FelCor Lodging Trust Sends Letter to Ashford Hospitality Trust

FelCor - ·1h
FelCor Lodging Trust Incorporated (NYSE:FCH)'s Board of Directors today sent the following letter to Montgomery J. Bennett, Chairman of Ashford Hospitality Trust (NYSE:AHT), regarding AHT's proposal to combine its business with FelCor. The full text of the letter is as follows:February 27, 2017Ashford Hospitality Trust, Inc.14185 Dallas Parkway, Suite 1100Dallas, Texas 75254Attention: Montgomery J. Bennett, ChairmanDear Monty:We listened with great interest to the Ashford Hospitality Trust ("AHT") earnings conference call last Friday. In particular, we were encouraged by CEO Douglas Kessler's statement that AHT would be willing to engage on the possibility of a cash transaction.FelCor has consistently communicated its concerns regarding both the inadequate value and uncertainty of AHT's all-stock, fixed exchange ratio proposal. Those concerns were underscored by the decrease in the market value of AHT's shares last week once the full details of the proposal were made public. However, an all or substantially all cash proposal provides much greater comfort and certainty and could alter our analysis of AHT's proposal. If AHT is willing to consider making such a revised proposal, FelCor stands ready to re-engage with AHT as soon as is practicable.Further, and as I proposed to both you and Doug in separate conversations prior to Ashford's February 21 public announcement, FelCor is willing to provide additional information, including property level information, to AHT provided AHT also shares reciprocal property level information with FelCor. We note that AHT has not provided any such information to date, and we welcome the opportunity to review it.I will call you today to discuss the potential to re-engage on this basis. I look forward to that discussion and hope it will prove productive for both of our companies.Very truly yours,FELCOR LODGING TRUST INCORPORATEDBy:Steven R. GoldmanAbout FelCorFelCor, a real estate investment trust, owns a diversified portfolio of primarily upper-upscale and luxury hotels that are located in major and resort markets throughout the U.S. FelCor partners with top hotel companies to operate its properties under globally renowned names and as premier independent hotels. Additional information can be found on the company's website at
Article by Mariano Faz

Staff turnover and its effect on a hotel's financial performance

A recently published white paper penned by TFG Asset Management revealed employee turnover in the UAE's hospitality industry measures approximately 25% - 30% per annum, which is a significant figure that can mainly be attributed to deteriorating staff loyalty. The research addresses the main motivations behind staff's intent to leave, creates a hypothetical scenario to measure the financial impacts, and crafts effective strategies to combat this alarming issue. The following article discusses the potential financial impact of a 30% voluntary staff turnover.Methodology: Our proposed model simulates the performance of the hypothetical hotel under two conditions, with high and low degrees of staff turnover. Under the base case (Scenario A), the level of turnover is marginal and measures 0-5%; therefore, full productivity, or a 100% contribution, is assumed under the condition that the hotel is able to retain its best staff. We adapt this percentage to our alternative scenario (Scenario B), presenting the high turnover rate and loss in productivity which reduces the staff contribution to performance in comparison to the base case. The primary assumptions within the case study are highlighted below:The 4-star hotel comprises 300 keys93 full-time staffFull productivity is assumed under Scenario A, or a staff turnover of 0-5%Reduced productivity is assumed under Scenario B, or a staff turnover of 30%In order to isolate the impact of the staff turnover ratio on the profitability of the hotel, the "ceteris paribus" concept has been applied, where it is assumed that all variables, apart from staff turnover, are fixed. In addition, the following conditions relating to the hotel must remain constant:For every departing employee, there is a replacement within that year. The time required to find a replacement depends on the role in question.Departing employees in both scenarios are voluntary and excellent performers.The turnover ratio of managers to entry level positions is 1:4.All operating metrics (occupancy, ADR, RevPAR, room nights) are constant.No external market variables are considered.All departing employees hand over their notices at the beginning of the month.No vacancy period is considered.On the top-line revenue: There are two main revenue streams: room revenue and F&B revenue. In order to calculate the revenue change in both scenarios, we allocate revenue percentage contribution from each staff member towards total sales. The difference in the weight of their contribution depends on the factors that influence the nature of their role, including their level of seniority, amount of customer-facing time and duties being performed.In addition to the revenue loss, we also assess the impact on the level of service which directly affects the Average Daily Rate. In order to consolidate this correlation, we have conducted our primary research by analysing more than three hundreds reviews published by and TripAdvisor across the three-, four- and five-star hotel categories. The research confirmed that quality of service is the most influential factor in determining a hotel's online rating, outweighing other features such as the property's facilities and geographical location. For example: four-star hotels displayed a variance in average online ratings of 4.0 points, where those with positive reviews received an average rating of 9.5 compared to 5.5 for those at the opposite end of the spectrum. Three-star hotels surveyed demonstrated the lowest average variance of 2.8 points, with positive and negative reviews averaging 9.3 and 6.5, respectively. By applying the findings mentioned above, we assume that a hotel that delivers the best quality of service will achieve an online score of 9.5. This allows us to craft our model to find the new ADR as follows:The conclusion reveals that room revenue drops sharply by 22%, F&B declines by 24% and ADR plummets 9%.On the bottom-line profit: This part measures the effects on the expense line which ultimately drives the profit. There are two types of costs. Tangible costs can be measured and calculated. Intangible costs are more challenging to quantify, and may include factors such as time, productivity, staff morale and customer disappointment. When assessing the impact of turnover rates on costs, the resultant effects should be evaluated thoroughly by considering both types. For this reason, the 30% staff turnover rate does not necessarily guarantee effective cost control.The main costs considered in the scenario include:Payroll - Overall, payroll is reduced, however, its margin is relative to the revenue increase.Accommodation cost - In the case of the UAE, accommodation is provided to staff and paid by the hotel owner. Accommodation costs are paid annually and remains fixed regardless of the mobility of staff. This also means its margin relative to the revenue increases in the 30% staff turnover scenario.Visa cost - In the UAE, expats dominate the labour market. Therefore, the HR department is responsible for ongoing employee residency visa renewals. In the 30% staff turnover scenario, the hotel must bear the visa cancellation fee for each departing employee in addition to a visa application fee for each new member of staff.Medical insurance - The corporate medical insurance policy is renewed each year. Under the 30% staff turnover scenario, it is assumed that the hotel operator has paid for medical insurance for all departing employees as well as new staff recruits. Accordingly, medical insurance is paid twice for every departing employee, resulting in an increase in expenses.Vacancy cost - Vacancy costs refer to the amount paid to temporary replacements employed overtime. The cost is calculated by multiplying the total number of staff replaced in a specific role by the hours per week required to cover for that vacancy (extra shifts, overtime), by the hourly pay for each type of employee and by the number of weeks required. New staff members may not be well-equipped to perform the same tasks as the employee they replaced. The period of time required to fill the vacancy can be measured by multiplying the hours per week required to make up for that vacancy by the hourly pay for each type of employee. In an ideal scenario, no vacancy cost will be incurred, in comparison to the margin that results from a situation where there is 30% staff turnover.Termination cost - As per UAE labour law, end of service gratuity is calculated by the period of service, where 21 days of wages for each year is paid for the first five years of employment. Based on the industry benchmark, a hotel employee will typically work for one company for a period of two to three years. Under this model, it is assumed that departing staff are employed for a duration of 2.5 years on average, which entitles each employee to 53 days of gratuity. As a result, an end of service gratuity payment in the 30% turnover scenario would accumulate a certain amount, compared to the base case, where no gratuity costs would be.Recruitment cost - Recruitment costs comprise both tangible and intangible elements, where advertising expenses and activities would constitute hard costs. Intangible costs are incurred during the recruitment process and include the time taken by the Heads of Departments and Line Managers to complete administrative and hiring tasks, screen resumes, check references and interview candidates. The base case will incur zero cost compared to the 30% staff turnover.In conclusion, while total payroll costs are lower, the effect of reduced revenues is more substantial than the marginal reduction in salaries. Other than the payroll itself, many staff-related expenses tend to rise in proportion to the staff turnover rate, and may include costs relating to medical insurance, training, vacancies, gratuity and recruitment. Intangible costs such as time, stress, lower staff morale and loss of knowledge can amplify the negative impact on Gross Profit. As a result, the scenario comparison illustrates a drop from 45.4% in the GOP margin to 37.6%, equating to a monetary loss of approximately AED 6 million.The empirical research findings presented in TFG Asset Management's research paper clearly highlight the implications of a high voluntary turnover rate which leads to a negative impact on top-line performance and ultimately reduces bottom-line profits. HR departments have traditionally struggled to justify the importance of valuing human capital within the business as existing metrics have often failed to provide a clear indication of the potential impact employees can have, not only on the bottom line, but on service quality and brand reputation. It is time for hoteliers to pause and rethink of their people strategies, to pause and embrace changes.You can now access TFG Asset Management's white paper "The impacts of staff turnover on a hotel's Income Statement" directly on

Pebblebrook bets on asset sales and redevelopment Featured Articles - 27 February 2017
Executives at Pebblebrook Hotel Trust touted the success of the company's strategic disposition plan, which included $463.8 million in hotel and other asset sales in 2016, during a fourth-quarter and full-year earnings call with investors.

The Impact of Staff Turnover on a Hotel's Income Statement

(The First Group) TFG Asset Management - 27 February 2017
In this white paper, TFG Asset Management in collaboration with the Emirates Academy of Hospitality Management analyse the hospitality labour market in Dubai and identifies the main challenges facing operators in retaining elite staff. We have conducted extensive research to assess the impact of staff turnover on a hotel's profitability, and as a result, developed relevant strategies to mitigate such challenges.In this white paper, TFG Asset Management in collaboration with the Emirates Academy of Hospitality Management analyse the hospitality labour market in Dubai and identifies the main challenges facing operators in retaining elite staff. We have conducted extensive research to assess the impact of staff turnover on a hotel's profitability, and as a result, developed relevant strategies to mitigate such challenges. Through field research, we have consulted six experienced Hospitality Managers (HMs) to gain a deeper and more precise understanding of the main issues.

Understanding the EMV Fraud Liability Shift

Hotel Business Review by - 27 February 2017
Even though it's been almost 18 months since the U.S. migrated to EMV smart-chip based payment technology, many businesses - for various reasons - are still hesitant to get on board. Many hotel property management system products don't support EMV acceptance, even though almost 80 percent of credit cards are now issued with smart chips. In fact, credit card issuers prioritized which cards were issued with chips first, which included high-limit international or travel cards - the types of cards being used often in hotels. Without the ability to accept EMV transactions, business owners - including hoteliers like you - are seeing liability shift chargebacks for which there is no defense.By David Hogan, Executive Director of Major Accounts, Heartland Payment Systems

Creating financial leadership in your hotel - 27 February 2017
The business of managing the hotel finances is not terribly technical or complicated. What makes it challenging is that it's usually a very large job involving many people. In a 500-room hotel, you can easily have 20+ forecast contributors. The communication system in the hotel is the key to both smooth management and predictive financial results. This is the how to.

Seattle warms to soft-drink tax

Restaurant Business - 24 February 2017
Seattle Mayor Ed Murray has called on the city to adopt a 2-cent-an-ounce tax on sugared soft drinks as a way of simultaneously discouraging consumption and raising money for education.

4 Ways CEOs Can Conquer Short-Termism - 24 February 2017
In a recent survey, 70% of respondents said that CEOs focus too much on short-term financial results, and nearly 60% said that they don't focus enough on positive long-term impact. These findings mirror the growing chorus of voices in business and academia that point to short-termism as being a major threat to business.

Who Cares About Revenue Management?

Duetto Research Blog - 24 February 2017
Nearly 30 years after its debut, we can now safely say that revenue management is an important hospitality discipline. Brands, owners, asset managers and technology suppliers -- from entry-level staff to C-level executives -- have all joined operators in understanding the importance of pricing your perishable inventory right to meet demand.

The Future of Hospitality Entrepreneurship, Trend #1: Digital Concierge and Hotel Services

Les Roches Webzine - 24 February 2017
Did you know that more than 4.3 billion people now use mobile phones? That's nearly 60% of the world's population. The widespread adoption of mobile technology has transformed businesses and services -- including in the hospitality industry.

Existing Hotel vs New Construction Hotel - Which is the Better Investment?

Hotel Online - 23 February 2017
Hospitality entrepreneurs usually enter a dilemma when it is time to expand their portfolio of assets, particularly hotels. They are confused whether to invest in a newly constructed hotel or to invest into the renovation of an existing one; investments should be made after measuring the pros and cons of each situation. Sometimes looking at the bigger picture is more relevant than the current performance of an existing asset, so it's better to evaluate each option thoroughly.

On the market: Indie financing, valuations and sales Featured Articles - 23 February 2017
Branded hotels with a history of strong performance give investors and buyers confidence, but the growing demand for unique experiences and having the ability to change to market needs is making independents an increasingly attractive option. While the U.S. hotel industry might be nearing the end of its cycle, guest demand for unique, authentic accommodations continues to grow. That demand has helped buoy the value of independent hotels even as hotel transactions overall are no longer setting the records they did just years ago.

Solid group, leisure demand push Host to record RevPAR Featured Articles - 23 February 2017
Host Hotels & Resorts' new President and CEO James Risoleo reported "better-than-expected" performance in the fourth quarter and full-year 2016. During the company's earnings call with investors, he also discussed near-term focuses for the real estate investment trust.

4 powerful influences for hospitality in 2017 Featured Articles - 23 February 2017
Success this year will depend on how the hotel industry deals with these forces. Four trends that represent macro and microenvironments will have a significant impact on the hospitality industry in 2017. These trends, which will affect CEOs to staff employees--with guests in the middle--include: Consolidation; booking direct vs. online travel agencies; Airbnb; and, of course, the election of President Donald Trump. Although three of these trends are not new, they will have a greater impact in 2017 than ever before. And Trump has brought the word "unpredictable" to the forefront in peoples' minds. Consider why these trends are noteworthy and how they will play out: 1. Continuing consolidationIt may be time to bring back that old childhood jingle, "Now I know my ABCs," and transform it to "Now I know my Marriott brands."

5 Ways How Swarm Intelligence Can Help Your Business

EDUCBA - 23 February 2017
Businesses employ a lot of surveys, statistical and data analysis tools to understand the problems faced at the production, marketing, inventory or warehousing. However scientific they are, they often don't give the required solutions.

A peek behind the Curtin

Service That Sticks!tm | By Steve Curtin - 23 February 2017
For today's post I thought I'd share an actual email conversation I had last week with a colleague who owns a video production company. It's raw and real. Nothing has been added, deleted, or otherwise altered to make a point. Our conversation dealt with client service, justice, service recovery, and service level standards. Take from it what you will. Comment if you'd like to add to the conversation.

How to manage your hotel confidently amid uncertain times

Hotel Management - 22 February 2017
So much for certainty. Throughout 2016, "uncertainty" was the watchword for hoteliers throughout the United States and in much of the world. Many in the industry hoped the result of the presidential election would clarify what the business climate would be going forward.We now know hotel developer Donald Trump has been elected and inaugurated as the 45th president, but that is about all we can say for sure.

What Mark Zuckerberg Understands About Corporate Purpose - 22 February 2017
Last week Mark Zuckerberg published a strong defense of both globalization and Facebook's business model. In a nearly 6,000-word letter, he argued persuasively that Facebook thrives under a globalized socioeconomic system, where barriers to information, labor, capital, and products are minimal.

How to Handle Interrupting Colleagues - 22 February 2017
You're giving a presentation on the company's strategic direction when one of your colleagues interrupts you. You pause, address his question, and continue with your point -- until he interrupts again. Sound familiar?

HITEC Toronto Exhibit Space is Officially Sold Out

HFTP - 22 February 2017
Global hospitality association Hospitality Financial and Technology Professionals (HFTP(r)), producers of the world's largest hospitality technology conference Hospitality Industry Technology Exposition and Conference (HITEC(r)), is pleased to announce its exhibit space for HITEC Toronto is officially sold out. A waiting list is available on a first-come, first-served basis for booth space - an updated floor plan is available on the HITEC Toronto website. HFTP's HITEC Toronto is the second, and largest, of three HITEC events planned for 2017, and will take place June 26-29 at the Metro Toronto Convention Centre in Toronto, Ontario Canada."Booth space for HITEC Toronto sold out quicker than ever before in HITEC's 45-year history," said HFTP CEO Frank Wolfe, CAE. "HFTP continues to reach new milestone accomplishments, and we are overjoyed to produce the first HITEC event in Canada, Europe and the Middle East this year."HITEC is the world's largest hospitality technology exposition and conference with over 331 companies and 853 booths occupying this year's Canadian show floor. HITEC offers a unique combination of top-notch hospitality technology education, led by industry peers and experts, and an unparalleled trade show showcasing the latest hospitality technology products and services. In recent years, HFTP has added its increasingly popular Entrepreneur 20X (E20X) startup pitch competition to the HITEC event program - introducing the competition at HITEC Austin in 2015.HITEC Toronto also offers multiple sponsorship and advertising opportunities for exhibitors to increase impressions before and after the show. See which opportunities are still available and download the 2017 HFTP/HITEC marketing kit by visiting the HITEC website at in early June 2017, HITEC Toronto exhibitors will have the opportunity to select space in advance for next year's HITEC Houston. The process takes place prior to arrival in Toronto to give exhibitors time to review and select space with the assistance of key company personnel. Selection order is based on total points accumulated by exhibiting at HITEC. Last year, more than 80 percent of exhibit space was reserved during this process so exhibitors are encouraged to participate for the best selection.For more information or to get on the exhibitor waiting list, please contact HFTP Exhibits Manager Alison Heathcote at For more information about HITEC and HFTP's other global activities, contact the HFTP Meetings & Special Events Department at or visit and hosted annually in a different city throughout the United States, HFTP decided to break barriers in 2017 by hosting three HITEC events all taking place outside of U.S. boarders. This will be the first time the global association's largest HITEC event - featuring thousands of hospitality professionals from around the world - will take place in a different country. In addition to HITEC Toronto, in 2017 HFTP is producing two additional, inaugural HITEC events: HITEC Amsterdam and HITEC Dubai. HITEC Amsterdam will serve as the first HITEC event of the year, taking place from March 28-30 at the RAI Amsterdam Convention Centre in Amsterdam, The Netherlands. HITEC Dubai will serve as the last HITEC event of 2017, and take place in the Fall in partnership with Naseba.Stay tuned to HFTP's main webpages: HFTP/HITEC; the world's first hospitality-specific search engine: PineappleSearch(r) - mobile app available via iTunes App Store and Google Play; HFTP's official blog: HFTP Connect; HFTP's industry-specific, informational news sites: HITEC Bytes (technology), HFTP Club Bytes (club), HFTP Finance Bytes (finance) and HFTP News (association); and HFTP's social media sites: Facebook, LinkedIn, Twitter (@HFTP), Instagram (HFTP_HITEC), YouTube and Flickr for the latest updates.About HFTP Hospitality Financial and Technology Professionals (HFTP(r)) is a global nonprofit hospitality association, headquartered in Austin, Texas, USA, that uniquely understands the industry's problems. HFTP has several thousand of members and stakeholders across the globe. HFTP assists its members in finding solutions to industry problems more efficiently than any organization via its expert networks, research, conferences such as HITEC and certification programs. HFTP also owns the world's only hospitality specific search engine, HFTP is recognized as the spokes group for the finance and technology segment of the hospitality industry. For more information about HFTP, email

The ultimate guide to how hotels can compete with Airbnb

Fiz Blog - 22 February 2017
The rise of Airbnb has seemed unstoppable. Seemingly out of nowhere, it appeared on the scene and within a few years had made such a large impact, profits of doom started talking about the death of the hotel industry. In 2016, 19% of leisure travellers claim they used Airbnb and OTAs, including, are now listing apartment rentals.

President: Phoenix American's ultimate catch is IPO Featured Articles - 21 February 2017
From the day he was born, the president of Dallas-based Phoenix American Hospitality was destined to be angling for hotels. The latest efforts by W.L. "Perch" Nelson are netting some early results."We're busy, we're building, we're excited about the future," Nelson said during a phone interview. "For the first time in my professional career I can see the clear path in front of me. Our direction is clear now that we partnered with a major institution to buy hotels."Nelson declined to provide details of the investor, but said Phoenix American's $87-million January acquisition of a 754-key portfolio of six Hyatt Place properties located in Georgia, North Carolina, Texas, South Carolina, Virginia and Kansas is proof that both investor and fund manager mean business.

Business rates changes 'nothing to be afraid of'

The Caterer - 21 February 2017
Government ministers have told Tory colleagues that the changes to business rates are "nothing to be afraid of" amid disquiet among businesses in Conservative heartlands.A planned revaluation of business rates, which takes effect in April, is expected to see rates rise for one in four businesses.

Nine Takeaways from the MBA Commercial Real Estate Finance/Multifamily Housing Convention & Expo, Day One

National Real Estate Investor (NREI) - 21 February 2017
The mood on the show floor at the annual MBA conference, which is taking place in San Diego this week, is an odd mixture of optimism and uncertainty. With healthy property fundamentals and few concerns about overbuilding in the commercial real estate space, mortgage bankers and financial intermediaries feel a certain level of confidence in the market. But worries about the potential implications of proposed tax reform, the strength of the dollar, the possibility of trade wars and other unforeseen geopolitical events are making the near-term future harder to predict than it was in years past. Here are the takeaways from Monday's panels and discussions:

Hundreds of UK hotel companies at risk of going bust

The Caterer - 20 February 2017
Nearly 2,000 hotel companies in the UK risk insolvency as a result of Brexit, according to new research from accountancy firm Moore Stephens.The company said that around 1,800 UK hotels have at least a 30% chance of going insolvent within the next three years.

New Trump Travel Ban Targets Same Countries as Old Trump Travel Ban - Destinations - 20 February 2017
A draft of President Donald Trump's revised immigration ban targets the same seven countries listed in his original executive order and exempts travelers who already have a visa to travel to the U.S., even if they haven't used it yet.A senior administration official said the order, which Trump revised after federal courts held up his original immigration and refugee ban, will target only those same seven Muslim-majority countries -- Iran, Iraq, Syria, Yemen, Somalia, Sudan and Libya.


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