past six months. This, along with other findings, paints a dire picture of what Hospitality companies face – lack of trust, threats of unionization, and poor customer service. So much for being grateful.
A major casualty of the past decade has been workplace trust. This includes mistrust of senior leaders, direct supervisors, and even co-workers. Maritz began observing this decline of trust in the early part of the decade, following the headlined corporate scandals that plagued companies like Enron, WorldCom, and Tyco. Employees became extremely skeptical of their leaders. In the past year, there has been a constant flow of stories of leaders continuing to draw high salaries, with lower level employees losing their jobs, or at least taking significant pay cuts. Currently, only 12 percent of those employed in the hospitality sector consider their company’s leaders to be completely ethical and honest. This is consistent with other business sectors that report similar percentages. Fewer than one-in-ten (nine percent) trust their management to make the right decisions in times of uncertainty, with nearly three times as many disagreeing. Only seven percent of hospitality employees ‘completely trust their employers to look out for their best interests’ and believe their senior leaders actions are ‘completely consistent’ with their words. More than five times as many hospitality employees actively disagree with those statements.
8 things to look for when searching for a Hotel GM
The general manager is the “CEO” of your multi-million dollar asset. What they do and how they lead determines the success and profitability of your property. The following is a list of eight proven skills you should look for when you are trying to bring on a new leader or to measure the one you have in place.
Hotel Restaurant Solutions - Turning a Headache into an Opportunity
CHIPP by HVS Executive Search highlights critical issues to consider when outsourcing a hotel’s restaurant operations to a professional restaurant brand/operator. In this unprecedented economy where hotel occupancy and rates are significantly down, hotel owner/operators are forced to closely review EVERY aspect of their operation to squeeze out profitability opportunities. If approached correctly, an area of great opportunity can be that of outsourcing property restaurant operations to a professional restaurant brand/operator.
Currently there are over 50,000 hotel properties operating in the United States, most of which offer restaurant options to their guests. While most of these are profitable at a departmental level, when all of the hotel’s restaurant expenses are properly accounted for, a vast majority of venues are unprofitable. In addition, most lodging owners/operators consider the running of their hotel restaurant to be a necessary evil, as the operational and managerial demands far outweigh the related revenue streams. However, when done correctly, an effective hotel restaurant will generate greater restaurant sales and profitability, enhance REVPAR and increase asset value. The key is to retain the benefits of the restaurant operations, while outsourcing the headaches.
When evaluating a partnership with a restaurant brand/operator, the hotel owner must consider three key elements: deal structure, operational considerations and restaurant brand/operator selection. This article addresses these basic issues that influence both hotel owners and restaurant brands.
Currently there are over 50,000 hotel properties operating in the United States, most of which offer restaurant options to their guests. While most of these are profitable at a departmental level, when all of the hotel’s restaurant expenses are properly accounted for, a vast majority of venues are unprofitable. In addition, most lodging owners/operators consider the running of their hotel restaurant to be a necessary evil, as the operational and managerial demands far outweigh the related revenue streams. However, when done correctly, an effective hotel restaurant will generate greater restaurant sales and profitability, enhance REVPAR and increase asset value. The key is to retain the benefits of the restaurant operations, while outsourcing the headaches.
When evaluating a partnership with a restaurant brand/operator, the hotel owner must consider three key elements: deal structure, operational considerations and restaurant brand/operator selection. This article addresses these basic issues that influence both hotel owners and restaurant brands.
Comparative Capitalization Rate Study
A review of the differentials in capitalization rates based on location and property type over a ten year period. If HVS maintained an “FAQ” list, “Where are cap rates today?” would be at the top of the list, followed closely by “What is the right cap rate for this hotel?” Not only is there no good answer to these questions, the correct response is actually a series of other questions, starting with “What net income are you capping?” and “How is that net income expected to change in the future?” and continuing on from there
Subscribe to:
Posts (Atom)