As discussed below, the new sweeps are a "warning shot" - something that all lodging operators should take very seriously, and they should start working NOW to be prepared for these investigations.
But this is only the tip of the iceberg in terms of what lodging professionals should be thinking of in terms of accessibility compliance. In this article and the next one, I will interview two of the Senior Members of JMBM's Global Hospitality Group® who lead our ADA defense practice for owners and operators.
Marty Orlick is one of the top ADA lawyers in the country, with more than 300 ADA lawsuits and investigations under his belt, and he is actively involved in defending hotels that are included in the DOJ's ADA survey. Jim Abrams, who retired as the President & CEO of the California Hotel & Lodging Association, has advised hundreds of lodging operators about, and written and lectured extensively on, all aspects of accessibility laws that apply to the hospitality industry.
What if I receive an ADA Compliance Questionnaire from DOJ?
Jim Butler: If I am the owner or manager of a hotel and get an envelope from the DOJ with one of its ADA Compliance Review questionnaires, what should I do?
Marty Orlick: First, take it very seriously! Get the questionnaire to the right person as quickly as possible. You want an experienced ADA defense lawyer to walk you through these deceptively simple questions. DOJ is surveying both hotel owners and managers, and the last thing you want is for this document to be sitting in someone's inbox while the person tries to figure out what it means and who should be dealing with it. Every question on the form has been carefully drafted to elicit important information about ADA compliance. The survey is specifically focused on identifying architectural and communications (e.g., signage) access barriers and, equally important, your hotel's ADA policies and procedures. It is very detailed. Completing the questionnaire will take time and careful thought.
Don't complete it yourself. Have an ADA defense lawyer review it and advise you, first!
Jim Butler: Why can't a knowledgeable hotel professional answer the questionnaire? Why should a lawyer -- much less an ADA defense lawyer -- get involved?
Marty Orlick: Each question is designed to obtain precise information about complex, technical compliance with the ADA guidelines. The forms must be completed under penalty of perjury, so wrong answers could subject someone to criminal penalties or create other unfortunate liabilities. Your answers can also help you to clarify the hotel's accessability features, policies and procedures.
In this very technical, legal context, hoteliers are unlikely to understand the legal issues in answering these critical questions. Even lawyers are unlikely to understand the implications unless they specialize in ADA matters. The questions must be thoroughly understood from a "Standard of Compliance" perspective as defined by law.
The wrong answer to a misunderstood question can cause serious problems that could cost you dearly. And the fact that your hotel has spent a lot of time and money to make the property accessible to the disabled does not mean the property will be fully compliant with the ADA.
Jim Butler: Give us an example of a question that could cause a hotelier problems.
Marty Orlick: Questions about guest rooms have to be answered with great care. The questionnaire will likely ask for a description of all room categories in the hotel, and the number of accessible rooms in each distinct room class, because the ADA generally requires hotels to provide accessible rooms in each class. The thing you have to ask is: "What is a "category" or "room class"? In answering the questionnaire, you should NOT list each marketing or price-point category, as opposed to room types that are actually functionally the same accommodations but have minor differences. If you did, you would create a problem. Your hotel may have many marketing-driven categories for rooms, but in actuality your rooms may simply be singles, doubles, queens, kings and suites.
For example, if you have typical guest rooms and upgrade some of them slightly, such as with an extra lamp, higher-end bath amenities and a few extra square feet, you may call them "suites" for marketing purposes. From a functional standpoint, these suites are no different than your normal guest rooms in terms of accessibility. Similarly, if rooms cost an additional five dollars per floor, but there is no difference between the rooms on the 17th and 18th floors, they should not be listed in separate categories for purposes of the accessibility questionnaire. You want to list on the questionnaire the fewest number of functionally different room types/categories, even if they are different than the types/categories you show on your web site for marketing purposes.
Jim Butler: Does the survey focus solely on accessibility-related building standards?
Marty Orlick: No. Not by a long shot. The ADA Compliance Review also specifically focuses on the hotel's written accessibility policies and procedures -- or lack of them. So, the ADA defense lawyer should ask you to start pulling together documentation. We need to review the written ADA policies and procedures that are provided to staff to see what they look like. Policies and procedure manuals should detail all the devices installed and all the processes the hotel has established for serving disabled guests.
Jim Butler: Give us some examples of what those policies and procedures should include.
Marty Orlick: Any hotel's written policies and procedures manuals should cover all aspects of its operations as they pertain to disabled individuals and those who travel or are associated with them. This would include such things as:
•How to easily identify which ADA compliant rooms are available when customers call for reservations.
•Procedures for hooking up telephone "TDD" devices or smoke alarms for the hearing or seeing impaired, or any other specialized equipment needed for specific disabilities including repositioning furniture and guest amenities.
•Procedures for the evacuation of disabled guests in event of emergency, and how to work with disabled guests who have service animals.
•Procedures used to train and monitor how the reservations, sales and operating staff are trained in all these procedures.
Many hotels surveyed will likely have technical ADA barrier violations. Those hotels can do things the easy way, by working cooperatively, through its legal counsel, with DOJ to correct the deficiencies, or they can do things the hard way--by refusing to cooperate or dragging their feet. As we know from our experience in Manhattan, the latter approach will be very lengthy, costly, and difficult.
Simply put, this is too important to mess up. You want an ADA expert's guidance to do this right and avoid unnecessary problems.
Wednesday, June 30, 2010
Tuesday, June 29, 2010
PKF-Hospitality Research Releases Hotel Horizons® Forecast Accuracy Assessment
Lessons Can Be Applied To 2011 Budgeting Process
Atlanta GA -- Hotel industry forecasting is not for the faint of heart. During the recession that began in earnest in 2008, the magnitude of the economic declines deviated so far from long run norms that it was virtually impossible for econometric models to predict what ultimately occurred in the hotel industry. Despite the challenge, the lodging forecasts still provided meaningful guidance for owners and investors trying to operate through the historic downturn. Because of the severity of the decline and its length, lodging forecasts had to be updated based on the ever changing economic outlook. These are some of the conclusions of a whitepaper recently published by PKF-Hospitality Research (PKF-HR) whose purpose was to quantify the accuracy of their proprietary Hotel Horizons® reports. The assessment compares forecast changes in hotel market performance measures and actual changes at two critical points during the recent economic cycle (2007 – 2009). The whitepaper report is available on a complimentary basis to all industry participants (www.pkfc.com/accuracy).
“When we initially entered the econometric forecasting business over 10 years ago, we committed ourselves to a process of continuous self-evaluation,” said R. Mark Woodworth president of PKF-HR. “Overall, we remain pleased with our demonstrated accuracy. We have learned that our forecasts are extremely reliable during less volatile periods in the business cycle, but less accurate during turbulent times. These findings will be used to inform our ongoing forecasting efforts.”
PKF-HR’s Hotel Horizons® is a series of periodic hotel forecast reports that analyze the historical and expected performance of U.S. lodging markets. Driven by an econometric forecasting model, the Hotel Horizons® reports cover five years of supply, demand, occupancy, ADR, and RevPAR for 50 major U.S. markets, as well as six national chain-scale segments. Within each market forecast, separate estimates are prepared for upper-price and lower-price hotels. The model relies on historical lodging data from Smith Travel Research, as well as historic and forecast economic data from Moody’s Economy.com.
Ups and Downs
“To assess the accuracy of our macro U.S. and MSA hotel forecasting models, we analyzed two forecast periods,” Woodworth said. “The first ran from the fourth quarter of 2007 through third quarter of 2008. This represents a fairly traditional expansion phase which culminates at the eventual turning point of the business cycle. The second period of the analysis covers calendar year 2009, a period of extreme stress within the lodging industry.”
“These points in time highlight two very different periods of economic expectations: pre-financial crisis, and post-financial crisis,” said John B. (Jack) 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. “Econometric models have a difficult time performing at the turning points of a cycle, and have no ability to predict shocks, such as hurricanes and terrorist attacks. Therefore, we focused on how the model performed during a ‘normal’ period of economic growth, and during a time of economic stress, post-turning point.”
The Results
These distinct periods in the economic cycle yield varying degrees of accuracy. The following conclusions come from the research findings:
1.Hotel Horizons® forecasts closely approximate changes in hotel performance at the national level, and to a slightly lesser extent the MSA level.
2.Hotel Horizons® forecasts are incapable of predicting hotel performance during natural disasters and severe economic shocks; and for the short-term period following these events because of the unique nature of each event.
3.Hotel Horizons® forecasts are very accurate in periods leading up to turning points.
4.The accuracy of Hotel Horizons® forecasts is somewhat inconsistent during periods following a turning point, which are typically unstable periods for the economy.
The following chart shows the average percentage point difference between forecast and actual change of five key variables (supply, demand, occupancy, average daily rate and RevPAR) at the national level during the aforementioned time periods.
Forecast vs Actual Performance – All U.S. Hotels
Implications for Budgeting
Other analyses conducted by PKF-HR have found that hotel managers also struggle to forecast during industry downturns. During the two most recent recessions, hotels have missed their budgeted revenue targets by 8 to 10 percent. Starting in the summer, most hotels will begin to prepare their budgets for 2011.
“As we proceed through the turning point of the current business cycle, U.S. hotel owners and operators are hoping for recovery to begin in 2011. Our forecasts for most markets indicate that these hopes are well founded. The lessons we have learned about forecasting during a turning point are outlined in the accuracy whitepaper and can be of great value to managers as they prepare their budgets for next year,” Woodworth said. “And fortunately, we now know that our forecasts are most accurate during this time in the cycle.”
To download a complimentary copy of the “Assessing Accuracy: Hotel Horizons® Forecasts” whitepaper, please visit www.pkf.com/accuracy.
* To learn more about PKF-HR’s Hotel Horizons® forecast reports, please visit www.hotelhorizons.com.
Atlanta GA -- Hotel industry forecasting is not for the faint of heart. During the recession that began in earnest in 2008, the magnitude of the economic declines deviated so far from long run norms that it was virtually impossible for econometric models to predict what ultimately occurred in the hotel industry. Despite the challenge, the lodging forecasts still provided meaningful guidance for owners and investors trying to operate through the historic downturn. Because of the severity of the decline and its length, lodging forecasts had to be updated based on the ever changing economic outlook. These are some of the conclusions of a whitepaper recently published by PKF-Hospitality Research (PKF-HR) whose purpose was to quantify the accuracy of their proprietary Hotel Horizons® reports. The assessment compares forecast changes in hotel market performance measures and actual changes at two critical points during the recent economic cycle (2007 – 2009). The whitepaper report is available on a complimentary basis to all industry participants (www.pkfc.com/accuracy).
“When we initially entered the econometric forecasting business over 10 years ago, we committed ourselves to a process of continuous self-evaluation,” said R. Mark Woodworth president of PKF-HR. “Overall, we remain pleased with our demonstrated accuracy. We have learned that our forecasts are extremely reliable during less volatile periods in the business cycle, but less accurate during turbulent times. These findings will be used to inform our ongoing forecasting efforts.”
PKF-HR’s Hotel Horizons® is a series of periodic hotel forecast reports that analyze the historical and expected performance of U.S. lodging markets. Driven by an econometric forecasting model, the Hotel Horizons® reports cover five years of supply, demand, occupancy, ADR, and RevPAR for 50 major U.S. markets, as well as six national chain-scale segments. Within each market forecast, separate estimates are prepared for upper-price and lower-price hotels. The model relies on historical lodging data from Smith Travel Research, as well as historic and forecast economic data from Moody’s Economy.com.
Ups and Downs
“To assess the accuracy of our macro U.S. and MSA hotel forecasting models, we analyzed two forecast periods,” Woodworth said. “The first ran from the fourth quarter of 2007 through third quarter of 2008. This represents a fairly traditional expansion phase which culminates at the eventual turning point of the business cycle. The second period of the analysis covers calendar year 2009, a period of extreme stress within the lodging industry.”
“These points in time highlight two very different periods of economic expectations: pre-financial crisis, and post-financial crisis,” said John B. (Jack) 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. “Econometric models have a difficult time performing at the turning points of a cycle, and have no ability to predict shocks, such as hurricanes and terrorist attacks. Therefore, we focused on how the model performed during a ‘normal’ period of economic growth, and during a time of economic stress, post-turning point.”
The Results
These distinct periods in the economic cycle yield varying degrees of accuracy. The following conclusions come from the research findings:
1.Hotel Horizons® forecasts closely approximate changes in hotel performance at the national level, and to a slightly lesser extent the MSA level.
2.Hotel Horizons® forecasts are incapable of predicting hotel performance during natural disasters and severe economic shocks; and for the short-term period following these events because of the unique nature of each event.
3.Hotel Horizons® forecasts are very accurate in periods leading up to turning points.
4.The accuracy of Hotel Horizons® forecasts is somewhat inconsistent during periods following a turning point, which are typically unstable periods for the economy.
The following chart shows the average percentage point difference between forecast and actual change of five key variables (supply, demand, occupancy, average daily rate and RevPAR) at the national level during the aforementioned time periods.
Forecast vs Actual Performance – All U.S. Hotels
Implications for Budgeting
Other analyses conducted by PKF-HR have found that hotel managers also struggle to forecast during industry downturns. During the two most recent recessions, hotels have missed their budgeted revenue targets by 8 to 10 percent. Starting in the summer, most hotels will begin to prepare their budgets for 2011.
“As we proceed through the turning point of the current business cycle, U.S. hotel owners and operators are hoping for recovery to begin in 2011. Our forecasts for most markets indicate that these hopes are well founded. The lessons we have learned about forecasting during a turning point are outlined in the accuracy whitepaper and can be of great value to managers as they prepare their budgets for next year,” Woodworth said. “And fortunately, we now know that our forecasts are most accurate during this time in the cycle.”
To download a complimentary copy of the “Assessing Accuracy: Hotel Horizons® Forecasts” whitepaper, please visit www.pkf.com/accuracy.
* To learn more about PKF-HR’s Hotel Horizons® forecast reports, please visit www.hotelhorizons.com.
Saturday, June 26, 2010
The Meaning of Success...What is Means..
Years ago I began as a Houseman in a 395 room Luxury Hotel, a couple of years later it became a 710 room, 2 block structure...I cleaned lobbies, and hallways, did routine stuff, and did floors, carpets, windowws, and cleaned rooms. I learned that Housekeeping was the backbone of the hotel. Even in slow times we cut back, closed floors, did deep cleaning, sold the rest, and maintained them. Today it seems that beyond the movement that the "Green people" began 10 years ago with towels not being changed everyday.That was a good move, we learned to conserve water, electricity and water...There are a few variables that make this a new concern for hotels...It usually boils down to labor, and what is the best way to "cut corners" ,
I think that if more GM's knew how to inspect rooms, which some do, it goes farther and they may see more and or find discrepancies that need to be corrected. Turn down service at the Luxury level cannot be replaced or reduced without a long time frequent guest would notice the most subtle changes.
I recall operations where we coordinated the amenity program with Housekeeping and Room Service.
and then there was the turndown amenity...Cookies and Milk....Another Resort put out trays of Graham crackers and pitchers of cold milk with trays of glasses.. I have seen alot in almost 30 years of Hospitality and 5 of it within Five Star, Five Diamond properties...But remember it all begins with the first "Hello"
I think that if more GM's knew how to inspect rooms, which some do, it goes farther and they may see more and or find discrepancies that need to be corrected. Turn down service at the Luxury level cannot be replaced or reduced without a long time frequent guest would notice the most subtle changes.
I recall operations where we coordinated the amenity program with Housekeeping and Room Service.
and then there was the turndown amenity...Cookies and Milk....Another Resort put out trays of Graham crackers and pitchers of cold milk with trays of glasses.. I have seen alot in almost 30 years of Hospitality and 5 of it within Five Star, Five Diamond properties...But remember it all begins with the first "Hello"
Friday, June 25, 2010
Lessons From the Field: Paying it Forward Means Everyone Wins
From John Hogan, I studied under John years ago...very valuable information.
In the spring of 2009, I published a three part series titled “Getting the most out of your hotel franchise investment.” The series included an overview on franchising and branding as integral parts of the hotel and hospitality landscape, and identified that roughly 56% (at the end of 2008) of the 49,500 hotels in the US belonging to a branded or franchised organization. It is a challenge to define an exact number of hotels in most locations on any given day, as supply changes weekly as buildings change function, open or close or ownerships redefines their use. The purpose of this article is to expand on one critical element of all hotels - that of providing proper staff training so that they may successfully serve their customers on an ongoing basis. While economic forecasts vary by region and market segment, the overall feeling shared at many recent industry meetings, in professional publications and online services is that of a more upbeat outlook in hospitality and the hotel industry in the foreseeable future. This positive upswing will mean the need for both additional staff and increased training in evolving markets
For the past several years, I have been sharing LESSONS FROM THE FIELD as a series of best practices, suggestions and “HOW TO" columns that have addressed many areas in hotels. As I was preparing this column, I selected to showcase what I referred to in the title as “ a best kept secret.” In fact, this resource is not really a secret, as it premiered in 1993. This resource offers many hospitality and hotel industry professionals both the opportunity to share their experiences and best practices, while learning from others in areas they want to increase their knowledge.
The resource I am referring to is THE ROOMS CHRONICLE (TRC) Focusing on improving quality, efficiency, and profits, TRC has built a positive reputation for its hands-on, common-sense, operational “how-to’s”. The articles generally address topics for front office, housekeeping, laundry, reservations, telephone, engineering, energy, purchasing, risk management, and related departments. These articles incorporate the experience and skills of many leading hotel people — people who currently work full time in the industry and many articles contain real examples from hotels that have found solutions to challenges.
HOW THE ROOMS CHRONICLE CAME TO BE
Professional organizations and magazines are plentiful for the sales & marketing staff, for food/beverage and human resources professionals, but Aleta A. Nitschke, CHA observed that the hotel front office manager and housekeeper were often overlooked even though they were integral parts of the largest areas in the hotel. Recognizing this lack of operational information for rooms division employees, Nitschke, founded The Rooms Chronicle in 1993 and The Rooms Chronicle…online in 1999. Ms. Nitschke had the opportunity to see many hotel operations during her career, beginning with a summer job of cleaning rooms at a tiny resort inn. Over the years, she worked for six companies, in 10 cities, and 13 hotels. She served as Radisson Hotels’ corporate director of rooms where she supervised the rooms operations of over 200 hotels. Ms. Nitschke is co-author of several editions of the American Hotel & Lodging Association Educational Institute’s Managing Housekeeping Operations textbook.
In 2003, the College of Hospitality and Tourism Management of Niagara University became the publishers of the print edition of TRC. With William D. Frye, Ph.D., CHE, as Executive Editor, the journal continues its mission of providing hands-on educational information for the hospitality industry. Dr. Frye possesses over 20 years management experience and has been associated with the hospitality industry for the past 18 years, primarily in hotel operations and hospitality education. Prior to arriving at Penn State, Dr. Frye was the general manager of a resort lodging property in Taos, New Mexico. He has also been employed previously by The Copley Plaza-A Wyndham Hotel, a historic, world-class luxury hotel located in Boston, Massachusetts as a night manager, as well as the Sonesta Hotel Corporation, Wyndham Hotels & Resorts, and Hilton Hotels in rooms’ division operations. Along with Aleta Nitschke, he is co-author of AH&LA EI’s current housekeeping textbook, Managing Housekeeping Resources.
I contacted Dr. Frye, CHE , who I know to be very involved in both academic and industry associations and asked him to comment on the evolution of The Rooms Chronicle and what he viewed as opportunities and challenges for the future.
On the evolution of TRC
The TRC continues to be well received and requested by many department heads, managers and owners of small properties and supervisors who are looking to increase their knowledge and skills. We serve both independent and branded properties, as the information and best practices found in our work support many different types and sizes of hotels. While most subscribers continue to receive the traditional hard copy version of TRC, an online edition is made available for master subscription contracts and select customers. Recognized by The Educational Institute of The American Hotel & Lodging Association for our work, TRC has established itself as a journal that can make a difference in the way a hotel is operated in customer service, operations, generating more revenue per guest visit and retaining employees. In short, the mission of TRC is to educated hoteliers on the tricks of the trade so they can operate their hotels more efficiently and profitably.
Where does your material come from?
From 3000-room casinos to 5-room bed and breakfasts, every brand and every type of hotel contributes to and reads TRC. I liked your expression on Paying it Forward , because that is where much of our most read material comes from - industry professionals in the various specialties associated with the lodging industry who are willing to share their experiences with others. This cadre of experts range from general managers, department managers, corporate executives, attorneys, expert consultants, professors, and even line-level employees that possess unique industry knowledge and are willing to help others by sharing their expertise through the medium of TRC. Putting things in an article is an excellent way for them to fine-tune their thoughts as well as sharing it with others.
Do you use TRC material in classroom work at Niagara University?
The TRC venue gives many of our honor students the opportunity to research specific topics and problem areas identified to us by industry or readers. Some of the students are also encouraged to contribute their findings in articles published by TRC (after faculty review, of course) TRC is incorporated into the readings and coursework within the College of Hospitality and Tourism Management at Niagara University, especially in the Advanced Hotel Operations course and independent research topics.
Could other colleges use this option?
We at Niagara University and TRC are always open to working with other universities and industry. Professors and graduate students from other universities have previously collaborated with TRC cadre and authored columns for publication.. Specifics would have to be detailed, but contact us to start a discussion.
What are your current opportunities and challenges?
The growth of the journal is primarily due to word of mouth, as readers consistently praise its contents. The highest recommendation is that TRC readers re-subscribe at a rate three times the national average for magazine publications. We do not have a marketing “arm” or manager and so we do rely on those word-of-mouth referrals. For eight years, TRC has offered a 100% money-back guarantee on the cost of the subscription; to date,, no subscriber has ever requested a refund.
While we do not have a marketing budget or manager, we have already developed many special services and personalized services for management companies and brands. Check the site for details or contact us to see how we can assist.
As mentioned earlier, the articles written by industry professionals are well read and appreciated by so many readers and students. I believe those who submit columns find that their careers are likely enhanced as well, as their organizations and managers recognize the value of their knowledge and want to retain them.
Are there particular areas you plan to stress in the next 18 months? What areas could you use articles from industry most?
The entire rooms division is very important to the success of every hotel, but we plan to emphasize three areas and would welcome industry contribution in:
1.Sustainability (including energy efficiency)
2.Housekeeping
3.Reservations and rooms marketing (a rapidly changing area)
Real world problems and real world solutions are always of interest and may help other hotel staff to approach their challenges with the information shared in TRC.
“Few men during their lifetime come anywhere near exhausting the resources dwelling within them. There are deep wells of strength that are never used.” Richard E. Byrd
Dr. Frye is an Associate Professor at Niagara University, teaches classes in hotel operations and management, hospitality and tourism law, club management, and hospitality marketing, and is the professor in charge of several of Niagara's hospitality and tourism internship and cooperative education programs. He is the current chair of the Lodging Special Interest Group for the International Council on Hotel, Restaurant, and Institutional Education. Dr. Frye has been certified three times as a Certified Hospitality Educator and served on the nominating board of the International Council of Hotel, Restaurant, and Institutional Education. Dr. Frye is also the editor of the Electronic Journal of Hospitality Legal, Safety and Security Research and in 2008, he co-authored a textbook, Managing Housekeeping Operations, published by the American Hotel & Lodging Educational Institute.
Dr. Frye is a Founding Associate of a consortium of successful corporate and academic mentors delivering focused and affordable counsel in solving specific challenges facing the hospitality industry. Services are designed to help individual hoteliers and hospitality businesses improve their market penetration, deliver service excellence and increase their profitability.
Coming soon www.HospitalityEducators.com
Keys to Success Hospitality Tip of the Week: Focus on Hotel Operations
Late June and July is the best time to work on both capital and operating budgets for next year. The economic roller coaster will likely continue in some markets but those who plan with well-defined goals and measurements will be much more likely to succeed than those who “play it by ear.”
In the spring of 2009, I published a three part series titled “Getting the most out of your hotel franchise investment.” The series included an overview on franchising and branding as integral parts of the hotel and hospitality landscape, and identified that roughly 56% (at the end of 2008) of the 49,500 hotels in the US belonging to a branded or franchised organization. It is a challenge to define an exact number of hotels in most locations on any given day, as supply changes weekly as buildings change function, open or close or ownerships redefines their use. The purpose of this article is to expand on one critical element of all hotels - that of providing proper staff training so that they may successfully serve their customers on an ongoing basis. While economic forecasts vary by region and market segment, the overall feeling shared at many recent industry meetings, in professional publications and online services is that of a more upbeat outlook in hospitality and the hotel industry in the foreseeable future. This positive upswing will mean the need for both additional staff and increased training in evolving markets
For the past several years, I have been sharing LESSONS FROM THE FIELD as a series of best practices, suggestions and “HOW TO" columns that have addressed many areas in hotels. As I was preparing this column, I selected to showcase what I referred to in the title as “ a best kept secret.” In fact, this resource is not really a secret, as it premiered in 1993. This resource offers many hospitality and hotel industry professionals both the opportunity to share their experiences and best practices, while learning from others in areas they want to increase their knowledge.
The resource I am referring to is THE ROOMS CHRONICLE (TRC) Focusing on improving quality, efficiency, and profits, TRC has built a positive reputation for its hands-on, common-sense, operational “how-to’s”. The articles generally address topics for front office, housekeeping, laundry, reservations, telephone, engineering, energy, purchasing, risk management, and related departments. These articles incorporate the experience and skills of many leading hotel people — people who currently work full time in the industry and many articles contain real examples from hotels that have found solutions to challenges.
HOW THE ROOMS CHRONICLE CAME TO BE
Professional organizations and magazines are plentiful for the sales & marketing staff, for food/beverage and human resources professionals, but Aleta A. Nitschke, CHA observed that the hotel front office manager and housekeeper were often overlooked even though they were integral parts of the largest areas in the hotel. Recognizing this lack of operational information for rooms division employees, Nitschke, founded The Rooms Chronicle in 1993 and The Rooms Chronicle…online in 1999. Ms. Nitschke had the opportunity to see many hotel operations during her career, beginning with a summer job of cleaning rooms at a tiny resort inn. Over the years, she worked for six companies, in 10 cities, and 13 hotels. She served as Radisson Hotels’ corporate director of rooms where she supervised the rooms operations of over 200 hotels. Ms. Nitschke is co-author of several editions of the American Hotel & Lodging Association Educational Institute’s Managing Housekeeping Operations textbook.
In 2003, the College of Hospitality and Tourism Management of Niagara University became the publishers of the print edition of TRC. With William D. Frye, Ph.D., CHE, as Executive Editor, the journal continues its mission of providing hands-on educational information for the hospitality industry. Dr. Frye possesses over 20 years management experience and has been associated with the hospitality industry for the past 18 years, primarily in hotel operations and hospitality education. Prior to arriving at Penn State, Dr. Frye was the general manager of a resort lodging property in Taos, New Mexico. He has also been employed previously by The Copley Plaza-A Wyndham Hotel, a historic, world-class luxury hotel located in Boston, Massachusetts as a night manager, as well as the Sonesta Hotel Corporation, Wyndham Hotels & Resorts, and Hilton Hotels in rooms’ division operations. Along with Aleta Nitschke, he is co-author of AH&LA EI’s current housekeeping textbook, Managing Housekeeping Resources.
I contacted Dr. Frye, CHE , who I know to be very involved in both academic and industry associations and asked him to comment on the evolution of The Rooms Chronicle and what he viewed as opportunities and challenges for the future.
On the evolution of TRC
The TRC continues to be well received and requested by many department heads, managers and owners of small properties and supervisors who are looking to increase their knowledge and skills. We serve both independent and branded properties, as the information and best practices found in our work support many different types and sizes of hotels. While most subscribers continue to receive the traditional hard copy version of TRC, an online edition is made available for master subscription contracts and select customers. Recognized by The Educational Institute of The American Hotel & Lodging Association for our work, TRC has established itself as a journal that can make a difference in the way a hotel is operated in customer service, operations, generating more revenue per guest visit and retaining employees. In short, the mission of TRC is to educated hoteliers on the tricks of the trade so they can operate their hotels more efficiently and profitably.
Where does your material come from?
From 3000-room casinos to 5-room bed and breakfasts, every brand and every type of hotel contributes to and reads TRC. I liked your expression on Paying it Forward , because that is where much of our most read material comes from - industry professionals in the various specialties associated with the lodging industry who are willing to share their experiences with others. This cadre of experts range from general managers, department managers, corporate executives, attorneys, expert consultants, professors, and even line-level employees that possess unique industry knowledge and are willing to help others by sharing their expertise through the medium of TRC. Putting things in an article is an excellent way for them to fine-tune their thoughts as well as sharing it with others.
Do you use TRC material in classroom work at Niagara University?
The TRC venue gives many of our honor students the opportunity to research specific topics and problem areas identified to us by industry or readers. Some of the students are also encouraged to contribute their findings in articles published by TRC (after faculty review, of course) TRC is incorporated into the readings and coursework within the College of Hospitality and Tourism Management at Niagara University, especially in the Advanced Hotel Operations course and independent research topics.
Could other colleges use this option?
We at Niagara University and TRC are always open to working with other universities and industry. Professors and graduate students from other universities have previously collaborated with TRC cadre and authored columns for publication.. Specifics would have to be detailed, but contact us to start a discussion.
What are your current opportunities and challenges?
The growth of the journal is primarily due to word of mouth, as readers consistently praise its contents. The highest recommendation is that TRC readers re-subscribe at a rate three times the national average for magazine publications. We do not have a marketing “arm” or manager and so we do rely on those word-of-mouth referrals. For eight years, TRC has offered a 100% money-back guarantee on the cost of the subscription; to date,, no subscriber has ever requested a refund.
While we do not have a marketing budget or manager, we have already developed many special services and personalized services for management companies and brands. Check the site for details or contact us to see how we can assist.
As mentioned earlier, the articles written by industry professionals are well read and appreciated by so many readers and students. I believe those who submit columns find that their careers are likely enhanced as well, as their organizations and managers recognize the value of their knowledge and want to retain them.
Are there particular areas you plan to stress in the next 18 months? What areas could you use articles from industry most?
The entire rooms division is very important to the success of every hotel, but we plan to emphasize three areas and would welcome industry contribution in:
1.Sustainability (including energy efficiency)
2.Housekeeping
3.Reservations and rooms marketing (a rapidly changing area)
Real world problems and real world solutions are always of interest and may help other hotel staff to approach their challenges with the information shared in TRC.
“Few men during their lifetime come anywhere near exhausting the resources dwelling within them. There are deep wells of strength that are never used.” Richard E. Byrd
Dr. Frye is an Associate Professor at Niagara University, teaches classes in hotel operations and management, hospitality and tourism law, club management, and hospitality marketing, and is the professor in charge of several of Niagara's hospitality and tourism internship and cooperative education programs. He is the current chair of the Lodging Special Interest Group for the International Council on Hotel, Restaurant, and Institutional Education. Dr. Frye has been certified three times as a Certified Hospitality Educator and served on the nominating board of the International Council of Hotel, Restaurant, and Institutional Education. Dr. Frye is also the editor of the Electronic Journal of Hospitality Legal, Safety and Security Research and in 2008, he co-authored a textbook, Managing Housekeeping Operations, published by the American Hotel & Lodging Educational Institute.
Dr. Frye is a Founding Associate of a consortium of successful corporate and academic mentors delivering focused and affordable counsel in solving specific challenges facing the hospitality industry. Services are designed to help individual hoteliers and hospitality businesses improve their market penetration, deliver service excellence and increase their profitability.
Coming soon www.HospitalityEducators.com
Keys to Success Hospitality Tip of the Week: Focus on Hotel Operations
Late June and July is the best time to work on both capital and operating budgets for next year. The economic roller coaster will likely continue in some markets but those who plan with well-defined goals and measurements will be much more likely to succeed than those who “play it by ear.”
Hotel Management Agreement Performance Standards Analyzing A Typical Operator Provision
The Hotel Management Agreement or HMA is one of the most important factors in the financial success or failure of a hotel, and the value of an owner's or lender's interests in the property.
With experience gained in negotiating, re-negotiating, litigating, arbitrating and advising on more than 1,000 hotel management agreements and more than $60 billion of hotel transactions, the members of JMBM's Global Hospitality Group® wanted to share some lessons learned.
If you would like to review why getting a great operator and a fair HMA are so critical to the success of your hotel, or if you missed any of the earlier series on this subject, please go to www.HotelLawBlog.com, look under the TOPIC tab at the top of the home page, and then select "Hotel Management Agreements" to see some great information.
What does a typical Operator performance clause look like?
Operators may propose an HMA without any performance standard. That would be in their interest, because a performance standard can only be used to their disadvantage - to reduce their income, subordinate their fees, or possibly terminate the management contract. And of course, the right to terminate is the right to re-negotiate the agreement as well. So failure of a performance standard does not mean you have to terminate the Operator, but it might be used as the basis to re-negotiate the allocation of financial and other risks.
The typical performance standard clause proposed by a branded hotel operator often looks something like this:
In addition to the other rights of termination in this Agreement, the Owner shall have the right to terminate this Agreement if, for any two consecutive Fiscal Years beginning after the completion of the third (3rd) Full Fiscal Year, both (a) the Annualized RevPAR for the Hotel for such Fiscal Year is less than 80% of the average Annualized RevPAR for the Competitive Set for such Fiscal Year (the "RevPAR Test"), and (b) the Gross Operating Profit of the Hotel is less than 80% of the Gross Operating Profit of the Hotel as set forth in the Annual Budget for such Fiscal Year (the "GOP Test") (the RevPAR Test and the GOP Test are collectively referred to as the "Performance Standard").
This provision is fairly short, but it contains a number of moving parts, and we need to discuss some of the key components.
What is RevPAR?
RevPAR is acronym for "Revenue Per Available Room." RevPAR is calculated by dividing the gross revenues for a hotel for a period of time by the total number of available room nights over the same period. The resulting number will tell you how much money you are generating from each room in your hotel for a particular period. It is a way of combining the results of two other key factors -average daily rate or ADR and Occupancy. The ADR is included in the revenue component of RevPAR, and the occupancy is encompassed in the available room night component.
What is the Competitive Set?
The competitive set is a group of hotels that are similar to your hotel. For example, a 100 room select-service hotel might be compared to a nearby Courtyard by Marriott, but not the local Ritz-Carlton which would be excluded. Picking the competitive set is a critical issue and something of an art. The data for the competitive set is provided by independent data sources, like Smith Travel Research, and usually require a minimum of five different hotels in the set (in addition to your hotel) to ensure confidentiality and anonymity of hotel data particpants.
What is the Budget test?
The budget test requires that the Hotel achieves a minimum percentage (often less than 100%) of the profit that the operator anticipated in its budget for a particular year. This standard raises a very important issue for owners, since operators prepare the budgets for the hotel and therefore have the ability to propose a budget that is easier to achieve. While owners typically have budget approval rights (or at least they should!), operators are in a much better position to forecast the potential profitability of the hotel. Even more importantly, the operator, by virtue of its management of the hotel, is in a position to manipulate the operations of the hotel to achieve the necessary level of performance. For example, an operator might choose to push certain expenses into a following year to meet the operating test or accelerate certain income.
Why is it measured over two consecutive years?
Operators prefer to structure a performance test so that the operator is only in breach if it fails to meet the budget in two consecutive years. This helps protect operators, since the operator isn't in danger of being terminated if it suffers one bad year out of a series of good years. However, it also emphasizes one of the concerns that an owner should have about the budget test - since it takes two years of failure to trigger the owner's right to terminate, the operator can, in the second year of a down cycle, revise its projections to make it less likely that they will fail, and also make it easier to maneuver the financial performance of the property and avoid termination. It also means that a hotel could perform poorly for several years, which reduces the value of the hotel and the ability to finance it.
Is this two tests, or one?
The performance test usually proposed by an operator is designed so that the operator has to fail each of the tests in both years of the test period to be subject to termination - in other words, the operator might not achieve the necessary profits, but if it operates on par with its competitors, that year doesn't count as having failed the test. An operator wants this because it doesn't want to be penalized if the hotel doesn't make its predicted profits, but operates at least as well as its competitors; conversely, a hotel operator would not want to be subject to termination if it achieves anticipated profitability, even if other hotels in the area operate more profitably.
"Cures" and other parts of the performance test
There are often additional components or matters that relate to the Operator's performance test. For example, an operator performance provision will often provide that the Operator can avoid termination if it "cures" the performance failure by paying the owner the difference between the actual profits and budgeted profits for the year. Should the Operator have any cures if the performance standard is to be meaningful? If so, how many? Must the cure be made on the first year of performance test failure? If not, does the two consecutive year test completely reset or just need one more failing year? What is the right measure of a "cure" payment? Does the missed profit really cover all the damage? Certainly not!
Well, the "cure provision" of a performance test are extremely prolix and cannot be treated here except to alert you to its importance.
Additionally, don't forget that the Operator will typically be excused from the performance tests for any period of time that involves an event that qualifies as a "force majeure." There are typically also "passes" from the test or "lockouts" from exercising any rights under it for an initial stabilization or lockout period that may run from 12 months to 7 years, or longer, or during periods when the property is being upgraded.
And any breach of the HMA by Owner claimed by the Operator - such as failure to fund a big capital improvement program - may also excuse the Operator from being held accountable under a performance test.
What should I consider when negotiating the performance standard? EVERY LITTLE THING MATTERS. The test looks simple, but every part of it is meaningful. For example, constructing the competitive set alone raises many issues:
•Are there really 5 hotels in your market that compete directly with your hotel? Many times it is difficult to find those hotels, and you have to consider adding hotels that are in different classes or different locations.
•What is the right percentage for the test? If the average RevPAR for the hotels in the competitive set is lower than your hotel, a target RevPAR of 90% of your hotel's projected RevPAR may be too low, making the test less than meaningful. A new hotel should significantly outperform an older set of hotels. Maybe your hotel should be at 120% of the competitive set.
•What happens when new hotels come into the market area, or existing hotels in the competitive set close, or when hotels are rebranded? Should that change the RevPAR test?
These are only a few of the most obvious issues, and taken in the light of a complex hotel management agreement, a hotel owner needs expert assistance to ensure not only that the performance test itself is meaningful, but also that it works seamlessly with the remainder of the agreement and all of the parties' goals.
Hotel Management Agreement Resources
If you found this article helpful, you may also find of interest other articles on Hotel Management Agreements and related brand topics at Hotel Management Agreements.
With experience gained in negotiating, re-negotiating, litigating, arbitrating and advising on more than 1,000 hotel management agreements and more than $60 billion of hotel transactions, the members of JMBM's Global Hospitality Group® wanted to share some lessons learned.
If you would like to review why getting a great operator and a fair HMA are so critical to the success of your hotel, or if you missed any of the earlier series on this subject, please go to www.HotelLawBlog.com, look under the TOPIC tab at the top of the home page, and then select "Hotel Management Agreements" to see some great information.
What does a typical Operator performance clause look like?
Operators may propose an HMA without any performance standard. That would be in their interest, because a performance standard can only be used to their disadvantage - to reduce their income, subordinate their fees, or possibly terminate the management contract. And of course, the right to terminate is the right to re-negotiate the agreement as well. So failure of a performance standard does not mean you have to terminate the Operator, but it might be used as the basis to re-negotiate the allocation of financial and other risks.
The typical performance standard clause proposed by a branded hotel operator often looks something like this:
In addition to the other rights of termination in this Agreement, the Owner shall have the right to terminate this Agreement if, for any two consecutive Fiscal Years beginning after the completion of the third (3rd) Full Fiscal Year, both (a) the Annualized RevPAR for the Hotel for such Fiscal Year is less than 80% of the average Annualized RevPAR for the Competitive Set for such Fiscal Year (the "RevPAR Test"), and (b) the Gross Operating Profit of the Hotel is less than 80% of the Gross Operating Profit of the Hotel as set forth in the Annual Budget for such Fiscal Year (the "GOP Test") (the RevPAR Test and the GOP Test are collectively referred to as the "Performance Standard").
This provision is fairly short, but it contains a number of moving parts, and we need to discuss some of the key components.
What is RevPAR?
RevPAR is acronym for "Revenue Per Available Room." RevPAR is calculated by dividing the gross revenues for a hotel for a period of time by the total number of available room nights over the same period. The resulting number will tell you how much money you are generating from each room in your hotel for a particular period. It is a way of combining the results of two other key factors -average daily rate or ADR and Occupancy. The ADR is included in the revenue component of RevPAR, and the occupancy is encompassed in the available room night component.
What is the Competitive Set?
The competitive set is a group of hotels that are similar to your hotel. For example, a 100 room select-service hotel might be compared to a nearby Courtyard by Marriott, but not the local Ritz-Carlton which would be excluded. Picking the competitive set is a critical issue and something of an art. The data for the competitive set is provided by independent data sources, like Smith Travel Research, and usually require a minimum of five different hotels in the set (in addition to your hotel) to ensure confidentiality and anonymity of hotel data particpants.
What is the Budget test?
The budget test requires that the Hotel achieves a minimum percentage (often less than 100%) of the profit that the operator anticipated in its budget for a particular year. This standard raises a very important issue for owners, since operators prepare the budgets for the hotel and therefore have the ability to propose a budget that is easier to achieve. While owners typically have budget approval rights (or at least they should!), operators are in a much better position to forecast the potential profitability of the hotel. Even more importantly, the operator, by virtue of its management of the hotel, is in a position to manipulate the operations of the hotel to achieve the necessary level of performance. For example, an operator might choose to push certain expenses into a following year to meet the operating test or accelerate certain income.
Why is it measured over two consecutive years?
Operators prefer to structure a performance test so that the operator is only in breach if it fails to meet the budget in two consecutive years. This helps protect operators, since the operator isn't in danger of being terminated if it suffers one bad year out of a series of good years. However, it also emphasizes one of the concerns that an owner should have about the budget test - since it takes two years of failure to trigger the owner's right to terminate, the operator can, in the second year of a down cycle, revise its projections to make it less likely that they will fail, and also make it easier to maneuver the financial performance of the property and avoid termination. It also means that a hotel could perform poorly for several years, which reduces the value of the hotel and the ability to finance it.
Is this two tests, or one?
The performance test usually proposed by an operator is designed so that the operator has to fail each of the tests in both years of the test period to be subject to termination - in other words, the operator might not achieve the necessary profits, but if it operates on par with its competitors, that year doesn't count as having failed the test. An operator wants this because it doesn't want to be penalized if the hotel doesn't make its predicted profits, but operates at least as well as its competitors; conversely, a hotel operator would not want to be subject to termination if it achieves anticipated profitability, even if other hotels in the area operate more profitably.
"Cures" and other parts of the performance test
There are often additional components or matters that relate to the Operator's performance test. For example, an operator performance provision will often provide that the Operator can avoid termination if it "cures" the performance failure by paying the owner the difference between the actual profits and budgeted profits for the year. Should the Operator have any cures if the performance standard is to be meaningful? If so, how many? Must the cure be made on the first year of performance test failure? If not, does the two consecutive year test completely reset or just need one more failing year? What is the right measure of a "cure" payment? Does the missed profit really cover all the damage? Certainly not!
Well, the "cure provision" of a performance test are extremely prolix and cannot be treated here except to alert you to its importance.
Additionally, don't forget that the Operator will typically be excused from the performance tests for any period of time that involves an event that qualifies as a "force majeure." There are typically also "passes" from the test or "lockouts" from exercising any rights under it for an initial stabilization or lockout period that may run from 12 months to 7 years, or longer, or during periods when the property is being upgraded.
And any breach of the HMA by Owner claimed by the Operator - such as failure to fund a big capital improvement program - may also excuse the Operator from being held accountable under a performance test.
What should I consider when negotiating the performance standard? EVERY LITTLE THING MATTERS. The test looks simple, but every part of it is meaningful. For example, constructing the competitive set alone raises many issues:
•Are there really 5 hotels in your market that compete directly with your hotel? Many times it is difficult to find those hotels, and you have to consider adding hotels that are in different classes or different locations.
•What is the right percentage for the test? If the average RevPAR for the hotels in the competitive set is lower than your hotel, a target RevPAR of 90% of your hotel's projected RevPAR may be too low, making the test less than meaningful. A new hotel should significantly outperform an older set of hotels. Maybe your hotel should be at 120% of the competitive set.
•What happens when new hotels come into the market area, or existing hotels in the competitive set close, or when hotels are rebranded? Should that change the RevPAR test?
These are only a few of the most obvious issues, and taken in the light of a complex hotel management agreement, a hotel owner needs expert assistance to ensure not only that the performance test itself is meaningful, but also that it works seamlessly with the remainder of the agreement and all of the parties' goals.
Hotel Management Agreement Resources
If you found this article helpful, you may also find of interest other articles on Hotel Management Agreements and related brand topics at Hotel Management Agreements.
Thursday, June 24, 2010
Personal touches that Increase Hotel Business..
Personal touches might include being aware of your guests’ circumstances – are they there to celebrate a special occasion? A small gift, flowers or something as simple as a cupcake and a candle. Do they have special requirements e.g. dietary? Are they off to a wedding and need a buttonhole, confetti or gift-wrap?
Your personal touches might not be pre planned, but as a result of being attentive to your guests’ needs. Train your staff to listen and be observant to what guests say or are looking for. Whether it’s help with the stairs, needing a needle and thread, or a last minute birthday card and stamp.
Are your guests away from loved ones, and want to take a gift back home? What do you do, have or use that is unique or unusual and reflects your brand or identity? Homemade preserves, gifts made by a local artist or craftsman that reflect your location, branded toiletries…
Do your guests want to be reminded of their visit after they’ve returned home? What could you give as a little memento?
And if nothing else, a simple hand written thank you note after their stay will keep you in mind for their next visit or when recommending to friends and family.
It’s the exceptional and unexpected that gets you noticed, remembered and most importantly brings you repeat or referral business.
Your personal touches might not be pre planned, but as a result of being attentive to your guests’ needs. Train your staff to listen and be observant to what guests say or are looking for. Whether it’s help with the stairs, needing a needle and thread, or a last minute birthday card and stamp.
Are your guests away from loved ones, and want to take a gift back home? What do you do, have or use that is unique or unusual and reflects your brand or identity? Homemade preserves, gifts made by a local artist or craftsman that reflect your location, branded toiletries…
Do your guests want to be reminded of their visit after they’ve returned home? What could you give as a little memento?
And if nothing else, a simple hand written thank you note after their stay will keep you in mind for their next visit or when recommending to friends and family.
It’s the exceptional and unexpected that gets you noticed, remembered and most importantly brings you repeat or referral business.
8 Pitfalls Of Hotel Lending, And How To Avoid Them | Lessons From The Past
This article will focus on 8 pitfalls of hotel lending - the special traps that hotel lending presents beyond all the typical considerations of traditional real estate lending - and how to avoid them. These are hotel-specific structuring, documentation and legal issues that can really snare the unwary lender.
This is the third article in a series. As the article titles of this series suggest, there are several aspects to successful hotel lending:
This is the third article in a series. As the article titles of this series suggest, there are several aspects to successful hotel lending:
How vital are housekeeping services to hotel guests?
USA Today writes about the cutting back of Housekeeping in hotels, This is a drastic cut that I never would agree to.
It is a scary time to make changes, I can understand menu changes, but staffing, there are minimal standards that are necessary, I remember I used to do them ...
It is a scary time to make changes, I can understand menu changes, but staffing, there are minimal standards that are necessary, I remember I used to do them ...
Wednesday, June 23, 2010
Hotel capex to drop for second straight year--NYU
* Capex projected to be $3 billion in 2010
* Spending may not pick up again until 2012
NEW YORK, June 22 (Reuters) - Spending on new carpets, beds and lampshades at U.S. hotels will drop for a second straight year in 2010, as the lodging industry grapples with high debt and a slow recovery of demand.
Capital expenditures at U.S. hotels will fall about 10 percent from 2009 levels to $3 billion, according to a new study from New York University's hospitality school.
The result may be more faded walls, torn drapes and scratched furniture, which could hurt satisfaction scores that hotels tout to lure new business, according to the study's author, NYU professor Bjorn Hanson.
"We're more at the beginning of guests noticing this," Hanson said, in an interview.
Last year was tumultuous for the U.S. lodging industry, with companies such as Marriott International Inc (MAR.N) and Starwood Hotels & Resorts Worldwide Inc (HOT.N) seeing an unprecedented drop in demand.
In 2009, capital spending fell to $3.3 billion, a 40 percent drop from 2008, when the lodging industry spent a record $5.5 billion on improvements such as freshly painted walls, lobby overhauls and other improvements.
Last year marked the first annual drop in capital expenditure for the hotel industry since 2003.
Hanson expects the hotel industry will see an uptick in capital expenditure in 2012, a year after profits are projected to pick up at individual hotels.
The infusion of investment in 2008 is allowing some hotels to skip some projects they might have readily completed a few years back.
But some of those upgrades are now starting to show signs of wear and tear, Hanson said, adding he sees the effect of lessened capital spending during his own travels.
"There was an effort to use some more intense colors (a few years ago)," Hanson told Reuters in an interview. "When the fabric gets a bit worn, those colors seem to show the wear, a little bit of fading or a little loss of finish."
Spending on capital improvements is likely more difficult for new hotels that were built or bought in the past 5 years at higher costs, Hanson said. New properties may have to funnel more of their revenue toward paying down debt.
But one area hotels are likely to keep up with is the lobby.
"Lobbies are less likely to be deferred because so many people make their decision about staying at their hotel and what room rate is appropriate based on the lobby," he added.
(Reporting by Deepa Seetharaman; editing by Andre Grenon)
* Spending may not pick up again until 2012
NEW YORK, June 22 (Reuters) - Spending on new carpets, beds and lampshades at U.S. hotels will drop for a second straight year in 2010, as the lodging industry grapples with high debt and a slow recovery of demand.
Capital expenditures at U.S. hotels will fall about 10 percent from 2009 levels to $3 billion, according to a new study from New York University's hospitality school.
The result may be more faded walls, torn drapes and scratched furniture, which could hurt satisfaction scores that hotels tout to lure new business, according to the study's author, NYU professor Bjorn Hanson.
"We're more at the beginning of guests noticing this," Hanson said, in an interview.
Last year was tumultuous for the U.S. lodging industry, with companies such as Marriott International Inc (MAR.N) and Starwood Hotels & Resorts Worldwide Inc (HOT.N) seeing an unprecedented drop in demand.
In 2009, capital spending fell to $3.3 billion, a 40 percent drop from 2008, when the lodging industry spent a record $5.5 billion on improvements such as freshly painted walls, lobby overhauls and other improvements.
Last year marked the first annual drop in capital expenditure for the hotel industry since 2003.
Hanson expects the hotel industry will see an uptick in capital expenditure in 2012, a year after profits are projected to pick up at individual hotels.
The infusion of investment in 2008 is allowing some hotels to skip some projects they might have readily completed a few years back.
But some of those upgrades are now starting to show signs of wear and tear, Hanson said, adding he sees the effect of lessened capital spending during his own travels.
"There was an effort to use some more intense colors (a few years ago)," Hanson told Reuters in an interview. "When the fabric gets a bit worn, those colors seem to show the wear, a little bit of fading or a little loss of finish."
Spending on capital improvements is likely more difficult for new hotels that were built or bought in the past 5 years at higher costs, Hanson said. New properties may have to funnel more of their revenue toward paying down debt.
But one area hotels are likely to keep up with is the lobby.
"Lobbies are less likely to be deferred because so many people make their decision about staying at their hotel and what room rate is appropriate based on the lobby," he added.
(Reporting by Deepa Seetharaman; editing by Andre Grenon)
Two Relatively Easy Housecalls - The Life of a Hotel Doctor
By Mike Oppenheim, M.D.
An elderly lady opened the door, smiled in welcome, and gestured me to come in and sit. As I followed, she remained silent, so I knew immediately that she spoke no English. If someone doesn’t know “hello” comprehension is generally zero. Although half my patients are foreign, almost all know enough English to deal with a simple problem. The rest have a companion to interpret, but now and then this problem arises.
“Portuguese.” she said. “Speak Spanish?”
When I shook my head, she took up her cell phone. The first number she dialed didn’t answer. The second, after a short conversation in Portuguese, proved unfruitful. She continued dialing. She was undoubtedly Brazilian, and almost every South American I see has travel insurance; if I phone the insurance agency’s 800 number, someone will interpret. Unfortunately, her travel insurer hadn’t called me but a national housecall service, Expressdoc. When Expressdoc needs a housecall in Los Angeles, it calls me. Since I collect the same fee, I don’t care where the call originates, but it’s a mystery why some insurers don’t call me directly and save money. I could phone Expressdoc and ask for the agency’s number, but that makes them uncomfortable. They also know the insurer could bypass them, so they’d rather not make them aware of who’s doing the visits. I sympathize; housecalls is a dog-eat-dog business. The lady finally reached a friend, and we proceeded with the consultation, passing the phone back and forth. As usual, delivering medical care was the easiest part of the housecall. She had broken her glasses a few days earlier and complained of headaches, but I suspected she wanted a doctor’s note so insurance would pay for replacement glasses.
Before driving home, I answered a message from the Embassy Suites at the airport. The previous evening, a Canadair stewardess had phoned, confined to bed with a backache. Many foreign airlines call me to see sick crew members; I bill their central office. Sadly, American air crew with their American insurance are out of luck. Billing an American insurance carrier – and for a housecall! – guarantees torment and aggravation, and I’ve long since given it up. Billing a foreign airline is no simple matter (“my manager says send your bill to the main office” never works), but once we’ve agreed on a formal arrangement, matters work smoothly. Sadly, I have no arrangement with Canadair. I explained this to the flight attendant, and she agreed to consult her supervisor. When I answered my message, I was delighted to hear her explain that Canadair had faxed an approval for my visit and its credit card number. Her backache had improved, and all she needed was a doctor’s note approving travel home as a passenger. I expected an easy visit.
After a short consultation and the note, I presented myself to the front desk where I discovered my optimism was premature. The number on the Canadair fax belonged to an American Express card. American Express charges more, so many credit card services, including mine, don’t cover them. I explained this to the desk clerk who summoned her manager who apologized, phoned Canadair, and learned that the airline did not have a Visa or Master card, a situation I’ve never encountered. No problem, the manager assured me. The hotel would mail me a check and bill Canadair. This seemed a bad idea because hotels don’t normally do that, and long experience has taught that expecting a hotel to do something it doesn’t normally do leads to frustration. But my rule is to never hassle a hotel, so I smiled and agreed. An hour later, the manager phoned to say that, rather than mail a check, the hotel would pay cash on my next visit. Naturally, I agreed.
Two days later, picking up my wife at the airport, I stopped by the Embassy Suites. I wouldn’t be writing this if matters went smoothly, but the desk clerks looked mystified when I explained my purpose. They phoned the manager who was tied up in an important meeting. I waited half an hour, but when my wife called. I departed after leaving a polite message on his cell phone. He was off duty when I returned the next day, and the desk clerks remained puzzled at my request. There is no great lesson here, and I’m sure I’ll eventually collect, although I suspect I’ll have to phone Canadair a few times, fax a few forms to Canada, and wait a few months.
An elderly lady opened the door, smiled in welcome, and gestured me to come in and sit. As I followed, she remained silent, so I knew immediately that she spoke no English. If someone doesn’t know “hello” comprehension is generally zero. Although half my patients are foreign, almost all know enough English to deal with a simple problem. The rest have a companion to interpret, but now and then this problem arises.
“Portuguese.” she said. “Speak Spanish?”
When I shook my head, she took up her cell phone. The first number she dialed didn’t answer. The second, after a short conversation in Portuguese, proved unfruitful. She continued dialing. She was undoubtedly Brazilian, and almost every South American I see has travel insurance; if I phone the insurance agency’s 800 number, someone will interpret. Unfortunately, her travel insurer hadn’t called me but a national housecall service, Expressdoc. When Expressdoc needs a housecall in Los Angeles, it calls me. Since I collect the same fee, I don’t care where the call originates, but it’s a mystery why some insurers don’t call me directly and save money. I could phone Expressdoc and ask for the agency’s number, but that makes them uncomfortable. They also know the insurer could bypass them, so they’d rather not make them aware of who’s doing the visits. I sympathize; housecalls is a dog-eat-dog business. The lady finally reached a friend, and we proceeded with the consultation, passing the phone back and forth. As usual, delivering medical care was the easiest part of the housecall. She had broken her glasses a few days earlier and complained of headaches, but I suspected she wanted a doctor’s note so insurance would pay for replacement glasses.
Before driving home, I answered a message from the Embassy Suites at the airport. The previous evening, a Canadair stewardess had phoned, confined to bed with a backache. Many foreign airlines call me to see sick crew members; I bill their central office. Sadly, American air crew with their American insurance are out of luck. Billing an American insurance carrier – and for a housecall! – guarantees torment and aggravation, and I’ve long since given it up. Billing a foreign airline is no simple matter (“my manager says send your bill to the main office” never works), but once we’ve agreed on a formal arrangement, matters work smoothly. Sadly, I have no arrangement with Canadair. I explained this to the flight attendant, and she agreed to consult her supervisor. When I answered my message, I was delighted to hear her explain that Canadair had faxed an approval for my visit and its credit card number. Her backache had improved, and all she needed was a doctor’s note approving travel home as a passenger. I expected an easy visit.
After a short consultation and the note, I presented myself to the front desk where I discovered my optimism was premature. The number on the Canadair fax belonged to an American Express card. American Express charges more, so many credit card services, including mine, don’t cover them. I explained this to the desk clerk who summoned her manager who apologized, phoned Canadair, and learned that the airline did not have a Visa or Master card, a situation I’ve never encountered. No problem, the manager assured me. The hotel would mail me a check and bill Canadair. This seemed a bad idea because hotels don’t normally do that, and long experience has taught that expecting a hotel to do something it doesn’t normally do leads to frustration. But my rule is to never hassle a hotel, so I smiled and agreed. An hour later, the manager phoned to say that, rather than mail a check, the hotel would pay cash on my next visit. Naturally, I agreed.
Two days later, picking up my wife at the airport, I stopped by the Embassy Suites. I wouldn’t be writing this if matters went smoothly, but the desk clerks looked mystified when I explained my purpose. They phoned the manager who was tied up in an important meeting. I waited half an hour, but when my wife called. I departed after leaving a polite message on his cell phone. He was off duty when I returned the next day, and the desk clerks remained puzzled at my request. There is no great lesson here, and I’m sure I’ll eventually collect, although I suspect I’ll have to phone Canadair a few times, fax a few forms to Canada, and wait a few months.
Monday, June 21, 2010
Hotel Lending: Why hotel lending is different. . . and some things you should know . . .
Hotel lending is different from any other kind of real estate lending . . . because hotels are different from every other class of real estate. These differences are key to understanding why hotel lending is different than lending on any other class of real estate.
Wednesday, June 16, 2010
Deloitte Hospitality 2015: Seven key trends to shape future success
•China and India tourism industries will grow to be greater than that of the UK, France or Japan
•US baby boomers will drive growth in the hospitality and travel sectors
•Social media is crucial for hotel operators to manage the impact on their brands
In order to reverse the recent downward trend and achieve future growth, the hospitality industry will need to address seven major issues over the next five years, according to new report by Deloitte entitled, Hospitality 2015.
•US baby boomers will drive growth in the hospitality and travel sectors
•Social media is crucial for hotel operators to manage the impact on their brands
In order to reverse the recent downward trend and achieve future growth, the hospitality industry will need to address seven major issues over the next five years, according to new report by Deloitte entitled, Hospitality 2015.
Tuesday, June 15, 2010
Mapping RevPAR performance
Geographic information systems (GIS) are powerful tools when married to data. Simply put, a GIS system allows the end user to see patterns and trends that might not reveal themselves when looking at raw data.
For example, I've geo coded the STR census database of more than 50,000 hotels, and we now have a visual representation of virtually every property in the country. With a few command lines I can highlight properties by chain scale, age and even performance.
Recently I wanted to find what areas of the country are rebounding from the downturn in 2009 and what areas are still struggling. STR has over 600 "tracts" defined for the country, and each tract is comprised of a number of zip codes. After layering the tracts into GIS software and then uploading tract performance data, I was able to geospatially discern what areas of the country are headed in which direction.
The map below shows the results of this search, detailing year-to-date (April) RevPAR change from 2009 to 2010. Due to space limitations, I'm only showing the continental U.S. here.
For example, I've geo coded the STR census database of more than 50,000 hotels, and we now have a visual representation of virtually every property in the country. With a few command lines I can highlight properties by chain scale, age and even performance.
Recently I wanted to find what areas of the country are rebounding from the downturn in 2009 and what areas are still struggling. STR has over 600 "tracts" defined for the country, and each tract is comprised of a number of zip codes. After layering the tracts into GIS software and then uploading tract performance data, I was able to geospatially discern what areas of the country are headed in which direction.
The map below shows the results of this search, detailing year-to-date (April) RevPAR change from 2009 to 2010. Due to space limitations, I'm only showing the continental U.S. here.
RMS ESP: Predicting the future of Revenue Management
The formal practice of revenue management, in the big scheme of things, hasn’t been around all that long. It was only in the late 1980’s that hotels (and hotel schools) began to consider the science of yield management in terms of hotel room inventory, and even less time ago than that that hotels began to implement policies and systems specifically for the purpose of managing revenue.
In that time, understandably, revenue management has evolved considerably. Technology has encouraged these transformations at every phase; computer systems have grown more capable of performing the tasks crucial to revenue management, the rise of the internet and online travel agents injected the complexity of myriad sales channels into the mix, and sophisticated algorithms have been developed to better predict changes in pricing and booking pace. As befits a relatively young field, change is the only constant.
Making accurate predictions in an environment of this sort, then, is a dubious proposition. What can be reasonably expected of the future of revenue management if change and evolution is so pervasive? Of course, at REVPAR GURU we have always insisted that the future- of trends or of room rates- can be predicted not only from historical data, but also from the rigorous analysis of up-to-the-minute information.
So we will follow our corporate philosophy, and not shrink from this challenge. Here are REVPAR GURU’s predictions for the future of revenue management:
Automated revenue management systems will rise to prominence.
Hoteliers and revenue managers will all wake up to the fact that an automated RMS, rather than threatening the relevance of revenue managers and revenue management staffs, will actually augment them do their jobs better. By freeing revenue managers from the tedium of tasks that need to be performed hourly (rate adjustments, inventory allocations, etc.), automated revenue management systems enable personnel to engage in more productive pursuits, like devising new sales techniques or focusing on group sales.
Sales channels will continue to expand.
As sales channels continue to expand, the effective revenue management systems will have to be able to manage an ever-growing number of sales channels. There is still room in the online space for additional sales channels, through new OTA launches or social media integration, etc. The mobile space is also emerging as a channel for consumers to make reservations; a good revenue management system will need the capability to process mobile bookings in addition to online, phone and in-person bookings.
In order to maximize RevPAR, rates will need to be adjusted at an ever-faster pace.
This is simply a function of the rate at which information becomes available, and how much information is out there at any given time. This is multiplied by the fact that if more hotels utilize automated systems, their rates will be adjusted more rapidly, forcing other automated systems to adjust, and so on and so on. But in general, history has indicated that more and better information will be available tomorrow than there was today, so we feel confident in predicting that in the information-saturated environment of the near future, rates will have to be adjusted quicker to take advantage of fluctuations in supply and demand.
Concepts from other industries will be more widely utilized in the hotel revenue management field.
Since revenue management involves a certain measure of prediction, it stands to reason that revenue management systems will draw from other industries where prediction is at the core of their business. To use one example, the REVPAR GURU system incorporates stock market principles to help generate optimal room rates. Other systems may also use primarily financial instruments to make predictions, or leverage emerging techniques like crowdsourcing or artificial markets. At any rate, the RMS that only use backwards-looking techniques are fast becoming obsolete.
Comprehensive revenue management systems and full system integration will become more attractive to hotels.
The reason these ideas- comprehensive systems that are integrated property-wide- haven’t already gained significant traction isn’t because they aren’t good ideas, it’s because hoteliers assume that they are expensive ideas. Well, that’s partially true; comprehensive revenue management systems are investments (when compared to the pricing of simple RMS systems that require constant manual updates and data analysis), but the advantage conferred by a comprehensive system well outstrips its cost. Over time, this is a concept that hotels will come to understand, making these kinds of systems the standard for effective revenue management.
As with more prognostication regarding revenue management, some of these predictions may turn out to be false. But they all speak to the increased role revenue management systems will play in hotels, as well as to the technological trends the industry ought to be quite familiar with. The revenue management systems of the next decade may not resemble today’s systems at all, but they will certainly be the product of increased access to information, cross-disciplinary conceptual development, better and faster automation, a more robust internet and other sales channels and more complete integration of systems in a given property. They are also sure to be beneficial to the innovative hotels that utilize them.
In that time, understandably, revenue management has evolved considerably. Technology has encouraged these transformations at every phase; computer systems have grown more capable of performing the tasks crucial to revenue management, the rise of the internet and online travel agents injected the complexity of myriad sales channels into the mix, and sophisticated algorithms have been developed to better predict changes in pricing and booking pace. As befits a relatively young field, change is the only constant.
Making accurate predictions in an environment of this sort, then, is a dubious proposition. What can be reasonably expected of the future of revenue management if change and evolution is so pervasive? Of course, at REVPAR GURU we have always insisted that the future- of trends or of room rates- can be predicted not only from historical data, but also from the rigorous analysis of up-to-the-minute information.
So we will follow our corporate philosophy, and not shrink from this challenge. Here are REVPAR GURU’s predictions for the future of revenue management:
Automated revenue management systems will rise to prominence.
Hoteliers and revenue managers will all wake up to the fact that an automated RMS, rather than threatening the relevance of revenue managers and revenue management staffs, will actually augment them do their jobs better. By freeing revenue managers from the tedium of tasks that need to be performed hourly (rate adjustments, inventory allocations, etc.), automated revenue management systems enable personnel to engage in more productive pursuits, like devising new sales techniques or focusing on group sales.
Sales channels will continue to expand.
As sales channels continue to expand, the effective revenue management systems will have to be able to manage an ever-growing number of sales channels. There is still room in the online space for additional sales channels, through new OTA launches or social media integration, etc. The mobile space is also emerging as a channel for consumers to make reservations; a good revenue management system will need the capability to process mobile bookings in addition to online, phone and in-person bookings.
In order to maximize RevPAR, rates will need to be adjusted at an ever-faster pace.
This is simply a function of the rate at which information becomes available, and how much information is out there at any given time. This is multiplied by the fact that if more hotels utilize automated systems, their rates will be adjusted more rapidly, forcing other automated systems to adjust, and so on and so on. But in general, history has indicated that more and better information will be available tomorrow than there was today, so we feel confident in predicting that in the information-saturated environment of the near future, rates will have to be adjusted quicker to take advantage of fluctuations in supply and demand.
Concepts from other industries will be more widely utilized in the hotel revenue management field.
Since revenue management involves a certain measure of prediction, it stands to reason that revenue management systems will draw from other industries where prediction is at the core of their business. To use one example, the REVPAR GURU system incorporates stock market principles to help generate optimal room rates. Other systems may also use primarily financial instruments to make predictions, or leverage emerging techniques like crowdsourcing or artificial markets. At any rate, the RMS that only use backwards-looking techniques are fast becoming obsolete.
Comprehensive revenue management systems and full system integration will become more attractive to hotels.
The reason these ideas- comprehensive systems that are integrated property-wide- haven’t already gained significant traction isn’t because they aren’t good ideas, it’s because hoteliers assume that they are expensive ideas. Well, that’s partially true; comprehensive revenue management systems are investments (when compared to the pricing of simple RMS systems that require constant manual updates and data analysis), but the advantage conferred by a comprehensive system well outstrips its cost. Over time, this is a concept that hotels will come to understand, making these kinds of systems the standard for effective revenue management.
As with more prognostication regarding revenue management, some of these predictions may turn out to be false. But they all speak to the increased role revenue management systems will play in hotels, as well as to the technological trends the industry ought to be quite familiar with. The revenue management systems of the next decade may not resemble today’s systems at all, but they will certainly be the product of increased access to information, cross-disciplinary conceptual development, better and faster automation, a more robust internet and other sales channels and more complete integration of systems in a given property. They are also sure to be beneficial to the innovative hotels that utilize them.
Immutable Laws of Lodging Investment
As the industry continues its slow climb out of the Great Recession, investors are either licking their chops or licking their wounds. While many investors will blame the sheer magnitude of this downturn for the economic devastation that occurred in the lodging sector, it is undeniable that much of the hardship was caused by – or at least exacerbated by – questionable investment decisions before the recession started. It is equally undeniable that all those mistakes will be repeated in the future for a variety of reasons, not the least of which is a conscious – or subconscious – amnesia.
As a veteran of six economic cycles of varying severity, I can say with conviction that, for those who do not want to repeat past mistakes (or for those new to the game who do not wish to make them in the first place), there are repetitive patterns that are not only clearly observable, but definitively predictive. I have distilled them into 13 distinct observations that are so incontrovertible that I refer to them as the immutable laws of lodging investment.
Heeding them may not totally prevent financial hardship in the lodging sector – especially in an era where unexpected events like 9-11 can suddenly and radically disrupt normal cycles…..nor will it completely insulate investors from downturns as severe as what we just experienced. They should, however, dramatically reduce the likelihood of problems and mitigate adverse impacts if/when they occur.
The immutable laws of lodging investment, in no particular order, are…..
1.With few exceptions, hotels are not an appropriate asset class for a long-term hold… because the lodging business (i) is highly cyclical, (ii) has high operating leverage (rapidly eroding profit during cyclical lows), (iii) is vulnerable to uncontrollable and unpredictable external events (e.g., terrorist attacks, epidemics, oil spills), and (iv) is subject to extreme irrationality by those who control pricing decisions. So, the highest yields will accrue to industry-savvy cyclical traders.
2.Never fall in love with real estate. It is all too easy for irrationality to quietly creep into decision-making when one becomes too attached to the allure of a particular site, building, concept, or opportunity. Emotional attachment has undone more investors than affairs of the heart have undone politicians.
3.Location is and always will be the most important criteria in differentiating real estate – and hotels are no exception. This law applies at both the macro/destination level (e.g., airlift, demand base, local economy, labor market, etc.) and the micro level (access, visibility, surrounding uses, barriers to entry, etc.). Market compression is no substitute for location…..a lesson learned episodically when markets go through their inevitable declines.
4.Leave some chips on the table. No one is smart enough to know when the bottom or the top will occur. Those who catch it just right are simply lucky. You do not need to be a first mover during cyclical lows to buy at a good price – and there are plenty of signs to indicate when the sector is “nearing” the top (i.e., still time to exit).
5.Do not equate luck with skill or intellect. Many lodging industry investors, who made money because they hit a cycle right, have gone on to lose it because they could not distinguish their good fortune from their ability.
6.Easy credit is a leading indicator that the top is approaching. Because lenders generally rely on the false security of well established trends, one of the first signs that the market is becoming risky is when lenders deem it to be safe (high leverage, easy terms, and narrow spreads). Easy (easier) availability of construction financing is an even brighter beacon because that spigot generally opens at about the time it should be closing. When hotel debt becomes easy and plentiful, it may not yet be time to run for the exits – but the hairs on the back of your neck should be tingling.
7.If you can’t build a hotel so as to open in the initial stages of a growth cycle, you probably shouldn’t build it at all. In most instances, the only guaranteed winners of late-cycle new construction – especially for upscale and luxury full-service hotels and resorts – are developers using other people’s money, brands bent on growth, and (somewhere in the future) the second or third owner. This may be the most difficult of the laws to adhere to because it requires financing to be obtained at the time when most construction lenders are loathe to provide it (and, ironically, the only time in the cycle that they should).
8.Cap rates should be viewed as a derivative of rather than an indicator of value. Viewed in the context of real estate cycles, cap rates are the inverse of what they should be. That is, they are at their lowest when the cycle is near the top, net operating income is peaking, and there is no place to go but down. They are at their highest when the market has hit bottom, net operating income is at its lowest point, and the future holds the most opportunity for growth.
9.There will always be a replacement source of irrational capital. Every cycle manages to attract a source of capital that will over-value assets as the cycle matures. Indeed, these are the buyers every cyclical investor prays for. The trick is to take advantage of them – not become one of them.
10.Leverage over 65% loan-to-value is a high-risk strategy for hotels. The degree to which a borrower chooses to lever lodging assets in excess of this level is inversely proportional to (i) the number of cycles the borrower has experienced, (ii) the amount of the borrower’s “own” money in the deal (versus other people’s money), and (iii) the borrower’s propensity to avoid risk. Even experienced cyclical investors can be impacted by excess leverage because of event-related downturns that are entirely unpredictable. Indeed, the only “safe” way to over-leverage is to go all the way (i.e., little or no equity and non-recourse financing) – assuming the borrower won’t mind if the lender ends up owning the asset.
11.Understand the nature of various industry participants and diligently observe their behavior. It is easy to get swept up in excessive exuberance, especially when the entire market seems to be moving in the same direction. But most industry participants are self-serving entities that are unwittingly or intentionally stoking the cyclical flames. After all, developers need to develop, managers/brands need to grow, lenders need to lend, brokers need transactions, etc., etc. These (and others like them) are the least reliable indicators of cyclical downturns. The entities to pay closest attention to are industry-savvy agnostics – that is, those who are knowledgeable of the business and indifferent to advancing any agenda other than optimizing returns. They most likely have a strategy – and the discipline to stick with it.
12.The degree to which pricing is rational is inversely proportional to the amount and cost of capital in the system. This phenomenon is clearly observable in the market today as asset prices are unjustifiably high in comparison to industry performance and market uncertainty. Although asset pricing has been exacerbated by a dearth of available product (basic supply and demand), the central cause is plentiful low cost capital, particularly from the public markets.
13.The first sign that a down market is about to turn positive is when the vast majority of industry participants have joined in its funeral dirge. Looking back on this latest cycle, for example, it was early in the fourth quarter of 2009 when Chopin’s Op.35, no.2 became the background soundtrack for nearly every conversation about the lodging industry. Thus the bottom in terms of asset values is already behind us. Most investors, however, should take comfort from Law Number 4, because the only entities who can (read should) take advantage of the lowest cyclical pricing are those who can afford to guess wrong.
As a veteran of six economic cycles of varying severity, I can say with conviction that, for those who do not want to repeat past mistakes (or for those new to the game who do not wish to make them in the first place), there are repetitive patterns that are not only clearly observable, but definitively predictive. I have distilled them into 13 distinct observations that are so incontrovertible that I refer to them as the immutable laws of lodging investment.
Heeding them may not totally prevent financial hardship in the lodging sector – especially in an era where unexpected events like 9-11 can suddenly and radically disrupt normal cycles…..nor will it completely insulate investors from downturns as severe as what we just experienced. They should, however, dramatically reduce the likelihood of problems and mitigate adverse impacts if/when they occur.
The immutable laws of lodging investment, in no particular order, are…..
1.With few exceptions, hotels are not an appropriate asset class for a long-term hold… because the lodging business (i) is highly cyclical, (ii) has high operating leverage (rapidly eroding profit during cyclical lows), (iii) is vulnerable to uncontrollable and unpredictable external events (e.g., terrorist attacks, epidemics, oil spills), and (iv) is subject to extreme irrationality by those who control pricing decisions. So, the highest yields will accrue to industry-savvy cyclical traders.
2.Never fall in love with real estate. It is all too easy for irrationality to quietly creep into decision-making when one becomes too attached to the allure of a particular site, building, concept, or opportunity. Emotional attachment has undone more investors than affairs of the heart have undone politicians.
3.Location is and always will be the most important criteria in differentiating real estate – and hotels are no exception. This law applies at both the macro/destination level (e.g., airlift, demand base, local economy, labor market, etc.) and the micro level (access, visibility, surrounding uses, barriers to entry, etc.). Market compression is no substitute for location…..a lesson learned episodically when markets go through their inevitable declines.
4.Leave some chips on the table. No one is smart enough to know when the bottom or the top will occur. Those who catch it just right are simply lucky. You do not need to be a first mover during cyclical lows to buy at a good price – and there are plenty of signs to indicate when the sector is “nearing” the top (i.e., still time to exit).
5.Do not equate luck with skill or intellect. Many lodging industry investors, who made money because they hit a cycle right, have gone on to lose it because they could not distinguish their good fortune from their ability.
6.Easy credit is a leading indicator that the top is approaching. Because lenders generally rely on the false security of well established trends, one of the first signs that the market is becoming risky is when lenders deem it to be safe (high leverage, easy terms, and narrow spreads). Easy (easier) availability of construction financing is an even brighter beacon because that spigot generally opens at about the time it should be closing. When hotel debt becomes easy and plentiful, it may not yet be time to run for the exits – but the hairs on the back of your neck should be tingling.
7.If you can’t build a hotel so as to open in the initial stages of a growth cycle, you probably shouldn’t build it at all. In most instances, the only guaranteed winners of late-cycle new construction – especially for upscale and luxury full-service hotels and resorts – are developers using other people’s money, brands bent on growth, and (somewhere in the future) the second or third owner. This may be the most difficult of the laws to adhere to because it requires financing to be obtained at the time when most construction lenders are loathe to provide it (and, ironically, the only time in the cycle that they should).
8.Cap rates should be viewed as a derivative of rather than an indicator of value. Viewed in the context of real estate cycles, cap rates are the inverse of what they should be. That is, they are at their lowest when the cycle is near the top, net operating income is peaking, and there is no place to go but down. They are at their highest when the market has hit bottom, net operating income is at its lowest point, and the future holds the most opportunity for growth.
9.There will always be a replacement source of irrational capital. Every cycle manages to attract a source of capital that will over-value assets as the cycle matures. Indeed, these are the buyers every cyclical investor prays for. The trick is to take advantage of them – not become one of them.
10.Leverage over 65% loan-to-value is a high-risk strategy for hotels. The degree to which a borrower chooses to lever lodging assets in excess of this level is inversely proportional to (i) the number of cycles the borrower has experienced, (ii) the amount of the borrower’s “own” money in the deal (versus other people’s money), and (iii) the borrower’s propensity to avoid risk. Even experienced cyclical investors can be impacted by excess leverage because of event-related downturns that are entirely unpredictable. Indeed, the only “safe” way to over-leverage is to go all the way (i.e., little or no equity and non-recourse financing) – assuming the borrower won’t mind if the lender ends up owning the asset.
11.Understand the nature of various industry participants and diligently observe their behavior. It is easy to get swept up in excessive exuberance, especially when the entire market seems to be moving in the same direction. But most industry participants are self-serving entities that are unwittingly or intentionally stoking the cyclical flames. After all, developers need to develop, managers/brands need to grow, lenders need to lend, brokers need transactions, etc., etc. These (and others like them) are the least reliable indicators of cyclical downturns. The entities to pay closest attention to are industry-savvy agnostics – that is, those who are knowledgeable of the business and indifferent to advancing any agenda other than optimizing returns. They most likely have a strategy – and the discipline to stick with it.
12.The degree to which pricing is rational is inversely proportional to the amount and cost of capital in the system. This phenomenon is clearly observable in the market today as asset prices are unjustifiably high in comparison to industry performance and market uncertainty. Although asset pricing has been exacerbated by a dearth of available product (basic supply and demand), the central cause is plentiful low cost capital, particularly from the public markets.
13.The first sign that a down market is about to turn positive is when the vast majority of industry participants have joined in its funeral dirge. Looking back on this latest cycle, for example, it was early in the fourth quarter of 2009 when Chopin’s Op.35, no.2 became the background soundtrack for nearly every conversation about the lodging industry. Thus the bottom in terms of asset values is already behind us. Most investors, however, should take comfort from Law Number 4, because the only entities who can (read should) take advantage of the lowest cyclical pricing are those who can afford to guess wrong.
NYU: Leaders talk survival and recovery
Surviving an economic recession that reached previously unseen depths isn’t simple, but many hotel companies used a similar approach: Streamline expenses as much as possible and plan for the future.
Five company leaders shared their corporate philosophies before, during and coming out of the recession with attendees of the 32nd annual New York University International Hospitality Investment Conference last week (Click on the Link..Some good Points, that are useful..)
Five company leaders shared their corporate philosophies before, during and coming out of the recession with attendees of the 32nd annual New York University International Hospitality Investment Conference last week (Click on the Link..Some good Points, that are useful..)
Monday, June 14, 2010
Changes in store for F&B menus
For instance, braised ribs are tasty, sure, but the dish might not be so appetizing when the days are already hot and sticky. But a light pasta with peas and asparagus? A divine summer dish.
The changes being made to menus at Marriott and Fairmont are indicative of the changes hotels are making to their F&B operations in an attempt to keep their offerings current with diner demands.
Customers are becoming savvier in terms of what they want to eat, “It’s amazing how wise they are,”. “There’s a lot who have wine applications on their phone and they know how to match up.”
Customers also are more frequently looking for healthy dining options as the passage of health-care reform has put healthy eating at the front of a lot guests’ minds. Island View, for instance, has added gluten-free options to its menus.
The changes being made to menus at Marriott and Fairmont are indicative of the changes hotels are making to their F&B operations in an attempt to keep their offerings current with diner demands.
Customers are becoming savvier in terms of what they want to eat, “It’s amazing how wise they are,”. “There’s a lot who have wine applications on their phone and they know how to match up.”
Customers also are more frequently looking for healthy dining options as the passage of health-care reform has put healthy eating at the front of a lot guests’ minds. Island View, for instance, has added gluten-free options to its menus.
Marketing: The new rules of the game
Marketing: The new rules of the game
Trends in consumer behavior are forcing hotels to rewrite the old rules of marketing. Some of the changes that we are going through in these very challenging times I truly believe will become structural and for the long run. If there ever was the belief that the greater part of the hotel industry was becoming a commodity, it is clearer today. There are several ingredients to this
Trends in consumer behavior are forcing hotels to rewrite the old rules of marketing. Some of the changes that we are going through in these very challenging times I truly believe will become structural and for the long run. If there ever was the belief that the greater part of the hotel industry was becoming a commodity, it is clearer today. There are several ingredients to this
Marketing to Children: That rugrat is your future
An influential demographic segment for hoteliers to consider – but one that is often overlooked (perhaps even literally overlooked) – is children. Of course there are no children’s hotels as such. But as Prof. Alain Najar of the Ecole Hoteliere de Lausanne points out, catering to their needs today can insure their business tomorrow. What will 2010 bring in this area ?....
Tuesday, June 8, 2010
Deloitte Hospitality 2015: Seven key trends to shape future success
In order to reverse the recent downward trend and achieve future growth, the hospitality industry will need to address seven major issues over the next five years, according to new report by Deloitte entitled, Hospitality 2015.
DEALTALK-U.S. hotel sales start up,frustrations remain
* Hotel deals could hit $6 billion in 2010- Baird
* 'Awful lot of frustration out there'- advisor
* Public lodging REITs better positioned to buy hotels
Hotel transaction volume in the United States looks set to surpass the prevailing forecast of $3.5 billion this year, as aspiring investors grouse about stiff competition and higher-than-expected prices for choice hotels.
Through May, hotel investments amounted to about $2.2 billion, much of which has been the province of publicy-traded lodging real estate investment trusts (REIT), according to a Baird Research note published in late May.
By year's end, the value of hotel transactions in the United States will top the earlier $3.5 billion estimate from hospitality firm Jones Lang LaSalle Hotels, analysts said.
At the current pace, sales could hit at least $5.5 billion for 2010, if not $6 billion, a feat that would put deal volume on par with 2003 levels, Baird said. This figure includes outright hotel sales as well as purchases of debt.
"We've seen a very good pick-up in the deal flows in the last couple of months," said Jacques Cohen, principal of Euro Capital Properties, which bought the famed Watergate Hotel last month. [ID:nN27111650]
He added: "Prices have gone up quite a lot as well."
Hotel deal volume hit a 10-year low in 2009 as banks held back their lending and hotel revenue plummeted. At that time, experts had predicted a wave of distressed hotel sales in 2010 as these properties faced looming debt payments.
But this has not happened so far.
DISTRESSED DEALS?
Banks have shown a willingness to help borrowers restructure their loans. Now, as business travel picks up and room rates rise, the outlook for the lodging sector has become brighter, forcing potential buyers to pony up more money than they anticipated.
For example, some investors pinned the value of the Raffles L'Ermitage-Beverly Hills hotel at $30 million, said Alan Reay, president of consulting firm Atlas Hospitality.
The five-star property near Rodeo Drive went for about $45 million in March, according to the Baird note.
"There's still a lot of money chasing relatively few distressed deals," Deutsche Bank analyst Chris Woronka said.
Of the more than 40 hotel sales highlighted by Baird, just 13 were "stress induced." These distressed sales accounted for $1 billion, or roughly half of deal activity this year.
"There's an awful lot of frustration out there," said Robert LaForgia, principal of advisory firm Apertor Hospitality and the former chief financial officer of Blackstone Group- owned (BX.N) Hilton Worldwide, previously called Hilton Hotels Corp.
Public REITs have been able to snatch up properties more readily than their private counterparts, helped by their access to the public markets.
Seventy-one percent of hotels sold this year have been bought by public REITs, Baird said. Currently, public REITs own just 4 percent of U.S. hotels.
DiamondRock Hospitality (DRH.N) and Hersha Hospitality (HT.N) have been among the REITs that have recently purchased hotels or hotel debt.
DiamondRock bought the $69 million senior mortgage loan secured by the 443-room Allerton Hotel in Chicago last month. The property was declared a Chicago landmark in 1998.[ID:nASA00E32]
These transactions are indicative of the narrowing chasm between what buyers and sellers believe is a fair price. But experts are quick to point out it is the buyers that have had to bend to the will of sellers.
"I haven't seen this plethora of hotel deals that everyone has expected to see in the market," LaForgia said.
* 'Awful lot of frustration out there'- advisor
* Public lodging REITs better positioned to buy hotels
Hotel transaction volume in the United States looks set to surpass the prevailing forecast of $3.5 billion this year, as aspiring investors grouse about stiff competition and higher-than-expected prices for choice hotels.
Through May, hotel investments amounted to about $2.2 billion, much of which has been the province of publicy-traded lodging real estate investment trusts (REIT), according to a Baird Research note published in late May.
By year's end, the value of hotel transactions in the United States will top the earlier $3.5 billion estimate from hospitality firm Jones Lang LaSalle Hotels, analysts said.
At the current pace, sales could hit at least $5.5 billion for 2010, if not $6 billion, a feat that would put deal volume on par with 2003 levels, Baird said. This figure includes outright hotel sales as well as purchases of debt.
"We've seen a very good pick-up in the deal flows in the last couple of months," said Jacques Cohen, principal of Euro Capital Properties, which bought the famed Watergate Hotel last month. [ID:nN27111650]
He added: "Prices have gone up quite a lot as well."
Hotel deal volume hit a 10-year low in 2009 as banks held back their lending and hotel revenue plummeted. At that time, experts had predicted a wave of distressed hotel sales in 2010 as these properties faced looming debt payments.
But this has not happened so far.
DISTRESSED DEALS?
Banks have shown a willingness to help borrowers restructure their loans. Now, as business travel picks up and room rates rise, the outlook for the lodging sector has become brighter, forcing potential buyers to pony up more money than they anticipated.
For example, some investors pinned the value of the Raffles L'Ermitage-Beverly Hills hotel at $30 million, said Alan Reay, president of consulting firm Atlas Hospitality.
The five-star property near Rodeo Drive went for about $45 million in March, according to the Baird note.
"There's still a lot of money chasing relatively few distressed deals," Deutsche Bank analyst Chris Woronka said.
Of the more than 40 hotel sales highlighted by Baird, just 13 were "stress induced." These distressed sales accounted for $1 billion, or roughly half of deal activity this year.
"There's an awful lot of frustration out there," said Robert LaForgia, principal of advisory firm Apertor Hospitality and the former chief financial officer of Blackstone Group- owned (BX.N) Hilton Worldwide, previously called Hilton Hotels Corp.
Public REITs have been able to snatch up properties more readily than their private counterparts, helped by their access to the public markets.
Seventy-one percent of hotels sold this year have been bought by public REITs, Baird said. Currently, public REITs own just 4 percent of U.S. hotels.
DiamondRock Hospitality (DRH.N) and Hersha Hospitality (HT.N) have been among the REITs that have recently purchased hotels or hotel debt.
DiamondRock bought the $69 million senior mortgage loan secured by the 443-room Allerton Hotel in Chicago last month. The property was declared a Chicago landmark in 1998.[ID:nASA00E32]
These transactions are indicative of the narrowing chasm between what buyers and sellers believe is a fair price. But experts are quick to point out it is the buyers that have had to bend to the will of sellers.
"I haven't seen this plethora of hotel deals that everyone has expected to see in the market," LaForgia said.
Kimpton Is Bullish On Fourth Quarter 2010
Kimpton Is Bullish On Fourth Quarter 2010
(David Brudney explains How Kimpton Does What it Does and Why..)
I sat down recently with a friend and colleague from our previous careers with Hyatt Hotels, and we had an interesting discussion on the current state of hotel sales and marketing today, on attracting and building guest loyalty, and, in particular, what business will look like by end of this year.
“I’m bullish in most of our markets, and I believe we will see far better results by the 4th quarter of this year,” said Steve Pinetti, Senior Vice President, Sales & Marketing, Kimpton Hotels & Restaurants based in San Francisco, CA. “We are already seeing some upswing in most all of our cities”, Pinetti claims.
Kimpton Hotels currently manages 50 boutique hotels and 52 restaurants in 23 cities in the U.S. and Canada (www.kimptonhotels.com). With the opening of the 292-room Eventi in New York, Kimpton’s total room inventory has reached 9,875. For the record, Kimpton is not a client, there is no conflict, and I am using comments and opinions of Pinetti because my readers - - in particular, hotel owners, asset managers and operators - - should find what he has to say to be of great interest and value.
Pinetti concurred when I shared with him the results of my recent sampling of group booking windows -- at selected hotels, and conference centers throughout the U.S. -- that we are experiencing a return to more of 90 days and beyond.
“Demand is still short term, however. I believe it will continue to be that way until the market realizes it is necessary and viable to plan further out due to availability and rates and believe that 2011 will be a solid RevPAR growth year”, said Pinetti.
“AIG Effect” minimal
The impact the “AIG Effect” has had on Kimpton’s business has been “very minimal”, according to Pinetti. He added that the drive-in market has been strong throughout this recession.
Pinetti told me that Kimpton Hotels have actually gained market share over the past 18 months with almost all Kimpton cities showing increases in both occupancy and average rate. I asked Steve, Of course, how Kimpton did that?
Twitter and Facebook followers
“Well, we are starting to see business as a result of our Twitter and Facebook followers and, too, it has a lot to do with the fact we are a social-conscious company -- it’s baked in. We are able to drive business from those individuals and companies that support our charity partners.”
He explained how the Kimpton sales force “knows how to connect” with clients, and that Kimpton’s sales professionals are smart, quick, and concise, and that they make sure the customer knows that they’re working with someone who “gets it”.
“They promise to do their research on who the customer is, and they listen and then confirm back what the customer’s needs are -- and they do follow the ‘sundown’ rule, responding to any opportunity that same day or never more than 24 hours.”
Technology and building relationships
We discussed how technology has gotten in the way of personally being able to connect with planners, thus making it difficult to really sell and build relationships, and whether or not that “limits” hotel sales professionals’ ability to connect and to produce.
Does Pinetti believe today’s hotel sales professionals are too dependent on technology-based selling skills, and thus neglecting or avoiding altogether using the traditional, relationship-based selling skills?
“You must have balance with multiple skill sets in sales today. Both skills are required for a sales professional and team to become successful. We ‘read’ the customer as to their communication preference -- some demand e-mailing, others prefer telephone calls, and some are most receptive to personal sales calls and meeting face-to-face in the office or at trade shows.”
Curious, I asked what he tells his sales team to do when clients says “no”. “If you’ve done your research, and clearly understand the customer’s needs, you either didn’t explain it properly or you’re not talking with the right person”, said Pinetti.
Pinetti is one of those rare sales professionals able to make a seamless and successful transition from the big box, big group hotel brand culture to marketing a small, startup boutique chain.
Everyone involved with hotels today -- operators, owners, asset managers, and G.M.s alike -- would be well advised to take note of what Kimpton is doing. I have found very few brands and independents that have harnessed the power and energy of new technology, the influence of new social media and social consciousness programs, together with the retention of the traditional relationship-based selling skills, the way that Kimpton has.
No surprise to me at all that Kimpton is doing so well in so many markets
(David Brudney explains How Kimpton Does What it Does and Why..)
I sat down recently with a friend and colleague from our previous careers with Hyatt Hotels, and we had an interesting discussion on the current state of hotel sales and marketing today, on attracting and building guest loyalty, and, in particular, what business will look like by end of this year.
“I’m bullish in most of our markets, and I believe we will see far better results by the 4th quarter of this year,” said Steve Pinetti, Senior Vice President, Sales & Marketing, Kimpton Hotels & Restaurants based in San Francisco, CA. “We are already seeing some upswing in most all of our cities”, Pinetti claims.
Kimpton Hotels currently manages 50 boutique hotels and 52 restaurants in 23 cities in the U.S. and Canada (www.kimptonhotels.com). With the opening of the 292-room Eventi in New York, Kimpton’s total room inventory has reached 9,875. For the record, Kimpton is not a client, there is no conflict, and I am using comments and opinions of Pinetti because my readers - - in particular, hotel owners, asset managers and operators - - should find what he has to say to be of great interest and value.
Pinetti concurred when I shared with him the results of my recent sampling of group booking windows -- at selected hotels, and conference centers throughout the U.S. -- that we are experiencing a return to more of 90 days and beyond.
“Demand is still short term, however. I believe it will continue to be that way until the market realizes it is necessary and viable to plan further out due to availability and rates and believe that 2011 will be a solid RevPAR growth year”, said Pinetti.
“AIG Effect” minimal
The impact the “AIG Effect” has had on Kimpton’s business has been “very minimal”, according to Pinetti. He added that the drive-in market has been strong throughout this recession.
Pinetti told me that Kimpton Hotels have actually gained market share over the past 18 months with almost all Kimpton cities showing increases in both occupancy and average rate. I asked Steve, Of course, how Kimpton did that?
Twitter and Facebook followers
“Well, we are starting to see business as a result of our Twitter and Facebook followers and, too, it has a lot to do with the fact we are a social-conscious company -- it’s baked in. We are able to drive business from those individuals and companies that support our charity partners.”
He explained how the Kimpton sales force “knows how to connect” with clients, and that Kimpton’s sales professionals are smart, quick, and concise, and that they make sure the customer knows that they’re working with someone who “gets it”.
“They promise to do their research on who the customer is, and they listen and then confirm back what the customer’s needs are -- and they do follow the ‘sundown’ rule, responding to any opportunity that same day or never more than 24 hours.”
Technology and building relationships
We discussed how technology has gotten in the way of personally being able to connect with planners, thus making it difficult to really sell and build relationships, and whether or not that “limits” hotel sales professionals’ ability to connect and to produce.
Does Pinetti believe today’s hotel sales professionals are too dependent on technology-based selling skills, and thus neglecting or avoiding altogether using the traditional, relationship-based selling skills?
“You must have balance with multiple skill sets in sales today. Both skills are required for a sales professional and team to become successful. We ‘read’ the customer as to their communication preference -- some demand e-mailing, others prefer telephone calls, and some are most receptive to personal sales calls and meeting face-to-face in the office or at trade shows.”
Curious, I asked what he tells his sales team to do when clients says “no”. “If you’ve done your research, and clearly understand the customer’s needs, you either didn’t explain it properly or you’re not talking with the right person”, said Pinetti.
Pinetti is one of those rare sales professionals able to make a seamless and successful transition from the big box, big group hotel brand culture to marketing a small, startup boutique chain.
Everyone involved with hotels today -- operators, owners, asset managers, and G.M.s alike -- would be well advised to take note of what Kimpton is doing. I have found very few brands and independents that have harnessed the power and energy of new technology, the influence of new social media and social consciousness programs, together with the retention of the traditional relationship-based selling skills, the way that Kimpton has.
No surprise to me at all that Kimpton is doing so well in so many markets
“Green is for Go” Greening Your Hotel Meetings and Conferences
Does your hotel offer meeting and/or conference space? Have you noticed a trend in the RFP’s you receive from groups asking about your “green” or “sustainable” initiatives? All signs are pointing in the direction of a widespread increase in this trend.
Even with the current recession, business meetings in the United States alone constitute an amazing $175 billion industry, and Americans make more than 400 million long-distance business trips each year. Don’t let your hotel miss an opportunity to garner its share of group business.
Despite a global recession, investment levels in energy efficiency have remained strong, according to the Energy Efficiency Indicator (EEI) released June 3, 2010 by Johnson Controls (NYSE: JCI). As stated in this report, the primary motivation driving sustainable investments is cost savings, with 97% of respondents identifying it as significant. Or, as stated by Dennis Quaintance, CEO of Proximity Hotels (the first platinum LEED certified hotel), “It ain’t sustainable to go broke.”
What is a “Green Meeting”?
The Convention Industry Council (CIC) presented this definition: “A green meeting or event incorporates environmental considerations to minimize its negative impact on the environment.” There are almost a limitless number of ways to green a meeting – and many of these offer opportunities to save money and increase efficiency.
Event planners will look at numerous aspects of your hotel’s efforts toward sustainability, including such areas as:
•Food and Beverage: Do you maximize the use of reusable, rather than disposable glassware, flatware, tablecloths, etc?
•Registration and Exhibitions: Do you use electronic communication over paper as often as possible? Do you encourage exhibitors to do the same?
•Location: Do you offer shuttle service or mass transit? Are areas of interest and entertainment nearby in order to decrease vehicle emissions?
•Do you have an energy and water use conservation program currently in place?
Why are Green Meetings becoming more Prevalent?
There are many reasons that this green trend is growing exponentially across the globe. Consumers and businesses are becoming much more aware of their “carbon footprint” and as more companies feel the pressure to create sustainability goals, they increasingly are asking their employees to stay in green-certified hotels. Companies that are closely scrutinized by the public sector (government agencies, for example) do not want to present a mixed message to the public – stating they want to help the planet, but ignoring a hotel’s approach to sustainability when planning for a company meeting. According to the Environmental Protection Agency, an amazing 93,000 federal employees are traveling on any given business day to 8,000 locations across the country. Federal travelers alone use 24 million room nights of hotel space in the United States annually. Now add to this number businesses both large and small who are making efforts toward sustainability, and the totals can be staggering.
Are Green Meetings an Example of “Greenwashing”?
When a product or building (such as a hotel) extols its virtues of being “green”, but does so in a misleading or exaggerated way, it is described as “greenwashing”. That can be a difficult label to shed, as guests and/or groups may feel as though they’ve been misled, or worse. Many green standards are in their infancy and thus still ill-defined. . There is no need to try to fool meeting and event planners, as many of them are looking for some effort toward sustainability, and will be happy with the progress you’ve made so far and the goals you have set. Much like social media, it is important to be transparent.
Green meetings can have a tremendous impact on our environment. Most hotels purchase more products in one week than 100 families typically purchase in a year. By initiating green goals such as recycling, reducing and reusing, you can feel good that you are helping the environment in a big way, helping your revenue stream, and reducing many of your operating costs.
Who Supports Green Meetings?
Depending on where your hotel(s) are located on the globe, various government, for-profit and non-profit organizations are jumping in to assist and encourage hoteliers to go green. There is a plethora of information available to help you (some excellent web-sites are posted for you at the bottom of this publication), and the number of green experts available for consulting or commissioning grows every month.
It has been through such collaborations that some hotel brands are now “pre-certifying” a few of their prototypes. For example, Marriott has launched such a prototype for their Courtyard Hotels. By taking advantage of “volume certification” or “portfolio certification”, Marriott may be able to save property owners approximately $100,000 in design and other costs, and about six months in design time. More prototype brands are expected to follow.
As Michael Kawecki, LEED AP, GA and owner of Axiom Sustainable Consulting, LLC states, “with volume certification, each credit is documented based on regions, and then further documentation is provided during construction. For example, rather than energy modeling each store, a prototype is modeled in each climate area, and then that model is good for all future stores.” It is obvious how this type of certification could save a significant amount of work for hotel owners, and flow into their group meeting venues.
Hyatt Hotels is also making numerous green initiatives. Jim Milkovich, corporate vice president of purchasing for Hyatt Hotels Corp. explains that Hyatt has won group business to its convention hotels in part because of its green initiatives. In an interview with Beth Kormanik of Buyer Interactive, Milkovich states, “If you can show a meeting planner how you are reducing, recycling and reusing products throughout the hotel and how your associates are engaged in the process – it’s not something you’re doing for this meeting, but it’s in your culture – that is what is really evident to those meeting planners.”
A terrific example of how a hotel has monetized and calculates an ROI for their green meetings is the Willard InterContinental Washington, D.C. As Herve′ Houdre′, GM of the Willard InterContinental states in HotelNewsNow.com, “The hotel carefully tracks its individual and guestroom bookings that result directly from its sustainable practices. I gave myself and my team a goal to generate $1 million in extra revenue (in 2009) due to our sustainable development strategy. Guests are impressed with the development strategy because they believe the strategy corresponds with their own culture.”
Keep in mind that prospective clients won’t know what your hotel is doing to limit its impact on the environment if you don’t tell them. “Don’t be shy,” advises hotel consultant Daniel Edward Craig. “Advertise your green initiatives on your website and in sales kits, proposals, your in-room directory and social media activities. Meeting planners and travelers want to know.”
What is the Future of Green Meetings for Hoteliers?
The landscape is changing quickly. In the United States, the meetings industry is working closely with the Environmental Protection Agency (EPA) to develop a green meeting industry standard. With such standards, hotels will have common goals to reach to win group or convention business. Because the EPA is a government-based organization, and the green meeting planning associations are not, such joint efforts are rare and cannot be ignored.
What Groups Can Help My Hotel With Green Meeting Initiatives?
There are a growing number of organizations eager to help hoteliers with sustainability and green meeting initiatives. The following limited list does not address the numerous and qualified private enterprise consultants:
Green Meeting Industry Council: info@greenmeetings.info
Meeting Professionals International (MPI): btess@mpiweb.org
International Association of Convention and Visitors Bureaus (IACVB): www.meetingsnet.com/contact/
The Coalition for Environmentally Responsible Economies (CERES) – Green Hotel Initiative: 617.247.0700 X 21
“Green” Hotels Association: green@greenhotels.com
NW Pollution Prevention Resource Center (PPRC) – Hospitality Sector: www.pprc.org
Green Seal – Environmental Standard for Lodging Properties: greenseal@greenseal.org
Hotel Association of Canada – Green Leaf Eco-Rating Program: info@hotelassociation.ca
U.S. Green Building Council: www.USGBC.org
Is there a cost to “going green” for your hotel and group or conference meetings? Yes. Is there a larger cost involved in ignoring the trend? Absolutely. Don’t allow your hotel to languish in meeting sales. Get educated on “green”, and pencil out the numbers. Or let an expert guide you. You will be surprised and delighted to learn - Green is for Go.
Even with the current recession, business meetings in the United States alone constitute an amazing $175 billion industry, and Americans make more than 400 million long-distance business trips each year. Don’t let your hotel miss an opportunity to garner its share of group business.
Despite a global recession, investment levels in energy efficiency have remained strong, according to the Energy Efficiency Indicator (EEI) released June 3, 2010 by Johnson Controls (NYSE: JCI). As stated in this report, the primary motivation driving sustainable investments is cost savings, with 97% of respondents identifying it as significant. Or, as stated by Dennis Quaintance, CEO of Proximity Hotels (the first platinum LEED certified hotel), “It ain’t sustainable to go broke.”
What is a “Green Meeting”?
The Convention Industry Council (CIC) presented this definition: “A green meeting or event incorporates environmental considerations to minimize its negative impact on the environment.” There are almost a limitless number of ways to green a meeting – and many of these offer opportunities to save money and increase efficiency.
Event planners will look at numerous aspects of your hotel’s efforts toward sustainability, including such areas as:
•Food and Beverage: Do you maximize the use of reusable, rather than disposable glassware, flatware, tablecloths, etc?
•Registration and Exhibitions: Do you use electronic communication over paper as often as possible? Do you encourage exhibitors to do the same?
•Location: Do you offer shuttle service or mass transit? Are areas of interest and entertainment nearby in order to decrease vehicle emissions?
•Do you have an energy and water use conservation program currently in place?
Why are Green Meetings becoming more Prevalent?
There are many reasons that this green trend is growing exponentially across the globe. Consumers and businesses are becoming much more aware of their “carbon footprint” and as more companies feel the pressure to create sustainability goals, they increasingly are asking their employees to stay in green-certified hotels. Companies that are closely scrutinized by the public sector (government agencies, for example) do not want to present a mixed message to the public – stating they want to help the planet, but ignoring a hotel’s approach to sustainability when planning for a company meeting. According to the Environmental Protection Agency, an amazing 93,000 federal employees are traveling on any given business day to 8,000 locations across the country. Federal travelers alone use 24 million room nights of hotel space in the United States annually. Now add to this number businesses both large and small who are making efforts toward sustainability, and the totals can be staggering.
Are Green Meetings an Example of “Greenwashing”?
When a product or building (such as a hotel) extols its virtues of being “green”, but does so in a misleading or exaggerated way, it is described as “greenwashing”. That can be a difficult label to shed, as guests and/or groups may feel as though they’ve been misled, or worse. Many green standards are in their infancy and thus still ill-defined. . There is no need to try to fool meeting and event planners, as many of them are looking for some effort toward sustainability, and will be happy with the progress you’ve made so far and the goals you have set. Much like social media, it is important to be transparent.
Green meetings can have a tremendous impact on our environment. Most hotels purchase more products in one week than 100 families typically purchase in a year. By initiating green goals such as recycling, reducing and reusing, you can feel good that you are helping the environment in a big way, helping your revenue stream, and reducing many of your operating costs.
Who Supports Green Meetings?
Depending on where your hotel(s) are located on the globe, various government, for-profit and non-profit organizations are jumping in to assist and encourage hoteliers to go green. There is a plethora of information available to help you (some excellent web-sites are posted for you at the bottom of this publication), and the number of green experts available for consulting or commissioning grows every month.
It has been through such collaborations that some hotel brands are now “pre-certifying” a few of their prototypes. For example, Marriott has launched such a prototype for their Courtyard Hotels. By taking advantage of “volume certification” or “portfolio certification”, Marriott may be able to save property owners approximately $100,000 in design and other costs, and about six months in design time. More prototype brands are expected to follow.
As Michael Kawecki, LEED AP, GA and owner of Axiom Sustainable Consulting, LLC states, “with volume certification, each credit is documented based on regions, and then further documentation is provided during construction. For example, rather than energy modeling each store, a prototype is modeled in each climate area, and then that model is good for all future stores.” It is obvious how this type of certification could save a significant amount of work for hotel owners, and flow into their group meeting venues.
Hyatt Hotels is also making numerous green initiatives. Jim Milkovich, corporate vice president of purchasing for Hyatt Hotels Corp. explains that Hyatt has won group business to its convention hotels in part because of its green initiatives. In an interview with Beth Kormanik of Buyer Interactive, Milkovich states, “If you can show a meeting planner how you are reducing, recycling and reusing products throughout the hotel and how your associates are engaged in the process – it’s not something you’re doing for this meeting, but it’s in your culture – that is what is really evident to those meeting planners.”
A terrific example of how a hotel has monetized and calculates an ROI for their green meetings is the Willard InterContinental Washington, D.C. As Herve′ Houdre′, GM of the Willard InterContinental states in HotelNewsNow.com, “The hotel carefully tracks its individual and guestroom bookings that result directly from its sustainable practices. I gave myself and my team a goal to generate $1 million in extra revenue (in 2009) due to our sustainable development strategy. Guests are impressed with the development strategy because they believe the strategy corresponds with their own culture.”
Keep in mind that prospective clients won’t know what your hotel is doing to limit its impact on the environment if you don’t tell them. “Don’t be shy,” advises hotel consultant Daniel Edward Craig. “Advertise your green initiatives on your website and in sales kits, proposals, your in-room directory and social media activities. Meeting planners and travelers want to know.”
What is the Future of Green Meetings for Hoteliers?
The landscape is changing quickly. In the United States, the meetings industry is working closely with the Environmental Protection Agency (EPA) to develop a green meeting industry standard. With such standards, hotels will have common goals to reach to win group or convention business. Because the EPA is a government-based organization, and the green meeting planning associations are not, such joint efforts are rare and cannot be ignored.
What Groups Can Help My Hotel With Green Meeting Initiatives?
There are a growing number of organizations eager to help hoteliers with sustainability and green meeting initiatives. The following limited list does not address the numerous and qualified private enterprise consultants:
Green Meeting Industry Council: info@greenmeetings.info
Meeting Professionals International (MPI): btess@mpiweb.org
International Association of Convention and Visitors Bureaus (IACVB): www.meetingsnet.com/contact/
The Coalition for Environmentally Responsible Economies (CERES) – Green Hotel Initiative: 617.247.0700 X 21
“Green” Hotels Association: green@greenhotels.com
NW Pollution Prevention Resource Center (PPRC) – Hospitality Sector: www.pprc.org
Green Seal – Environmental Standard for Lodging Properties: greenseal@greenseal.org
Hotel Association of Canada – Green Leaf Eco-Rating Program: info@hotelassociation.ca
U.S. Green Building Council: www.USGBC.org
Is there a cost to “going green” for your hotel and group or conference meetings? Yes. Is there a larger cost involved in ignoring the trend? Absolutely. Don’t allow your hotel to languish in meeting sales. Get educated on “green”, and pencil out the numbers. Or let an expert guide you. You will be surprised and delighted to learn - Green is for Go.
Monday, June 7, 2010
Hotel Lawyers: Public-private Financing Still Works For Hotel Developments
(Click on this one...It's very good reading ..)
Opportunities for Public - Private Financing of Hotel Developments
by Catherine De Bono Holmes
We were fortunate to have three leading experts in the field of public-private hotel financing share their experience with us recently on a panel in Los Angeles: Mark Tobin, President of HREC Development Resources, Ray Garfield, principal and founder of Garfield Traub Development, and William ("Bill") Corrado, Director of the Public Financing Department of Citigroup. Mark, Ray and Bill provided a wealth of information for hotel developers, governmental entities and educational institutions about the feasibility and economics of building a hotel using a variety of public and private financing. I am pleased to share with you their insights from the panel discussion, below.
Opportunities for Public - Private Financing of Hotel Developments
by Catherine De Bono Holmes
We were fortunate to have three leading experts in the field of public-private hotel financing share their experience with us recently on a panel in Los Angeles: Mark Tobin, President of HREC Development Resources, Ray Garfield, principal and founder of Garfield Traub Development, and William ("Bill") Corrado, Director of the Public Financing Department of Citigroup. Mark, Ray and Bill provided a wealth of information for hotel developers, governmental entities and educational institutions about the feasibility and economics of building a hotel using a variety of public and private financing. I am pleased to share with you their insights from the panel discussion, below.
Friday, June 4, 2010
Russell Rules –TEAMS WIN Adapting Leadership Lessons from the 20th Century's Greatest Team Winner
By Dr. John Hogan CHE CHA MHS
Lessons from the Field
A Common Sense Approach to Success in the Hospitality Industry
The title of this column also represents a new 2010 workshop as well, and it addresses a fundamental approach to achieving success.
This is not a message on sports, but on how the individual can move the entire hospitality organization to long-term success with innovation, leadership and strategic goals. Bill Russell of the Boston Celtics defined the passion for winning through teamwork and focus. In 2001, Russell and co-author David Faulkner united to produce an interesting series of insights of the fundamentals that molded Russell's competitive aptitude and zeal into a series of consistent winning seasons.
The book, Russell Rules: 11 Lessons on Leadership From the Twentieth Century's Greatest Winner is a collection of basketball and personal examples from Russell's career. The balance between sports, business and personal integrity is clear, easy to follow and is genuinely interesting, whether one likes sports or not. The lessons address commitment, team decision processes, accountability, change, discipline, the need for the desire to win and a number of “how-to business examples.”€
This column identifies three of those lessons and how they apply to hospitality.
The hospitality industry has tremendous potential for success, as well as incredible pressure. A hotel that is open 365 days per year for 24 hours a day requires dedicated staff that is committed to providing courteous service and comfortable accommodations.
The need for that staff introduces Key Learning Result #1: The Value of the “Sixth Man” in Hospitality and any Business. Every business has a range of personalities, with varying competencies, skill sets and unique value that they bring to the workplace. If trained properly and empowered to meet the needs of their guests, most hospitality professionals will step up to the demands and work to exceed the expectations of their guests. The concept of the “sixth man” of the Celtics was introduced as the equivalent of another starter in the game. This person could likely play several positions and was regularly used to help his team battle the opposition. In our business, cross-training people provides them the opportunity to learn additional skills and to be able to contribute to the needs of the hotel, fellow associates, guests and ownership. It allows them to become more valuable individually, while at the same time strengthening the team of the whole. Providing service for 365 days per year and 24 hours a day requires as much focus and assistance as possible.
Key Learning Result #2: Discipline, Delegation, and Decision Making in Hospitality
Russell’s book offers the message that decision-making is centered on gathering information, assessing it and deciding what is pertinent for your specific situation. Decisions involve choices and choices on teams are often made by the leadership.
Most hospitality businesses have organizational charts that outline a “chain of command”. Russell’s stories and examples focus on the need for organizational structure, but he stresses the discipline as everyone believing in the choices being made as helping to move towards the agreed-upon common goals. As in Key Learning Result #1, it requires trust and confidence in individuals who may not have a certain title or degree or experience. If the common goal is to operate a profitable and successful hospitality business by serving guests in special ways they appreciate, the entire team needs to know the goals, understand the protocols and business practices and be part of the effective delivery of the service.
Key Learning Result #3: The Celtic Mystique or Making Celtic Pride Work for You
While this is not meant to dwell on one team, reality tells us that many people are inspired and perhaps cheered by their favorite team. When you think of your favorite sports team, you probably recognize that you and your family have probably always been a fan of that particular team. Every championship team in soccer, baseball, football, basketball or hockey has developed a sense of culture. The team may have off -seasons or lose some matches; their fans tend to stick with them year after year. Nelson Mandella managed to overcome a number of political and cultural crises after he assumed the Presidency of South Africa by appealing to the unifying culture of the national Rugby Team, the Springboks.
In our business, turnover is usually rather high, yet I know of certain hospitality companies who have built traditions of success and loyalty of both staff and guests through their sense of culture. That culture is about developing meaningful relationships, supporting the community and collaboration among the team members.
Fundamental Keys to Success in Hospitality
I have found that there are four fundamentals in successfully operating hotels. They are intertwined and dependent on each other. Specifically, the first three properly delivered result in the fourth:
1.Hotel Marketing
2.Hotel Operations
3.Hotel Service and
4.Hotel Profitability
Delivering effective marketing, efficient operations and exceptional service will lead to extraordinary profitability over an extended period.
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Bill Russell became a sports icon with reason. He is an original, with more championships than any other team player, as evidenced by his recognition in being named the 20th century's greatest team player by Sports Illustrated and HBO called him the greatest winner in the 20th century. He was the first African American to coach a professional sports team and won two championships as a player/coach without even an assistant coach. He won championships in the NCAA, the Olympics and an NBA championship - all in the same year (1956).
In the 1960s, the sports world marveled at Bill Russell's ability to intimidate the opposing team.
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"Concentration and mental toughness are the margins of victory."
Bill Russell
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What Leadership Lessons are you Sharing with Your Team today?
Using various ways to encourage hotel staff professional development will lead to implementing habits to improve both financial results and delivery of quality service.
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Keys to Success Hospitality Tip of the Week:
Focus on Hotel Profitability
Begin the process this week for next year’s marketing plan, with firm time lines to be submitted in 30 and 60 days. This is essential for realistic budget planning.
(Note: I studied under John, he is a great Instructor)
--------------------------------------------------------------------------------
Lessons from the Field
A Common Sense Approach to Success in the Hospitality Industry
The title of this column also represents a new 2010 workshop as well, and it addresses a fundamental approach to achieving success.
This is not a message on sports, but on how the individual can move the entire hospitality organization to long-term success with innovation, leadership and strategic goals. Bill Russell of the Boston Celtics defined the passion for winning through teamwork and focus. In 2001, Russell and co-author David Faulkner united to produce an interesting series of insights of the fundamentals that molded Russell's competitive aptitude and zeal into a series of consistent winning seasons.
The book, Russell Rules: 11 Lessons on Leadership From the Twentieth Century's Greatest Winner is a collection of basketball and personal examples from Russell's career. The balance between sports, business and personal integrity is clear, easy to follow and is genuinely interesting, whether one likes sports or not. The lessons address commitment, team decision processes, accountability, change, discipline, the need for the desire to win and a number of “how-to business examples.”€
This column identifies three of those lessons and how they apply to hospitality.
The hospitality industry has tremendous potential for success, as well as incredible pressure. A hotel that is open 365 days per year for 24 hours a day requires dedicated staff that is committed to providing courteous service and comfortable accommodations.
The need for that staff introduces Key Learning Result #1: The Value of the “Sixth Man” in Hospitality and any Business. Every business has a range of personalities, with varying competencies, skill sets and unique value that they bring to the workplace. If trained properly and empowered to meet the needs of their guests, most hospitality professionals will step up to the demands and work to exceed the expectations of their guests. The concept of the “sixth man” of the Celtics was introduced as the equivalent of another starter in the game. This person could likely play several positions and was regularly used to help his team battle the opposition. In our business, cross-training people provides them the opportunity to learn additional skills and to be able to contribute to the needs of the hotel, fellow associates, guests and ownership. It allows them to become more valuable individually, while at the same time strengthening the team of the whole. Providing service for 365 days per year and 24 hours a day requires as much focus and assistance as possible.
Key Learning Result #2: Discipline, Delegation, and Decision Making in Hospitality
Russell’s book offers the message that decision-making is centered on gathering information, assessing it and deciding what is pertinent for your specific situation. Decisions involve choices and choices on teams are often made by the leadership.
Most hospitality businesses have organizational charts that outline a “chain of command”. Russell’s stories and examples focus on the need for organizational structure, but he stresses the discipline as everyone believing in the choices being made as helping to move towards the agreed-upon common goals. As in Key Learning Result #1, it requires trust and confidence in individuals who may not have a certain title or degree or experience. If the common goal is to operate a profitable and successful hospitality business by serving guests in special ways they appreciate, the entire team needs to know the goals, understand the protocols and business practices and be part of the effective delivery of the service.
Key Learning Result #3: The Celtic Mystique or Making Celtic Pride Work for You
While this is not meant to dwell on one team, reality tells us that many people are inspired and perhaps cheered by their favorite team. When you think of your favorite sports team, you probably recognize that you and your family have probably always been a fan of that particular team. Every championship team in soccer, baseball, football, basketball or hockey has developed a sense of culture. The team may have off -seasons or lose some matches; their fans tend to stick with them year after year. Nelson Mandella managed to overcome a number of political and cultural crises after he assumed the Presidency of South Africa by appealing to the unifying culture of the national Rugby Team, the Springboks.
In our business, turnover is usually rather high, yet I know of certain hospitality companies who have built traditions of success and loyalty of both staff and guests through their sense of culture. That culture is about developing meaningful relationships, supporting the community and collaboration among the team members.
Fundamental Keys to Success in Hospitality
I have found that there are four fundamentals in successfully operating hotels. They are intertwined and dependent on each other. Specifically, the first three properly delivered result in the fourth:
1.Hotel Marketing
2.Hotel Operations
3.Hotel Service and
4.Hotel Profitability
Delivering effective marketing, efficient operations and exceptional service will lead to extraordinary profitability over an extended period.
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Bill Russell became a sports icon with reason. He is an original, with more championships than any other team player, as evidenced by his recognition in being named the 20th century's greatest team player by Sports Illustrated and HBO called him the greatest winner in the 20th century. He was the first African American to coach a professional sports team and won two championships as a player/coach without even an assistant coach. He won championships in the NCAA, the Olympics and an NBA championship - all in the same year (1956).
In the 1960s, the sports world marveled at Bill Russell's ability to intimidate the opposing team.
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"Concentration and mental toughness are the margins of victory."
Bill Russell
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What Leadership Lessons are you Sharing with Your Team today?
Using various ways to encourage hotel staff professional development will lead to implementing habits to improve both financial results and delivery of quality service.
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Keys to Success Hospitality Tip of the Week:
Focus on Hotel Profitability
Begin the process this week for next year’s marketing plan, with firm time lines to be submitted in 30 and 60 days. This is essential for realistic budget planning.
(Note: I studied under John, he is a great Instructor)
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Investing: The secret to investing : E=mc2
What do good developers have to have in this market? (Besides a project with potential, of course.) Jonathan Worsley Chairman of London-based BENCH EVENTS, takes us into a very special dragon’s den and shares his observations there.
Thursday, June 3, 2010
Through The Eyes Of A Hotel Butler: Home Away From Home Experiences, Five Levels To Reach It
Through The Eyes Of A Hotel Butler: Home Away From Home Experiences, Five Levels To Reach It
By Osvaldo Torres Cruz
We are about to close the first decade of the 21st century during which Hospitality Industry has grown and expanded so that its related offers have considerable increased. As a result, hotels nowadays are focused in a great battle to conquer the most important trophy the guest carries along: his power of choice.
New strategies for the recruitment, retention and loyalty of guests, targeted towards not only to the rational but also sensorial world of guests, began to be used. Accordingly the concept of Experience, starts to be used for the first time among the Hoteliers, giving way to the new world of Experience in the hotel business, which focuses on the increasingly growing psychic needs of guests in order to achieve their emotional satisfaction.
It has been well proved that the design of experiences is closely linked to the generation of positive emotions and feelings in the guests. To this end Hotels have a valuable tool: the services they offer. The great challenge they face is: how to make available those services as a function of the experiences they wish to offer to their guests?
The attributes of the services have to be generators of stimuli to act as triggers of positive emotions and feelings in the guest receiving the service; however, how can we know which stimuli we have to include in each service and how to achieve it? The answer to these two great questions resides in the most important luggage that the guest carries along when arriving to the Hotel: his emotional world.
As to my experience I could say that to decode the guest emotional world we need five basic tools that will be marking the levels of experience, levels that will complement each other, being impossible to upgrade to a higher level without having established or completed the previous one.
I propose to analyse each level and its base tool.
1. Experiential Organizational Culture.
Base Tool: The Human Resource as main experience maker .
Undoubtedly the basic levels to be taken into account by the Hotel, as it will define the basis for the success of the holistic experience. The staff motivation viewed as an element of personal motivation will make the human resources to be better aligned with the company objectives and displays the importance of their role as managers of the guest experience. The will and motivation of human resources will generate a high degree of empathy which is essential for the accomplishment in the achievement of each subsequent level.
2nd level: The Relationships.
Base Tool: The relational personalized service.
The personalized service becomes an act of providing service aimed to establish a system of relations and links with the guest, which will influence his behavior motivating him to open his emotional world and share with the experience maker his emotional needs. On the other hand, daily and personalized assistance will enable the establishment of solid and everlasting Guest-Hotel ties.
3rd Level: The Opportunity.
Base tool: Moments of truth
Moments of truth, according to its definition, are those when the guest is in direct contact with the service. However, there is another meaning in the hotel business Experience, these become per se Moments of Opportunity which will allow us to get in touch with the guest with the objective of deciphering that emotional world so coveted. This is when the guest offers the opportunity to get to know him, as his emotional reactions arise when stimulated by the service.
4th Level: Identification Points.
Base tool: Differential Information
This information is nothing more than the disclosure of the Identification Points between perceptions that the services generate in the guest and his emotional patterns, which are by definition standard models or patterns of emotional behavior. The more identification points, the greater meaning of emotion and hence of experience, since these emotional patterns are linked to the personality and way of life of the guest. They make the framework into which the various emotional experiences integrate, marking the emotional tone with what the guest gets perceptions of life, regulating the experience and giving real meaning to the state of being.
5th Level -Emotional Services.
Fundamental Tool: The services attribute.
The services should be intended to meet these three questions:
1.What hopes the guest the service will make him feel? –
2.What sparks off an emotion in him about each particular service? –
3.How can we generate perceptions consistent with his emotional patterns and lifestyle?
The design of services in a way that its attributes can be used as triggers of sensorial stimuli capable of inducing an emotion and positive feelings, enables us to adjust them to the guest emotional patterns, causing identifiable perceptions inducing to differential meanings.
Once these levels are established and also achieved, this fact enables us to create the largest number of identification points related to patterns according to the guest lifestyle, thus making the best use of the differential value of the experience that the guest is living.
This identification and differentiation will make the final meaning of the experience to be his own, i.e. it will make the guest to feel at home and this is nothing more than the fact of having experienced a real Home Away from Home Experience, leaving indelible imprints on the mind and heart of the guest.
By Osvaldo Torres Cruz
We are about to close the first decade of the 21st century during which Hospitality Industry has grown and expanded so that its related offers have considerable increased. As a result, hotels nowadays are focused in a great battle to conquer the most important trophy the guest carries along: his power of choice.
New strategies for the recruitment, retention and loyalty of guests, targeted towards not only to the rational but also sensorial world of guests, began to be used. Accordingly the concept of Experience, starts to be used for the first time among the Hoteliers, giving way to the new world of Experience in the hotel business, which focuses on the increasingly growing psychic needs of guests in order to achieve their emotional satisfaction.
It has been well proved that the design of experiences is closely linked to the generation of positive emotions and feelings in the guests. To this end Hotels have a valuable tool: the services they offer. The great challenge they face is: how to make available those services as a function of the experiences they wish to offer to their guests?
The attributes of the services have to be generators of stimuli to act as triggers of positive emotions and feelings in the guest receiving the service; however, how can we know which stimuli we have to include in each service and how to achieve it? The answer to these two great questions resides in the most important luggage that the guest carries along when arriving to the Hotel: his emotional world.
As to my experience I could say that to decode the guest emotional world we need five basic tools that will be marking the levels of experience, levels that will complement each other, being impossible to upgrade to a higher level without having established or completed the previous one.
I propose to analyse each level and its base tool.
1. Experiential Organizational Culture.
Base Tool: The Human Resource as main experience maker .
Undoubtedly the basic levels to be taken into account by the Hotel, as it will define the basis for the success of the holistic experience. The staff motivation viewed as an element of personal motivation will make the human resources to be better aligned with the company objectives and displays the importance of their role as managers of the guest experience. The will and motivation of human resources will generate a high degree of empathy which is essential for the accomplishment in the achievement of each subsequent level.
2nd level: The Relationships.
Base Tool: The relational personalized service.
The personalized service becomes an act of providing service aimed to establish a system of relations and links with the guest, which will influence his behavior motivating him to open his emotional world and share with the experience maker his emotional needs. On the other hand, daily and personalized assistance will enable the establishment of solid and everlasting Guest-Hotel ties.
3rd Level: The Opportunity.
Base tool: Moments of truth
Moments of truth, according to its definition, are those when the guest is in direct contact with the service. However, there is another meaning in the hotel business Experience, these become per se Moments of Opportunity which will allow us to get in touch with the guest with the objective of deciphering that emotional world so coveted. This is when the guest offers the opportunity to get to know him, as his emotional reactions arise when stimulated by the service.
4th Level: Identification Points.
Base tool: Differential Information
This information is nothing more than the disclosure of the Identification Points between perceptions that the services generate in the guest and his emotional patterns, which are by definition standard models or patterns of emotional behavior. The more identification points, the greater meaning of emotion and hence of experience, since these emotional patterns are linked to the personality and way of life of the guest. They make the framework into which the various emotional experiences integrate, marking the emotional tone with what the guest gets perceptions of life, regulating the experience and giving real meaning to the state of being.
5th Level -Emotional Services.
Fundamental Tool: The services attribute.
The services should be intended to meet these three questions:
1.What hopes the guest the service will make him feel? –
2.What sparks off an emotion in him about each particular service? –
3.How can we generate perceptions consistent with his emotional patterns and lifestyle?
The design of services in a way that its attributes can be used as triggers of sensorial stimuli capable of inducing an emotion and positive feelings, enables us to adjust them to the guest emotional patterns, causing identifiable perceptions inducing to differential meanings.
Once these levels are established and also achieved, this fact enables us to create the largest number of identification points related to patterns according to the guest lifestyle, thus making the best use of the differential value of the experience that the guest is living.
This identification and differentiation will make the final meaning of the experience to be his own, i.e. it will make the guest to feel at home and this is nothing more than the fact of having experienced a real Home Away from Home Experience, leaving indelible imprints on the mind and heart of the guest.
Due diligence key to buying distressed hotel debt
The rewards of buying such loans are substantial, as they usually are sold at a discount—often steep—to the outstanding amount of the loan. The goal when purchasing a hotel loan is usually to obtain title to the hotel as quickly and inexpensively as possible, not to remain as the lender on the loan. However, too often buyers approach a note purchase like they are simply buying the underlying hotel—without adequately analyzing the numerous landmines along the path to hotel ownership. When you analyze whether to purchase a distressed hotel loan and what price to pay for it, it is important to assess all of those risks.
Contrasting boutique and chain hotel revenue management approaches
Boutique hotel properties and even boutique hotel chains have been enjoying a surge in popularity over the past few years. Consumers are increasingly seeking unique, tailored lodging experiences, and boutique hotels are well positioned to provide those experiences to them. Boutiques, not saddled with the same cost structures as chain-managed properties, present an attractive investment option for hotel owners.
Of course, the large chains still dominate the lodging landscape in the US. But the rise of boutiques and boutique chains affords an interesting opportunity to compare and contrast the revenue management strategies that work best for each class of hotel.
Any examination of contrasting revenue management strategies will highlight the differences between boutique and chain properties; in fact, the differences inherent to each of these types of hotel help determine which revenue management strategy is most effective.
Two differences, though, shine through. Let’s begin with one of the more glaring differences between a large chain property and a boutique: distribution.
GDS vs. OTA?
Inventory distribution and sales channel management are strikingly different in boutiques as compared to large chain hotels, hinging completely on the presence (or not) of a global distribution system, or GDS. Large chains have developed and employed these since the time before the internet, while boutique properties have typically not had the resources to develop a proprietary distribution system. In the age of the online travel agency and rampant internet bookings (more than 40% of all leisure hotel stays are booked online), the importance of a GDS is waning, but the difference in terms of the strategies behind distribution and channel management remain. Because boutiques rely more heavily on online distribution channels, their revenue management strategies have to be tightly focused on this area. This may mean using an automated revenue management system that can effectively maintain strong average daily rate and occupancy levels across multiple online channels, and paying close attention to the inventory allocated to each channel.
Chain hotels can also benefit from this kind of automated revenue management system- in fact, it can be argued that a GDS is simply another sales channel that must be managed along with all of the online sales channels- but the presence of a dedicated, proprietary GDS in chain hotels serves as insurance against the variability of online sales.
More Urgency
The lack of a GDS safety net is only one reason boutique hotels face more urgency than their chain counterparts. A large chain has the advantages of size and scope behind it: an established management company with group purchasing power, a long history of tried operating practices, the sales advantage of a recognized brand. Boutiques may share one or two of these advantages, but in general they have less room for error. Low RevPAR numbers for a week or a month at a large chain property may not be the end of the world, but for a boutique it could make the difference between profitability and insolvency. Boutiques face more pressure to maximize every financial metric, and that starts at the top line: maximizing RevPAR. By using sound revenue management strategy- which often includes leveraging advanced technology and software design to optimize ADR and occupancy-boutiques can stay ahead of their chain counterparts.
Unfortunately, just because boutiques face challenges and urgencies that chain hotels do not doesn’t necessarily mean that all boutique hotels are proactive in their revenue management strategies. Many boutiques simply employ ad-hoc methods of revenue management, to their detriment. (Many others do engage in forward-thinking strategies, including investments in automated revenue management systems, a trend which can account for the flourishing of boutiques in many markets.) If boutiques are going to make significant market share gains on their chain counterparts, they will have to embrace comprehensive revenue management strategies on a large scale.
Then, and only then, will it be the best of times for boutiques.
Of course, the large chains still dominate the lodging landscape in the US. But the rise of boutiques and boutique chains affords an interesting opportunity to compare and contrast the revenue management strategies that work best for each class of hotel.
Any examination of contrasting revenue management strategies will highlight the differences between boutique and chain properties; in fact, the differences inherent to each of these types of hotel help determine which revenue management strategy is most effective.
Two differences, though, shine through. Let’s begin with one of the more glaring differences between a large chain property and a boutique: distribution.
GDS vs. OTA?
Inventory distribution and sales channel management are strikingly different in boutiques as compared to large chain hotels, hinging completely on the presence (or not) of a global distribution system, or GDS. Large chains have developed and employed these since the time before the internet, while boutique properties have typically not had the resources to develop a proprietary distribution system. In the age of the online travel agency and rampant internet bookings (more than 40% of all leisure hotel stays are booked online), the importance of a GDS is waning, but the difference in terms of the strategies behind distribution and channel management remain. Because boutiques rely more heavily on online distribution channels, their revenue management strategies have to be tightly focused on this area. This may mean using an automated revenue management system that can effectively maintain strong average daily rate and occupancy levels across multiple online channels, and paying close attention to the inventory allocated to each channel.
Chain hotels can also benefit from this kind of automated revenue management system- in fact, it can be argued that a GDS is simply another sales channel that must be managed along with all of the online sales channels- but the presence of a dedicated, proprietary GDS in chain hotels serves as insurance against the variability of online sales.
More Urgency
The lack of a GDS safety net is only one reason boutique hotels face more urgency than their chain counterparts. A large chain has the advantages of size and scope behind it: an established management company with group purchasing power, a long history of tried operating practices, the sales advantage of a recognized brand. Boutiques may share one or two of these advantages, but in general they have less room for error. Low RevPAR numbers for a week or a month at a large chain property may not be the end of the world, but for a boutique it could make the difference between profitability and insolvency. Boutiques face more pressure to maximize every financial metric, and that starts at the top line: maximizing RevPAR. By using sound revenue management strategy- which often includes leveraging advanced technology and software design to optimize ADR and occupancy-boutiques can stay ahead of their chain counterparts.
Unfortunately, just because boutiques face challenges and urgencies that chain hotels do not doesn’t necessarily mean that all boutique hotels are proactive in their revenue management strategies. Many boutiques simply employ ad-hoc methods of revenue management, to their detriment. (Many others do engage in forward-thinking strategies, including investments in automated revenue management systems, a trend which can account for the flourishing of boutiques in many markets.) If boutiques are going to make significant market share gains on their chain counterparts, they will have to embrace comprehensive revenue management strategies on a large scale.
Then, and only then, will it be the best of times for boutiques.
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