Article by Hans Detlefsen

Hotel Cap Rates Inching Up: Is It a Good Time to Sell Hotels?

Hotel Appraisers & Advisors, LLC - 8 June 2017
At the beginning of 2017, hotel cap rates stood at historically low levels. However, research by Hotel Appraisers & Advisors (HA&A) shows that hotel cap rates are beginning to increase, reversing a multi-year trend. In this article, HA&A summarizes our recent research about hotel cap rates, based on a review of more than 400 hotel transactions and listings. We also discuss implications for hotel owners who may be considering near-term exit strategies.Is It Time to Sell?Is it a good time to sell hotels? Data from late 2016 and early 2017 show hotel cap rates recently reached historically low levels. According to many investors, there is only one direction cap rates can move from here -- up. Indeed, recent research conducted by HA&A shows that capitalization rates for hotels appear to be inching up in certain markets. When hotel cap rates increase, the value of a hotel's income stream decreases. So, if cap rates are higher at the end of 2017 than they were at the end of 2016, then market participants will be willing to pay less for an identical hotel income stream at the end of 2017 than they would have paid in 2016.As revenue growth projections decelerate and as more investors voice uncertainty about the national economy, we expect hotel cap rates to increase eventually. This reversal in cap rate trends appears to be occurring in certain hotel markets around the U.S. already. It may be too early to conclude whether this is a broad, national trend. However, for our clients who are considering near-term exit strategies, this may be a good time to evaluate options.Recent Data TrendsOver the past 18 months, researchers at HA&A analyzed hundreds of hotel listings and transactions from across the United States. Our research focused on national and local trends in hotel cap rates. We studied cap rate trends for all chain scales and brands as well as independent hotels. At the end of 2016, the weighted average hotel cap rate was 7.5%, based on chain hotels in our data[1] sample. This figure has risen to 7.7% based on year-to-date data through May 31, 2017. Since large transactions in the top markets tend to skew these national average cap rates downward, we also evaluated median cap rates. We also studied several matched pairs of comparable transactions in seven local market.The 2016 year-end median hotel cap rate in the U.S. was about 8.4%, according to our research. Based on year-to-date 2017 data through the end of May, the median hotel cap rate held steady at 8.4% nationally.While national trends may provide general guidance about certain trends in hotel cap rates, there is no such thing as a "national average" hotel transaction. All hotel sales are local. So, HA&A evaluated transaction data in several local markets where we could identify two similar hotels selling at different times. That is, we searched for markets in which one hotel sold in 2016 and a similar hotel sold in 2017. By focusing on these matched pairs of similar hotels in the same markets, we attempted to gain a better understanding of whether cap rates are changing.HA&A evaluated matched pairs of hotel sales in seven markets around the U.S. The following descriptions summarize our local cap rate findings.Chicago - UnchangedDenver - UpLos Angeles - UpSan Francisco - UpSan Jose - UpSeattle - DownWashington D.C. - UnchangedFour of the seven markets we evaluated exhibited an upward shift in hotel cap rates. One market showed hotel cap rates declining. Two markets indicated unchanged cap rates.Most of these cap rate changes were small and should not be considered in isolation. Moreover, one or two matched pairs is not sufficient evidence to draw conclusions about overall cap rate trends in any of these individual markets. But, in contrast to recent years, our cap rate research is showing some mixed results in 2017.What Causes Cap Rates to Change?A cap rate is simply the ratio between a property's single year of income and its market value. The process of applying a cap rate to a hotel's income to estimate its value is known as direct capitalization, when applied to a single year of income data. The Appraisal Institute[2] provides the following definition of direct capitalization:A method used to convert an estimate of a single year's income expectancy into an indication of value in one direct step, by dividing the net income estimate by an appropriate capitalization rate.What causes hotel cap rates to change? Many factors, such as hotel revenue trends, expense trends, regulations, labor market conditions, credit market conditions, property tax trends, market risk, geopolitical risk, and investor sentiment can all affect hotel cap rates. To simplify this incomplete list, we can think about two key investor considerations: (1) how are hotel income streams expected to change; and (2) how much uncertainty do investors ascribe to these expected changes in income?When investors expect hotel incomes to increase rapidly, like in recent years, they may be willing to underwrite acquisitions based on lower cap rates. On the other hand, when investors perceive heightened risk and uncertainty in the market, like in 2008 and 2009, their underwriting typically requires higher cap rates. When investors are concerned that income growth may decelerate or hotel incomes may even decline, hotel cap rates generally increase. Similarly, when investors perceive that their hotel income projections are subject to increased uncertainty and more risks, hotel cap rates typically increase.ConclusionModerate evidence is beginning to emerge that indicates hotel capitalization rates may have bottomed out in recent months. National data is inconclusive. Although weighted average hotel cap rates are higher in 2017 than they were in 2016, the median national cap rate has remained unchanged for chain hotels. Local research is also mixed, as we observed matched pairs in seven U.S. markets that revealed differing results about cap rate changes. However, the trend of the past several years that showed broadly declining hotel cap rates in the U.S. appears to have ended.As transaction volumes slow nationally, HA&A is closely monitoring a combination of national and local hotel cap rate trends. We expect hotel cap rates to eventually increase, and this appears to be happening slowly, at least in certain markets. Clients who are considering selling hotels in the near future may want to evaluate options and priorities at this time.This article is for discussion purposes only and is not intended to be construed as investment advice.[1] Data sources include Real Capital Analytics and HA&A interviews with brokers, buyers, and sellers.[2] The Appraisal Institute, The Appraisal of Real Estate, 13th Edition (Chicago: The Appraisal Institute, 2008), 22-23.
Article by Kirby D. Payne and Chelsey Leffet

Key Takeaways: AHLA & AAHOA's - Legislative Action Summit 2017

HVS - 8 June 2017
Legislative Issues Affecting the Hotel and Lodging IndustryWhile the LAS event focused on a few 'call to action' pieces, the industry is facing issues on a much wider scale than brought up at LAS or within this article. Issues that may or may not have been addressed during LAS but are important for industry professionals to be aware of are matters such as, immigration, illegal hotels, human trafficking, wages and benefits, per diem rates, resort fees, OTAs, tax reform, Americans with disabilities, and joint employer models. The following sections briefly describe only some of the main points and issues addressed at LAS this year.Online Booking ScamsAs technology advances and online travel bookings grow, the risk of running into a scam is reportedly high. Obviously, hoteliers and brands are doing the best they can to educate guests on how to successfully book their stay, while also protecting their reservations, information, and ultimately their experience at a property. It is understood that fraudulent websites and call centers posing as the hotel, without the consumer knowing, have led to the guest not being assigned to a room type they were expecting, their private information being stolen, a lost or cancelled reservation, the loss of a down payment, extra or hidden fees charged to their account, or forfeiting their reward loyalty points. The Stop Online Booking Scams Act would help protect these consumers from scams by prohibiting websites from pretending to be a certain hotel. With this bill, these websites would need to prominently display that they are not affiliated with the hotel in question and are in fact a third party. This would help to increase consumer confidence in the hotel industry's legitimate booking channels.Americans with Disabilities Act Drive-By LawsuitsThe widely supported Americans with Disabilities Act (ADA) has protected people with disabilities for over 25 years within the hotel industry. This act ensures that guests and employees alike are able to access and positively experience hotel facilities and amenities. In recent years, a growing number of lawsuits, reportedly over 11,000, have been filed under the ADA that target businesses. These so-called "drive-by" lawsuits occur when lawyers aim to extort settlements from business owners. In many instances, these suits are filed against hotels when neither the lawyer or their clients have ever been to the hotel. Legislation titled as the ADA Education and Reform Act aims to provide a defined period of time for the hotel owner to address an ADA violation before a lawsuit can move forward. Hotel business owners expressed their concerns on the Hill, asking Congress to act and help eliminate predatory litigation, while still protecting the ADA.Transparency for Commercial Short-Term RentalsHotels play a vital role in supporting local economies. In fact, the AHLA reported that over $170 billion is generated in federal, state, and local taxes, not including all the additional money and taxes being accumulated through guest spending within a community. As short-term rentals grow in popularity, commercial operators are being provided a platform to offer and run illegitimate and unregulated hotels. It has become a full-time business for many and the rentals are not being held to the same accountability and taxing measures as hotels. Guest safety is often compromised and the owners are able to dodge full tax payments. While no federal legislation presently exists, the industry is asking that a level playing field be provided and that the government ask for transparency from short-term rental companies regarding commercial activity on their platforms.In ClosingRegardless of one's role in the hospitality industry, or political affiliation, it is important to be knowledgeable of the issues affecting the industry. Being well versed in the potential effect of legislation and regulation on hotels is important when considering return on investment and value. We hope this article has shed light on how hoteliers and lodging professionals are hoping to shape our industry's future. We encourage all Americans that are associated with our industry to be informed about our issues and exercise our constitutional rights to "peaceably assemble" and "petition the Government."

Ensuring staff engagement during managerial transitions Featured Articles - 7 June 2017
Simon Sinek, a renowned author, motivational speaker and marketing advisor stated that “the responsibility of leadership is not to come up with all the ideas, but to create an environment in which great ideas thrive.” Sinek fully embraces the concept of involving each employee in the planning of work and strategies that will affect them directly in order to build a healthy work environment. It is well known that the hospitality industry has witnessed notable and significant upper management, executive and C-suite leadership changes this past year. Such changes are commonly present at the property level as well.
Article by Mariano Faz and Yung Dang

Hotel Asset Management Guide: Some Hotel Asset Management Best Practices

TFG Asset Management - 7 June 2017
Principle 1: On the top line, the Hotel Asset Manager (HAM) needs to divert away from strictly focusing on Rooms strategies.The risk of a hotel being treated as a commodity forces operators to solely compete on price, thus giving the hotel guests bargaining power. Hotel Owners tends to overlook opportunities to grow ancillary revenues and they can be strategically integrated with other facilities in the hotel's marketing activities. In this era, solely optimizing Room revenue is not an adequate strategy in the long run.A qualified hotel asset manager will take a broader look at their revenue strategy and understand that it is imperative to optimise revenue in all departments, from rooms, to F&B, to spa, or any other operating revenue streams.While it is vital to create a tailored segmentation strategy, it is also important to create value across all other operating departments. Asset managers must advise sales managers to map blueprints for each segmentation to understand individuals' needs and wants. For example, aside from maximizing room rates within each segment, the hotel must consider how they can encourage their guests to increase expenditure on other facilities offered at the property.There are multiple ways to optimise ancillary revenues and asset managers may evaluate the decision to operate facilities in-house or outsource them. Many hotels underestimate the potential revenue that can be generated through F&B, viewing it as a department that supports hotel guests rather than functioning as a profit centre. Hoteliers tend to dedicate fewer resources and spend less marketing effort on maximizing the profitability of restaurants. They are often adamant about altering the F&B models, especially across large hotel chains and have yet to move away from the traditional model which typically comprises an all-day dining, room service, banqueting, and a specialty restaurant.Principle 2: On the bottom-line, minimising expenses and capital expenditure does not lead to a high profit margin in a long run.There are many cases where heavy investment is actually required to boost revenue and profit in the long-run. For example, the investment in lighting replacement from conventional bulbs to LEDs can be substantial. However, the payback period usually ranges between one and three years, as energy savings will increase to 75% - 80% with a lifespan of approximately 25,000 hours as opposed to 1,000 hours. Asset managers will understand that such an investment results in a high return on investment by saving costs in the long-run. Another capital intensive investment that is traditionally overlooked is the principle of investing in a hotel renovation plan to upgrade the property.Renovation and refurbishment are some of the key drivers to improve the hotel's value. Sometimes, the Hotel Asset manager should not pressure the hotel operator to sustain high occupancies when the property needs a full refurbishment. The asset manager must initiate the refurbishment plan to stay ahead of the competition, allowing them to charge premium prices, increase revenue, profit and ultimately appreciate the value of the property.In the case of a sale, the owner is always interested to increase the overall asset value. A good renovation plan will improve the Net Operating Profit (NOP) and consequently, the trading value. The key is to understand to what extent owners should invest in the refurbishment plan. Asset managers and hotel managers must be able to measure the impact of the renovation plan on the hotel's performance, image, positioning and value before sending the budget to the owners for approval.Principle 3: On a tactical level, Hotel Asset Manager needs to analyse the hotel's positioning and competitive set instead of being overly reliant on the RevPAR index as the final performance metric.The RevPAR index benchmarks a hotel against its competitive set and functions as a tool that allows the Hotel Asset Manager to evaluate the performance of the Operator. Operators have a tendency to select a favorable competitive set and may, for example, select competitors with lower star category or fewer higher room categories. The incompatible competitive set will boost the hotel's RGI and function as a false indicator of actual performance.It is the hotel asset manager's role to conduct proper field research by reviewing the appropriate competitive set to position the owners' properties correctly. They are required to gather benchmarking data from the competitors and from Smith Travel Research (STR) reports. It is important to identify a suitable set of competitors at the beginning to provide a consistent base of measurement throughout the period of the Management Agreement. This will enable asset managers to understand the potential improvements and develop appropriate strategies accordingly. Performance evaluation should not be solely dependent upon the hotels' internal figures.Principle 4: At a strategic level, Hotel Asset Managers need to properly implement the objectives of the owning company in relation to the acquisition and disposition of the hotel portfolio.On a strategic level, the hotel asset manager must have the knowledge and understanding of the market to advise the owners on the appropriate acquisition and disposition strategies of their properties. In terms of acquisitions, mandatory preliminary research such as a feasibility study must be conducted in order to understand the level of expected returns.Upon purchasing the actual asset, the Hotel Asset Manager must select the most suitable brand for the property. Not all brands are adequate for some specific markets and locations. The Hotel Asset Manager should understand the profile of the owner to select the appropriate operator.During the life cycle of the asset, the asset manager should always keep the disposition strategy in mind. Multiple operational decisions can be postponed or advanced depending on the moment that the Owner is determined to sell. Understanding the hotel investment market is a determinant factor to effectively execute a sale. An example for a successful divestment strategy is Tata-owned Indian Hotels Company (IHCL)'s decision to go asset-light back in 2016 by a near-total equity exit from the Bermuda-based Belmond. The monetization of a 90-year-old property in Boston alone helped the group earn 1,250 crores, equivalent to approximately 193 million USD - 12 times the profit before tax reported in the previous year. This helped them to clear their debt partially.The hospitality industry has been undergoing enormous changes in the past years and is predicted to accelerate in the future. Hotel owners see the lucrative investments but also voice concerns over their asset strategy, management and partner. For this reason, employing an expert in the field - a professional hotel asset manager is becoming more and more crucial for all types of owners, from individuals, to private equity firms and REITS.
Article by David Lund

Hospitality Financial Leadership - The Russians

The Hotel Financial Coach - 6 June 2017
When heads of state come to visit your hotel they usually make a bit of a show. The Russians are no exception, they even bring their own warship, the KGB and a wad of cash!I had the pleasure of witnessing the Russian President Dmitriy Medvedev arrival in San Francisco in June of 2010. He flew in the presidential plane, meanwhile his missile cruiser Varyag sailed into San Francisco Bay to accompany his visit. Heads of state often have a ship accompany them on their state visits.The first and previous last time a Russian warship entered San Francisco Bay it was almost 150 years earlier during the American Civil War. The Russians sent two warships to America during the civil war to show the Union their support at a time when the English and France were thought to be supports of the Southern Confederacy.The Russian Presidents team took over two whole floors of the main building of the hotel. Almost 100 rooms in total for his staff and hangers on. Upon his arrival, the President was greeted in the lobby of the hotel by former secretary of state, George Schultz and the then current California Governor, Arnold Schwarzenegger. The Russian President arrived with a rather long line of military and support staff including a couple of beautiful younger ladies. It was quite a show and I was quite surprised that it all took place in the very public lobby. Usually, these meet and greets are behind closed doors. The typical modus operandi is the head of state arrives at the hotel and he or she is usually greeted by the General Manager and then quickly escorted to their private reception where the politicians and public figures greet them. The show that day was very public and there was no press, just unassuming hotel guests that were now witnessed to the international meet and greet.The Russians stayed 3 nights and racked up a pretty good bill, just north of $600,000. Most of the bill was for food and beverage with some incredibly lavish items. When groups come to your hotel they quite often ask for credit. In the hotel business, this is a common practice that is one of the hallmarks of our industry. Direct billing, we like to call it and we still do this and it's a direct result of our business being so old and competitive. All hotels would love to stop granting credit but we can't because we would lose a competitive feature. In order to ascertain your group or companies credit worthiness, we use certain credit reporting agencies and also our own sister hotels credit history. Having a group like this in-house can be high risk as it is political in nature and anything can happen. Having no deposit, no credit references and no credit card on file would normally be a potential disaster waiting to happen. When its government, especially a government with the label power of the Russian President you just hold your breath.Word came after day 2 that the account would be paid upon departure, in cash. This is incredibly unusual for an account of this size. In my entire 30+ plus year career I only had one other group pay their group account in cash at it was $250,000. The Russians had requested a simple receipt for their payment in the form of a hotel folio with the total amount indicated and an embossed stamp that said, PAID. We actually had such a one-handed stamp that looked like a pair of pliers with what would appear to be two large coins on each end. they were not interested in the reams of paper that would normally accompany the master account. All they wanted was this one piece of embossed paper!On the day of departure, our chief of security informed me that the money would be delivered to the executive office at 3:30 pm. Subsequent to learning this I arranged to have our bank on notice that we would be making a large cash deposit that afternoon and they were ready to receive it. Banks today do not have much cash on hand and the manager was quite intrigued by our call asking if it would be OK to deposit $600,000 in cash. My communication with the Russians was through our hotel's chief of security. He, in turn, would speak with the American secret service officer in charge of the visit who would, in turn, speak with the head Russian presidential security service, their version of the secret service.Three PM came and went and no money and no word from the Russians. At this point, the President was gone, off on the next leg of his journey to Washington and with him went the delegation of hangers on that stayed in the hotel. I am beginning to feel the burn. Five PM came and went and still no Russians and no money. I knew it, you can smell these a mile away, especially once the customer fails on their commitment, in this instance 3 pm. Nothing but silence permeated from the Russians through our security department and in turn through the secret service. At 6:30 my office phone rang and it was our chief of hotel security. He informed me that word had come that the money would be delivered at 7:30 pm and that he had requested the meeting take place in the executive office. He said the money would be coming from the ship and the KGB would be the one's delivering it. Holly crap! What to do now?At 7:30 at night having 600k in cash in my hotel is not a good thing. The bank is closed and I must keep this money overnight in the hotel. My imagination quickly gets to work and I can see the Russian underworld at 2 am strong arming my night staff, jumping the desk and quickly getting the cash. We have limited facilities to keep a small amount of cash, it's called the safe and its way to obvious a place to leave the cash. The safe is in the general cashier's area behind the desk and it's a small modern safe. Easily taken by a couple of determined thieves. The hotel has a huge safe that's over 100 years old that we use for safety deposit boxes, the main door to the safe is 6" thick and the safe is 7 feet tall and 4 feet wide, the problem is the safe is locked out, combination and working life long gone. One of the safety deposit boxes could work but popping these boxes is child's play for a gang of determined thieves that know the hotel just got a large payment.That's it, that's the game they are playing, it's all clear now! Pay in cash, pay late in the day so we cannot get the money to the bank, set it up with their Russian Mafia friends and get all the money! It's so simple and easy. The hotel is such a soft target we don't stand a chance. Putting the night staff in jeopardy is a bad idea. What to do? It's 7:30 and my credit manager and I are waiting in the executive office.7:45 and still no visitors and suddenly the door to the office opens and it's our chief of security with two heavy set gentlemen in suits and a little old lady who was dressed in a vintage pencil skirt and suit jacket, Audrey Hepburn style. She is the one with money. She comes unescorted from the reception area in the office to the inner office and closes the door. She sits down and opens her purse. The purse is the shape of a small doctor's bag and its vintage Louis Vuitton. She opens the bag and with one hand pulls out $600k, still wrapped in plastic you can see the open end of the package that once held a million. She plunked the $600k on the desk and asked, "how much more". I replied, "39,000". She pulled another smaller wad out and started counting $1,000 bills. She counted to herself and then passed the small stack to me. I passed them to my credit manager and I, in turn, said to the Russian lady, "do you mind if I have a look at the package?" "No, I don't mind, it's yours now..." With that, I examined the package closer and it had 6 stacks of factory bound $1000 dollar bills. I held this package which was barely the size of a box of salt. An incredible site to see.My credit manager confirmed the count of 39 and I, in turn, handed her the folio which was presented in a hotel letter envelope. She opened it and look at it quickly and said, "Thank you, this is all we need." With that she stood up, nodded her head, I thanked her and she turned and left the office. There were some quick words in Russian to her escorts and then they were gone.We're left in the office with the money and I have a very strange feeling that this is just too easy, too simple. Who shows up at 7:45 pm at night to pay a hotel bill for the Russian President in cash to the tune of $639,000 dollars, all with $1000 bills and it's all done by a little old lady who is a KGB agent.Now I need to decide what I do with money. I contemplated taking it home but that would be risky and anything could happen on the way home and back, not to mention that's not something I want in my home. I thought again about the safe, the safety deposit boxes. If we're are going to be hit tonight its way to obvious, they will get the money, it's like you're robbing a house, you're going to look in the top drawer of every dresser. With our business complete I put the money in my bicycle side bag and we left the executive office. The immediate feeling, I had walking down the corridor to our offices was, we could be a target any moment. This is crazy. Once in my office my credit manager was not long getting ready to leave, she asked me what was going to do with the money. I am going to drop in in the night wallet, I said. OK, see you tomorrow. She left and I'm now alone with more than a half a million dollars in brand new, unmarked cash.I unpacked the plastic and moved the stacks of $100,000 through my hands. I thought about Mexico or a South American country where I could hide out and live life on the lamb. Na! That's crazy, I would be too paranoid. I thought for a moment and then I turned my office chair around and stared at my waste paper container. I reached out and picked it up, it was half full of paper, a couple of coffee cups. I turned it upside down and dumped its contents onto the floor. I placed the cash, all of it, all 639 - $1000 bills in the bottom of the trash can. I then picked up the paper and cups and placed it back in its spot beside my side desk. Having changed into my riding clothes it's now time to go home. Forty blocks across town in the night air feels good. It's down, down down Nob Hill, across the tenderloin and the western addition and then up to Diviz and through NOPA and home. I sleep well. Up at 5:30 am, out the door on my bike at 7:30 and I'm back to work........ Just another normal day in the hotel business

Getting Your SWOT Analyses Right

Savvy IQ - 2 June 2017
In fact, most people carry out SWOT analyses very poorly, and they get them wrong, no, very wrong. Let me share with you why so many people mess up their SWOT analyses, and, more importantly, how to get them right.Getting SWOT Analyses WrongIn order to explain why so many companies get SWOT analyses wrong, let me describe how most companies develop their SWOT analyses. I admit that what I am about to share with you is a parody, but it is only just a parody...Most people start their SWOT analyses with their strengths, which the participants in a SWOT analysis session typically feel pretty good about. They know that they have to admit to a few weaknesses, so they move onto that next, but nothing that would be politically problematic. At that point, the participants are feeling somewhat tired, so they pull together a few opportunities, and finish up with a handful of potential threats.At this point, it is close to lunchtime, so the group arranges for a junior staffer to type up the results. The staffer circulates the document and places it on a company server, where it is promptly ignored until it is archived and deleted a year later. The end result of all of this effort is, to be precise, nothing.Getting SWOT Analyses RightSo, how do we get SWOT analyses right? The answer to that question is to remember that the purpose of a SWOT analysis session is to identify the opportunities that we are going to pursue over the following year.We should therefore, start any SWOT analysis by focusing on opportunities, and by that I mean only those opportunities that are likely to be substantial enough, and doable enough, to be worth pursuing. In practice, as we will see, we will end up spending the bulk of our time on opportunities, and very little on anything else. After identifying opportunities, we should then list any serious threats. Just as with opportunities, we should only focus on those threats that are likely to be material enough, and probable enough, to be worth considering.My basic advice when it comes to strengths and weaknesses is to spend very little time on them in any SWOT analysis meeting. While identifying strengths and weaknesses may be an interesting exercise, it is rarely time well spent. The only reason why we spend any time at all on either strengths or weaknesses in a SWOT analysis is to make sure that we can realistically attain our chosen opportunities, and deal with any serious threats. I wish to emphasize in this context that a strength means absolutely nothing, unless it enables us to pursue a sizable opportunity or deal with a significant threat. All other so-called strengths are not actually strengths at all, but merely irrelevances.At this point, we now have the raw material for a successful SWOT analysis. But we have to take it a level deeper if our SWOT analysis is actually going to be useful. We have to remember that "we can only do three"...We Can Only Do ThreeSteve Jobs would gather together his lieutenants each year to lay out the opportunities that Apple could pursue over the following year. Inevitably, the Apple management team would come up with a long list of potential opportunities that Apple could go after. Jobs would then say that "we can only do three", and he would list the three opportunities that Apple would focus on over the upcoming year. What I would suggest is that if that is true for Steve Jobs and Apple than it is true for all of our organizations. Realistically, we can only do three.We should make sure in a SWOT analysis meeting that we select the Top Three opportunities that we should go after, and the Top Three threats that we need to deal with. Because we cannot focus on everything, we should then ignore the rest for the time being.From SWOT Analysis To Actionable ResultsAs in any other project management meeting, we should finish up our SWOT analysis by allocating responsibilities, milestones and deadlines for each of the three threats and opportunities.My approach to SWOT analyses may not be quite what we have all learned in business school. On the other hand, if we go through the approach to SWOT analyses that I have just laid out, then our SWOT analysis meetings will be much more productive, and they will actually produce focused and actionable results.
Article by Jim Butler

The Lodging Industry Investment Council's Top Ten: investment trends and challenges

JMBM - 1 June 2017
For well over a decade, the members of the hotel industry's preeminent think tank, "LIIC - The Lodging Industry Investment Council," are annually surveyed to develop a list of the major hotel investment opportunities and challenges for the coming year. This exhaustive survey results in the LIIC Top Ten; a highly regarded profile of investment sentiment and attitudes for the lodging industry for the forthcoming 12 months. Altogether, the members of LIIC represent direct acquisition and disposition control of well over $40 billion of lodging real estate.Members are highly active and have the pulse of the market, with 45% of LIIC hotel investors having successfully purchased a hotel in the last 12 months and an additional 16% having made offers but not been the winner. Moreover, 76% plan to sell a hotel over the next 24 months.The hospitality industry's most influential investors, lenders, corporate real estate executives, REIT's, public hotel companies, brokers and significant lodging equity sources are represented on the Council. LIIC serves as the leading industry think tank for the lodging business ( Cahill, LIIC co-chairman, produced this year's survey ( Mr. Cahill is CEO and Founder of HREC - Hospitality Real Estate Counselors, a leading international hotel and casino brokerage and advisory firm (16 offices nationwide) specializing in lodging property sales, debt financing, consulting, appraisals and litigation support ( Nate Shartar and Alexander Cammarata, Associates in HREC's Denver office, assisted throughout the process.2017 Top Ten LIIC Survey ResultsHotel Real Estate: Forecasting Clear Skies with Some Clouds and Slightly Cooling Temperatures: Overall, the 2017 LIIC Survey is more positive than 2016 and starkly different than the peak year survey in 2015. Responses reveal a calmness, compared with wide spread nervousness in April 2016. Chinese investment is expected (36%) to slow slightly and Brexit's impact on US hotels is considered slight. Private Equity followed by Listed REITs are predicted to dominate the purchase of Upscale to Luxury hotels; while, Regional Owner/Operators are projected to dominate the purchase of Economy to Upper Midscale hotels.Movement in the Hotel Real Estate Cycle?: Most investors (68%) believe we are still in the extra innings of the current cycle which began in 2009; however, an astute, highly intelligent minority (32%) believe we have begun a new cycle. Projections for the US economy are positive, with 60% forecasting GDP growth averaging greater than 2% over the next 24 months.Asset Pricing Bid/Ask Settles, Values Flat to Maybe Increasing: Over the next 12 months, 54% project that lodging real estate values will be flat in comparison to 2016. However, a sizable group (36%) forecast a slight increase in values (up to 5%). Favorite investment target, Upper Upscale lodging properties.2017's Greatest Threats to Hotel Investment?: The top three threats on the horizon:New Lodging Supply: 90% of LIIC members cited new hotel supply as the current and dominant top investment concern. Hypocritically, 81% are building new lodging assets.Increasing Interest Rates: With interest rates increasing gradually up to 100bps over the next 24 months, sellers need to understand the impact on asset pricing for hotels they are looking to sell.Government Mandated Minimum Wage Increases: Investors (28%; down from last year) are threatened by government mandated minimum wage increases and the corresponding impact on hotel operating costs (74% anticipate a gradual negative impact over the next five years).Hotel Transaction Market Continues Slight Cooling: 52% of responders forecast the total dollar volume of U.S. hotel transactions in calendar 2017 will be down relative to year-end 2016 and 22% believe volume will be flat. Similarly, 46% believe the number of assets sold to be down; while, 32% anticipate the number of assets sold to be flat.Hotel Debt Available, Yet Less Favorable: Hotel investors are "debt leery" causing 56% to seek refinancing of existing debt over the coming year even though 52% believe the optimum refinance window closed in the last six months. Owners have more concern with interest rate increases on senior debt than lender's available leverage percentages.Lodging Development Marches Along: Investor attitude stays positive on the concept of building new lodging properties. As to developing hotels, 66% of LIIC responds "yes, if you are selective about product and markets". Respondents are putting their money behind their votes, with 81% of relevant LIIC members having new hotels actively under development.Want to Buy a Hotel? Quantity and Quality: Quantity: 42% of investors believe that a "below average quantity" of hotels are available for purchase closely followed by 44% at "average quantity." Quality (desirability to purchase): 52% believe the quality is average and 28% suggest negatively "slightly worse than 2016".Markets NOT to Invest in?: LIIC members were asked which of the top 25 markets they "would not consider buying a hotel" in: Houston, TX (64%), Nashville, TN (32%), Detroit, MI (28%), New York, NY (28%), St. Louis, MO-IL (28%)Sleeper - where to buy? New Orleans! Not one vote against recorded.Marriott and Starwood Merger? If you own a Starwood branded hotel, 36% surprisingly believe the value of Starwood lodging investments have increased specifically due to the merger. On the other hand, the primary concern (22%) stressing hotel owners is decreasing negotiating leverage with Mega Marriott going forward.LIIC Bonus Questions:Looking forward, the "hotel investment illuminati" predict:Buyers paying package (5 or more hotels) premium? Maybe not anymore, 53% say no and 47% yes.Congrats to the 13% of LIIC members that last year predicted the Trump Presidential victory; interestingly, 44% now say the Trump Administration is positively affecting hotel ownership.When staying at a hotel on a multiple day business trip, LIIC's greatest "Pet Peeves" are (1) painfully slow internet, (2) uncomfortable bedding, and (3) noise (hallways, PTACs, and outside traffic). Other "Peeves" include paparazzi, breakfast not starting early enough, and the cost of items in the snack shop being too expensive.For additional information, please contact:LIIC - The Lodging Industry Investment Council Co-ChairmenMike Cahill, CEO & Founder, HREC: mcahill@hrec.comSean Hennessey, CEO, Lodging Investment Advisors: shennessey@lodgingadvisors.comJim Butler, Partner, JMBM - Jeffer Mangels Butler & Mitchell, LLP:
Article by David Lund

Hospitality Financial Leadership - Creating Property Performance Commentaries

The Hotel Financial Coach - 30 May 2017
Creating a great commentary for your owners and corporate is a monthly mainstay in almost every hotel. It can also be a large dose of drudgery. This article is about how you can create an effective system in your hotel to generate a strong and meaningful commentary based on information from all areas of your business. Creating this kind of information system in your hotel is a powerful tool. This commentary power tool can help you drive superior financial results if you approach it with the right spirit and a system to follow.Who invented this commentary and why? The need for a commentary exists because of the principle of full disclosure. Full disclosure is a basic principle in the business and accounting world. What the principle says is that the readers of the financial statements need to know all relevant information that did or may impact their investment or stake in the business. Readers of only the financial statements cannot ascertain many important facts from looking at just the numbers. They need a "footnote" or special report to round out the financial results and to explain many of the reported results and future forecasts. If a possible future event is going to have an impact on the business it needs to be disclosed. Some examples would be: pending litigation, environmental issues, labor relations, governmental regulations, management changes, competitive changes, business trends, business on the books, etc., the list is long. The footnotes give the readers of the financials the information they need to ultimately make the most informed decision about their investment and its future. We translate the full disclosure principle in hospitality and voila we have our monthly property performance commentary, or executive commentary and sometimes it's called an owners commentary.Hotels are complex departmentalized beasts that are all connected and also very separated. What's happening in sales has zero to do with the kitchen but the chef and his or her food have everything to do with image and the sales and marketing efforts. Good commentaries in hotels tell the various stakeholders what's going on and what's planned for the coming month, quarter and year. Much of the revenues for a hotel are booked in the month for the month. On the flip side of this, it's the group base and its performance that drives the financial results. This coupled with catering pace needs to be closely monitored and explained carefully and consistently in the commentaries. The expenditures and labor costs can often have big impacts on the financial results and explaining the reasons why they perform the way they do is critical. Many times, the commentary is used to explain what happened. The forecast was for a certain level of income and profit and it did not materialize. Revenues were soft and costs need to be explained. That's where the drudgery comes from. We need to turn this around and realize a commentary is a tool. If we use the tool properly we can see what happened and take the appropriate actions so we don't make the same mistakes again.So how do we get every part of our business to tell their story each month in a way that provides meaningful information and proactive business thinking leading to constant improvement?The answer is a three-prong approach. The first part is every line needs an owner. My mother always said, "Many hands make light work." I translate that into our business and out comes a powerful concept. We literally take the P&L apart and we assign an owner to every single line of revenue, the cost of goods, payroll, and expense. The second part is we make agreements with every corresponding manager that they will Forecast, Track, Adjust, Review and Write monthly about their lines. A financial communication system for them to follow called F TAR W. This clarity is magic in your business when you combine this accountability with consistent training, executive support and the right business management encouragement. The third part is designing and communicating the monthly financial circle. The circle and key dates are on a monthly schedule that the whole hotel falls into. This keeps everyone on track.I have a separate blog on the detailed F TAR W process. If you missed it send me an email and I will see that you get a copy.When managers sit down and plan their numbers in the form of the monthly forecast we teach them to zero base the numbers. This gives them the clarity they need to see, to comprehend and execute their part of the business. Knowing exactly how much revenues are forecasted and what expenses are in my lines is mission critical. Without this zero-based detailed plan, they are lost. Having details on how many fixed and variable positions I have in my department provides me the structure I need to manage my labor. Expense forecasts need to be comprehensive with detailed lists of what is needed, with itemized lists and costs for each corresponding GL account. We don't just take a cost percentage or a cost per room occupied or cover and run with it. That does not work. We need details. With the details, we can see what our options are when we have a business situation that dictates that we need savings this month in order to help meet our profit targets. We couple this with a culture that makes the numbers as important as the guests and the colleagues. This means we discuss numbers daily at our communication meetings in all departments and this gives the leaders the focus and attention that's necessary to manage their numbers. We work with our managers to ensure that they take the time that is necessary to properly work the numbers. We create the culture around the business piece and the leaders now have a system to follow and they love it. We know the numbers are just another aspect of our business that requires our constant and continuous attention. Having a team of leaders who all manage their own piece is the key to success with your hotels' operational financial health.Good commentaries tell a story about what happened in our hotel and why. What did we learn from the results and how are we using this new-found information moving forward to obtain a better result? That's the muscle we exercise every month in our hotel. We're not going to simply regurgitate the numbers and explain ratio variances. This would add zero value. If food cost is up, we explain why? If protein costs are the culprit we tell our readers what we're going to do to remedy the situation. If the room rate performed better in our group segment, we explain what happened to make the forecast too low or the actual result better. What was our lesson and how will we take that knowledge forward in our hotel? If labor was over forecast, we explain what happened and how we are managing differently as a result. If expenses were off because our planning was flawed we tell it like it is and most importantly, always, what did we learn. This discovery process in our business is the key to improving results. Knowing that this process is the way forward in our business is good news. We also know that this job will never be done. There will always be new challenges to manage and yes, the same old problems come back every once and while. That's the hotel business!Commentaries flow from each part of our business as line owners follow their financial communication system. The last part of F TAR W is Write. Write about your lines. Don't let someone else tell your story. What did I forecast, what materialized, what changes did I make based on business levels and what did I learn? What happened and why and, most importantly, what are we doing about it moving forward. What management decisions and changes will be brought about because of the previous performance. Every month the window opens and closes in our business and each month we get a new opportunity to perform. The mistake most hotels make is that they leave the money tasks to a few executives. This is not effective because the action happens on the ground in every area of my business. I want to align my business practices around the individuals that make the schedules and order the supplies. This alignment gives me the ability to affect the result directly.An effective monthly commentary gives the stakeholders a clear picture of what happened in the business and why. It also tells the readers what we will "manage" differently based on the results we achieved. There needn't be any drudgery if you have a system to follow and you build a management team that produces. Ultimately, you're in control of the result and you can own this process by investing in financial leadership training and development with your leaders. This development will not happen by itself. It requires your attention, just like guest service and colleague engagement.Serve your leaders by creating financial leadership in your business and watch your profits soar. Serve your team and watch their engagement grow.Visit my website today for a copy of my guidebookThe Seven Secrets to Create a Financially Engaged Leadership Team in Your

Keeping Your Hotel's Landscape Healthy and Safe on a Budget

Hotel Business Review by - 29 May 2017
Your hotel's landscape is responsible for making a first impression with your guests. Your landscape should be a reflection of your hotel's brand and should clearly demonstrate to your customers the type of experience you hope your property will deliver-relaxing, comfortable, safe, and fun. In other words, dedicating financial resources to landscaping and grounds keeping are more than worthwhile from an ROI perspective. Nevertheless, as any hotel executive knows, unforeseen circumstances often require difficult budget decisions. If you are forced to dedicate less budget and resources to your landscaping, follow these best practices to ensure that your landscape's health, aesthetics, and safety do not suffer.

Talk about agreements, not expectations

The Hotel Financial Coach - 29 May 2017
In our culture, it sadly does have that connotation, and what we need to realize is that expectations are weak, cowardly and completely ineffective when dealing with other people--especially when we want to get real work done and build strong relationships. Yet we cast these expectations everywhere and let others have these diseased spells over us and its largely because we don't know there is an alternative.If I have a complaint in my world, it quickly becomes an expectation that someone needs to fix, and I tend to obsess over the injustice, and in doing so, I create my expectations. What we need to see is that this is completely ineffective for getting things to change. Complaints are very easy to ignore and diminish; however, requests on the other hand, are not easy to ignore. Once we have made a request, we're heading in the right direction because on the other side of a request we now have the ability to make an agreement.Let's take a hotel example. Currently I am having a very hard time getting the other managers to prepare their monthly forecast in its detail and to get it to me by the 30th of the month. I typically send a schedule and reminders. I speak at the department head meeting about the deadline, but I still don't get a high success rate on their submissions.It's always a struggle to get other's to do what I "expect." Without the forecast, I'm left with two very unattractive options: do it myself, or go without it. Both options mean I am being shortchanged because you're not living up to my expectation and I have two alternatives. I can complain about it which, by the way, I have been doing for years without any results, or I can make a "request" of you. This is the pivot point. If I am willing to see that my current status is an expectation and it is weak, I can bring myself to ask you, to make a request of you. It might go something like this:"Peter, can you help me? I want to include your numbers, not mine, as part of the detailed forecast and I'm requesting that you complete your part and get it to me by noon on the 30th. Can you do that?"Now it's not easy for Peter to say, "Sure no problem." He now sees what you're asking for in a different light and he might say. "I could but that means I'm going to have to rearrange my week and my assistant is on holiday and our second office computer is dead."This is what you want to hear. This is the foundation of an agreement as you have now both asked for something. It's no longer the case of you having a single expectation, now we have multiple issues in the air, yours and his, and this is the way to go. Turn the complaint into a request, and turn the request into an agreement."OK, so I will send our systems person to your office today to switch out your second computer, and I'm not sure what I can do to help you rearrange your week," to which Peter replies, "No worries. With the computer replaced, I can manage and I will get you my forecast by the 30th."What just happened here? 1. I changed my language up front from a tired self-centered expectation into a request. 2. Peter asked for my help to complete and meet my request. 3. I committed to acting to help him with the computer. 4. He in turn was positive in his response to meet my request.The above exchange is the foundation of an agreement and upon examination, we can see it passes the test to be an agreement because it has four parts, two for me and two for Peter.The test is "get and give." If an agreement is really an agreement it must have these parts; a get and give for each of us. In this example, Peter gets his computer fixed and he gives me information on time. I give him the resources to fix his computer and I get his report on time. Before the request and the agreement, it was just me and my ask. I wasn't giving anything, and I had an expectation of Peter and no agreement. Now, I can be pretty sure some of you who are reading this are saying to yourself, "I'm the boss and people need to do as I say," "I don't have time to make agreements with everyone."Maybe that's partly true, but know this: Your people are quietly thumbing their nose at you and your expectations. What you need to do if you want commitment, is to drop your expectations and start making agreements. Take the time to make these agreements and find out what you can do to help the people you work with. This will change your world. It all starts with you and the ask; without it you will not have an agreement. Find out how you can help the people you work with and they will be more than happy to reciprocate. If it's all about you and what you want, then all I have to say to you is, "good luck."
Article by David Lund

Maximizing opportunity - Any Monkey Could

The Hotel Financial Coach - 28 May 2017
He would say this to our director of sales quite often, not only to ridicule their efforts but to remind them that the business is there it's really about maximizing the opportunity and knowing that this telephone ringing condition will not last, it never does. So, what are we doing, and what's the plan to siege the day?This is the tale of any and every hotel. "The rising tide lifts all the boats." This quote was made famous by JFK and it is said that he got it from the chamber of commerce in a small New England town, probably a resort town. The relationship from this idea to your financial leadership is one of opportunity. We all know that when we have a good month, season or year we know it's because the business was there. It all starts with that. Without the business being there and coming in like spades we are sunk. The reality in that statement is true but we also need to see that we can have a much bigger impact when we have a high tide.We seldom examine the excellent results for ways to improve. Why would we bother to do that? We just had a record year, double digit RevPAR increase and profits are off the charts. All indications point to the fact that we are doing an excellent job. But we also know deep in our sole that the volume hides a multitude of sins. The opportunity in all of this is to step back and look to see what these sins are and how we can correct them when business is good. We seldom or never do this exercise when it's actually the best time to do it. Imagine doing a staffing review in the middle of the best year we have ever had? That's right, doing the staffing review on a full tide will yield much more treasure. In addition to finding more opportunities you will see that finding the money to do this is much easier when times are good. Why wait for headwinds in your business and your pesky asset manager telling you its time? The same is also true for an expense review. Looking at your spending when you're spending the most will uncover the biggest opportunities. There is a reverse psychology that appears when you do things that all others miss. People are much more willing to adjust and change when times are good. Try and do this when your business is in the tank and you will meet resistance and bad moral. The same needs to be said for looking at ways to increase revenues, do this when business is strong and you will have more creativity and certainty. Being the leader that always looks for the opportunities to grow especially when all others look away is the greatest use of your talent.There is quote by Earl Nightingale, it goes like this, "enter a market and observe what everyone is doing and do the opposite" To sum this up, look at what everyone else is doing in business and especially when business is strong and find the opposite, do that, siege the opportunity. Creating the kind of culture inside your business and inside the hearts and minds of your team will have a spillover effect. Any monkey can follow the crowd, it's the clever chimp that knows there are more opportunities when the house is full.

Small Business Success - Easy Tips That Will Help You Succeed

Savvy IQ - 26 May 2017
One of the most effective ways to get your business off the ground is to do what is called networking. Sounds simple, but often neglected.Showing off your business, the uniqueness of you product or service to other people, you have to learn how to do it in a way that conveys integrity, yet in a laid-back confident way. You simply need to talk to people, and not push them, as you try advertise your business. With such a push on social media, networking is becoming far easier. I am amazed how little people actually use forums such as LinkedIn to network for business purposes. I personally use LinkedIn as my network connection to people for my consulting business, Savvy IQ.In many cases, someone will be genuinely grateful to learn about your business if you can offer a product or service that they've been seeking. Once you understand that the people are interested in what you are talking about, you can tell them more about your services or products. To be a good networker, you have to learn to be sensitive about knowing when is and isn't a good time to promote your business.Success in any business begins with following the strategies of those that have gone before us and already succeeded. If you read blogs or social media posts where business strategies similar to your own are being discussed, you can learn a great deal. Even better, find out where these people are and meet them at a conference or event. Some of these people may mentor you, but some of them will not; it is your job to take the information that you can get and apply it to your business. With the internet, it's not hard to at least develop online relationships with successful entrepreneurs. To get free advice from an online guru, the easiest way to drain their brain is to buy a product from them and then fire away with questions. It is best to be prepared to ask questions that are meaningful, opposed to ones that you should actually already know the answer to.If you are able to be consistent and focused when running your business, you should do very well. You need to learn how to prioritize the things you need to get done everyday and stop waiting. It is typical for the average worker to waste a lot of time using social media these days for personal use, why not maximise this to network with customers. Once you start running your own business, you will see how your priorities begin to change, and how you will take responsibility for every one of your decisions and actions. If you fail to produce, or reach your daily goals, the only person you are hurting is yourself by your lack of motivation and commitment. It is important to get your priorities straight, and accomplish what needs to be done initially before moving down the list.Whatever your small business may be, try to market it in any way possible to make it profitable. Your business will steadily grow as long as your customers are happy and you market your business both online and off-line.

Paying the intermediaries: A look at hotel commissions Featured Articles - 25 May 2017
The increasing incidence of intermediaries selling hotel rooms and other services is a major topic of discussion among U.S. hotel owners and operators. From online travel agents to convention housing companies, third-parties are placing themselves in between hotels and their guests during the sales process. Of course, these intermediaries want to get paid, and therefore this has become a rising expense for hoteliers.
Article by Phil Butler

Startup Focus: Themis Anthrakopoulos, Founder of HotelMate

Pamil Visions PR - 24 May 2017
A few weeks back I researched and reported on a group of new startups with great potential for my Huff Post blog. One of those startups, a new booking channel and platform called HotelMate really interested me. The idea of an auxiliary booking channel wrapped around a commission free promise reminded me of Magnuson Hotels' Global Hotel Exchange offering from some years back. But where Global Hotel Exchange ran into rough waters getting hotels to commit, HotelMate is not so much of a so-called "OTA killer" as it is an added revenue tweak. And therein lies the potential success metric for the startup.I contacted the startup's founder and CEO Themis Anthrakopoulos, in order to learn more about how his innovative ideas differ from other revenue opportunities out there. From the interview, and from my own understanding of HotelMate, it is not hard to see the potential Anthrakopoulos is keying on. Where most hotels fail to truly optimize the vast network of hospitality employees as a market segment, HotelMate helps create a loyalty group based on employees and their families. The Lausanne startup aims to, Anthrakopoulos points out in the interview below, "create a collaborative and participatory hotel industry culture".Phil Butler: How is the HotelMate alternative booking and revenue channel different from conventional OTAs?Themis Anthrakopoulos: HotelMate is designed to reduce distribution costs for hotels, while increasing their occupancy. Considering that the position of OTAs is growing more and more controversial regarding the tools they use to drive bookings (higher commission percentages in exchange for higher hotel rankings in OTAs pages), hoteliers should at least avoid outsourcing their internal market segments, to already established OTA channels & drive the revenue and visibility within hotel industry.Phil Butler: Why do you think other OTAs or even big chains themselves have never attempted to create such a platform?Themis Anthrakopoulos: For OTAs it would be really difficult to provide such a business model since they focus on creating revenue through high commissions, while at HotelMate we focus mainly on increasing occupancy first at hotels and rewarding hotel associates and that's evident enough through our pricing model.On the other hand big hotel chains, have actually incorporated a business model for their own employees only though. Major hotel chains consider their employees a market segment large enough, to avoid outsourcing their bookings to well established OTAs, while the rest of hotel industry does nothing about this.The majority of hotels though, still end up paying high commissions to OTAs, for receiving reservations by fellow hotel employees, through their distribution channels. You see, for big hotel chains, this is an obvious win -- win situation. By offering room rates discounts to their employees not only they motivate and reward them, but they also use it as a way to fill their rooms especially during low occupancy periods.Phil Butler: How will HotelMate monetize since it is a commission free channel?Themis Anthrakopoulos: Instead of imposing high commission fees, we ask our member hotels to offer at least 10% discount on their lowest online rates as displayed on other commission based OTAs, applicable to registered hotel employees and under conditions to their families and friends. Member hotels can choose from, either a subscription fee of 99 EUR / year without any commission costs, or a flat fee of 10 EUR / reservation with no up-front costs.Phil Butler: Do you see the platform growing into something more similar to an OTA in the future?Themis Anthrakopoulos: We have no intentions to become another OTA. With HotelMate our goal is to enable the development of a collaborative and participatory hotel industry culture. One that drives employee engagement, improves morale and reflects reward. Hotels should reflect & define what their industry values are and build a system around rewarding good customer service, which will only improve perception & awareness for the hotel industry as a whole.Phil Butler: Can you tell us about early adopters of your system? What are the early prospects?Themis Anthrakopoulos: Even though all these issues are quite obvious, there hasn't been a collective reaction to any of these issues and therefore we still struggling to take off. While we have some early adopters from Europe mainly, we strive to bring awareness to the hotel industry. For that to happen, hotels need to acknowledge that each Online Travel Agency and Meta-Search site and Vacation rental site, represents a formidable marketplace with a large amount of inventory, offering a wide range of accommodation options to potential guests.So, when an Online Travel Agency grows in power, it's power and influence grows over the whole hotel industry and not just over a single hotel. In the long run therefore, the risk is clear that it may become obsolete for any hotel to have a distinguished online marketing presence, such as its own website. OTAs know that and their future strategy depends on that. It's about time hotels set the agenda and realise how inherently dangerous the status quo is to their future.

Unique challenges of asset management from within Featured Articles - 24 May 2017
The evolution of asset management within the hospitality space is a phenomenon that seemingly happened overnight. In academia, new asset management fields and degrees are popping up all the time. Asset management professionals have become an increasingly important part of the investment process, and traditional operators and brands are adding asset managers to their payrolls. My own career moved from portfolio management to finance to asset management as the needs of my employers changed. This is hardly a unique experience in today’s world.

Suitable seating laws: Do not read while standing Featured Articles - 23 May 2017
A recent court ruling regarding employers’ obligations to provide suitable seating for their workers has implications for the hotel industry. Picture this: a grand and bustling hotel lobby bathed in light, impeccably designed and furnished with beautiful seating areas where guests lounge and enjoy. Adjacent to the stunning lobby, and just steps from the hotel’s entrance, is the busy front desk, staffed by attentive, smartly dressed employees answering questions, checking guests into rooms and otherwise accommodating all those who approach them. Noticeably absent from anywhere behind the front desk, however, is a place for these employees to sit. And while it is no surprise that the hotel staff is not provided with plush chairs and couches like those adorning the lobby, the lack of suitable seating could raise red flags given the California Supreme Court’s relatively recent clarification of the issue in Kilby v CVS Pharmacy. That lawsuit, brought on behalf of pharmacy cashiers and bank tellers, alleged that CVS violated certain California wage orders issued by the California Industrial Welfare Commission. Nature of workThe court in that case interpreted the wage orders, which typically require that “all working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats.” In doing so, the court created potential exposure to class-action litigation and Private Attorney General Act claims against employers, including those in the hotel and resort industry.
Article by David Lund

Hospitality Financial Leadership - Share the Financials in Your Hotel or NOT

The Hotel Financial Coach - 23 May 2017
If you're in the camp that says we don't share, I ask you to think about what holds you back from sharing. Is there really a policy in your company that states the sharing of financial information is prohibited? I'm pretty sure those are few and far between. The way it usually goes down is something this. That's just what we do, we have always done it this way or the last guy or gal didn't either. I am willing to bet that most of your reading this could make the decision to share the financials with your department managers if you had a plan as to what would be accomplished if you did share. That's an exciting prospect. Changing the way, you manage and introducing a new process to generate a different result.The financial statements serve two purposes in your business. One, they are the vehicle we use to keep score. It's that simple, a way to keep score for the game we call the hotel business. How is your business prospering or not is revealed by the numbers in your statements? A quick look by someone who knows how to read the statement will reveal your truth. I know many hoteliers don't share because they are embarrassed by the lack of prosperity they are experiencing and the very thought of sharing this with their managers is too much to take. In our culture money has immense power. If we subscribe to this notion the power, we`re giving the money in our business is negative. It holds us down and keeps us from really wrapping our arms around our business and getting the results we know are possible. "But what will people think of me", "surely, they will think I'm incompetent", these are some of the fears we have. I often hear it's the owner that does not want the financials distributed. I also here its policy not to share and the reason is we want the managers and department leaders to look after the guests and their colleagues. No matter what the excuse or reason I always say the same thing in response to my inquiry about sharing the results. I say, "do you think you could achieve a better financial result if your leaders and managers knew what was happening financially?" Inevitably I get a deer in the headlights response of yes, but......The second purpose for the financial statements in your business is to help you to create plans and actions to improve the results moving forward. Really that's the BIGGEST and HIGHEST purpose of the financial statements for your business. Tell me how I'm doing, what's the score and drum roll here......It is What can I do to improve the results! Your financials point the way to possible improvements. If we don't know what's wrong with our patient, then prescribing a cure is beyond anyone's ability. A close review of your financial statements will reveal exactly what is wrong with your business. When we look at ways to improve our business we naturally want the maximum buy-in from our managers and leaders to help pull it off. Well, let's think for a moment and ask yourself how could I get my managers to really own the action going forward. How can I get the team as engaged as possible financially? The biggest part of the answer is to share the financial results with your leaders and involve them in the formulation of the profit improvement plans. This really is not a new thought or a leading edge new age strategy. This idea to get your managers to buy into the ideas for improvement by involving them in creating the ideas by sharing the financials is as old as the hills. Here is the kicker. If you won't share or believe you can't share the financials the buy-in and accountability you desire will NEVER HAPPEN. That's right, no matter what else you do if the managers and leaders of your hotel don't have financial statement information they will not step up. Why may you be asking is this the case? It's simple, you cannot expect someone to create a result that is better than the current result if he or she don't know what that result is or what the new one should look like. They are in the dark without any way of navigating and they have no destination to navigate too.Your leaders want to make a difference in what they do in the lives, at work, and at home. All of us have a basic human need to make a difference. Your managers what to have a greater impact on your business results. They also what to know the score, the scoop. They want their seat at the captain's table. They want to be on the inside track. They also want you to treat them like adults. For you to share the financial results and ask for their participation is an incredibly powerful gesture. It also needs to be presented properly with just the right amount of humility and vulnerability. Yes, vulnerability. When you share your results your opening up a part of you that they know is sensitive and personal. Money in our society has such incredible power and by showing your financial results you create equity with your leaders. Manage this process carefully and you can turn your financial world around. Educate your leaders on the financials. Show them how it works and what it all means and watch them get excited. Financial leadership skills are incredibly valuable assets for your managers to create. With these skills, they are highly marketable in our industry. These skills cannot be picked up at school, or from a textbook. The only place you can learn how to manage the P&L and your department is on the job. The only person in your business that has the capacity and capability to create these financial leadership skills with your managers is you. Do you remember what it was like when you were younger and someone took you under his or her wing, guided and mentored you? This is the same opportunity you have to create that priceless relationship with them. Do this for your leaders and they will move mountains for you and your business. And don't worry about your managers taking these new skills and running to the competition. By the very fact that you have served them and created greater prosperity for your managers means their commitment to you is at its highest level.Serve your leaders by sharing the financials. Serve your manager by training them on how the financials work. Serve your team by asking them to participate financially and ultimately to create their own forecasts and budgets. Serve by creating financial leadership in your business and watch your profits soar. Serve your team and watch their engagement grow.Visit my website today for a copy of my guidebookThe Seven Secrets to Create a Financially Engaged Leadership Team in Your

Adaptive Reuse, a Strategic and Sustainable Way to Penetrate New Markets

Hotel Business Review by - 22 May 2017
One of these overlooked strategies is also one of the most effective "green design" measures: the adaptive reuse of existing structures. And when we say "effective" in the context of sustainability, we mean that the strategy increases what green hospitality experts call the "triple bottom line"-that is, the notion that sustainability is good for people, the planet, and profit as well. Done strategically, adaptive reuse of older buildings-some of which may be local landmarks-contributes more fundamentally to our clients' sustainability goals and overall success than many other sustainability methods and campaigns combined.

Nine Green Must-Dos to Place Your Hotel Ahead of the Curve

Hotel Business Review by - 22 May 2017
Greenbuild was a pioneer in adapting the "supply chain evaluation" to hotels, because we all know the more you just ask the question, the more hotels start saying customers are asking for green. And embedding in the contract language also pioneered the "comply-or-explain" approach to sustainability, which at a corporate level is now a major global trend across stock exchanges and government regulators today for disclosing environmental, social, and governance performance. The premise is that although technically you're not required to communicate your efforts and programs, you'll have to tell the world why you're not, and everyone can see whether your peers are besting you. I saw this work in practice during those Toronto hotel walk throughs.
Article by Robert Mandelbaum

Paying the Intermediaries: An Analysis of Hotel Commissions

CBRE Hotels - 19 May 2017
Per the Uniform System of Accounts for the Lodging Industry (USALI), payments to intermediaries are classified as commissions. In recognition of the rise in intermediaries, the 11th edition of the USALI stipulates two commission expense categories within the rooms department; one for commissions paid for the booking of transient business, and one for commissions paid for the booking of group business. The commissions paid within the rooms department cover sales made for not only guest room rentals, but for any other ancillary revenue associated with those guests. If, however, an intermediary secures business solely for the benefit of the food and beverage department (i.e. local catering business without guest room rentals), then the commission payment is recorded within the food and beverage department.Not included in the rooms department commission expense category are payments made to agents for the rental of commercial space within a hotel. These commission payments are recorded as professional fees within the administrative and general department.In recognition of the rise in intermediaries, CBRE Hotels' Americas Research began to track commission payments within the rooms department starting in 2015. Our firm's Trends(r) in the Hotel Industry database captures the combined commissions paid for both transient and group business. The following paragraphs summarize the magnitude of rooms department commission payments in 2015 for U.S. hotels.A Significant ExpenseOn average, commission payments are the second largest expense within the rooms department, behind labor costs. This ranking does vary by property type. At limited-service and extended-stay hotels, the cost of providing complimentary meals exceeds commission payments. At resort properties, more money is spent on the laundry, linen, and supplies provided in the guest rooms.Measured as a percent of revenue, commission payments averaged 3.0 percent of total rooms revenue in 2015. Unfortunately the metric we do not have access to is the percentage of rooms revenue subject to a commission payment. Therefore, we are unable to calculate the average commission rate charged by travel agents and other intermediaries.Commissions calculated as a percent of rooms revenue were greatest at convention hotels (4.5%). This confirms the increased use of housing companies and other agencies by meeting planners. Historically, hotels would deal directly with the meeting planner, and for the most part not have to pay a commission.Commissions paid as a percent of rooms revenue were lowest at extended-stay properties (2.1%). In this segment, it appears that hotel sales managers are still able to deal directly with the corporate travel executives booking the long-term stays. Given recent trends in the convention segment, extended-stay hotel owners and operators should monitor intermediary activity in their segment going forward. The Dollar AmountBecause of the differences in room rates, the dollar value of the commission paid by a hotel is influenced by the average daily rate (ADR). Therefore, it is not surprising that commission payments measured on a dollar per occupied room (POR) basis tend to follow the ADRs achieved by the various property types and chain-scales.In 2015, convention hotels recorded the highest commission POR payments among all the property types ($8.14), followed by resort hotels ($6.22). When analyzing commissions POR by chain-scale, luxury properties paid the most ($10.25). Not only do luxury hotels and resorts achieve high ADRs, their guests are most likely to use the services of a travel agent.At the low end of commission POR payments are extended-stay ($2.13) and limited-service ($3.35) properties. These hotels achieve relatively low ADRs, and their guests may not be using intermediaries as much as other travelers.Looking ForwardIn an effort to measure the impact of intermediaries on the financial performance of hotels, the American Hotel and Lodging Association's Consumer Innovation Forum is working with several hotel franchising, ownership and management companies to establish metrics that measure the "total acquisition cost" of hotel revenue. Commissions are just one component of this equation. Other components include reservation fees, marketing costs, and other expense incurred to secure revenue.At CBRE, going forward we will be able to monitor annual changes in the commissions paid to intermediaries. This will shed some light on the ability of hotels to control this cost by negotiating more favorable contracts with the intermediaries, or increasing the frequency of guests booking directly with the hotel.tO purchase a copy of Trends(r) in the Hotel Industry, please visit, or call (855) 223-1200. This article was published in the April 2017 edition of Lodging.

Hotel Strategic Planning a Must

Savvy IQ - 18 May 2017
For the property that we are consulting for, the F&B layout, design and functionality has come purely from the interior designers that were appointed for the project; which have put together concepts and designs with an approach as to what will possibly look nice in a hotel and not what the market would need or what would be functional for the space. The concept idea has come form the investor of the property, from inspiration of a venue that he frequents in London often. However, there has not been any level of involvement from someone with operational hospitality experience or advice from someone in the industry; which in my experience is typical in many hotel F&B concept development phases. This then leads to the evident lack of planning and strategy.I have posted many articles on concept development and how a restaurant idea can come to fruition; In my experience, and one point I make over and over, is that a concept must begin from a menu. The menu defines the decor, ambience, pricing, service style and so on. If for example you decide on creating and Italian concept. The question I ask is: what type of Italian? Is it a Gelataria, Pizzeria, Osteria, Enoteca, Ristorante or a cafe? The differences with the type of offering will change the decor. You wont see a Gelataria with table cloths and candles set, and you wont see a Ristorante with counter service alone. I know these maybe slightly exaggerated, however the point that I am trying to make is that an operational hospitality professional should dictate the menu and concept direction, before a designer is even involved. Taking into consideration some of my previous posts on concept development, the next important piece of information I would like to share is the need of strategic planning, which leads me to writing this post.Strategic planning provides the roadmap for your hotel to move forward toward the achievement of the goals and objectives set, and ultimately, the mission and vision that you should have of developed (see the post 'A Restaurants Business Plan' December 29, 2015, Pavlos Sarlas). To be effective, strategic planning must encompass all levels of your hotel with involvement from as many as possible and practicable. In addition, coordination of plans between departments, divisions and the hotel as a whole is a best practice in achieving success.How its definedStrategic planning is the process of developing a plan, guideline or roadmap for your hotel, which is based on its mission, vision, values and stated goals and objectives, which indicates the specific strategies and tactics or actions that will be taken to achieve these goals.Strategic planning should guide the efforts of the entire hotel; however, it is not unusual for more than one strategic plan to be in place; an overall hotel plan, for instance, that drives the development and implementation of other related plans that might include marketing plans, HR plans, finance plans or department-specific plan.The importance of planningThe importance of strategic planning at all levels is twofold: first it puts a stake in the ground in terms of what the hotel is hoping to achieve and second, it serves as a guide for employees to direct their activities and resources (time and money) toward goals and objectives that have been considered and adopted by the organization as a whole.The challenges to strategic planningPerhaps the greatest challenge of strategic planning is the actual execution of the plan. So often, ideas are put down on paper, yet the deliverables are not achieved. In the instance of the hotel that I previously mentioned, there challenge comes form having many people with great ideas, but limited people to execute, delegate, document and follow up.Much time is spent creating the plan, often with numerous meetings and sometimes with the help of external resources, such as consultants or facilitators. But, once the plan is completed, hotels often face difficulties in moving forward with the elements of the plan. This can occur for a number of reasons: employees at all levels were not sufficiently involved or engaged in the plan's development, clear accountability is not established or there is no regular follow up on plan progress.Implementing best practicesHotels can increase their ability to execute their strategic plan by following a number of best practices. These include: identifying an individual who will be responsible for ensuring the plan's implementation, conducting regular updates on plan progress and clearly identifying accountability for each element of the plan's action plans. In addition, many hotels are part of a bigger group which can utilize best practices from other sister hotels. For the more boutique hotels, such as the one mentioned in my post, best practices can be seen from the competitor hotels or other successful global properties that you can learn from.The measure of successMeasures of plan success ultimately reflect accomplishment of the goals and objectives identified in the plan. Importantly, these goals and objectives must be meaningful and measurable. A goal of "increase sales," for instance, is not specific enough to determine whether it has been effectively met. A goal of "increase sales by 10 percent in the next six months" is a goal that two individuals can review and evaluate. This should be relevant to the whole strategy, both the overall hotel strategy and then the more micro strategies in each department.From an F&B side the strategy should even be broken down to an outlet level and and then an individual front of house and back of house plan, where the measures would include payroll costs, food costs, beverage costs, and average check increases through upselling or cover count per hour increases through marketing as an example.The importance of strategic planning at early stage is critical to the success of any hotel.
Article by David Lund

Hospitality Financial Leadership - Welcoming Imperfection

The Hotel Financial Coach - 16 May 2017
To maximize your effectiveness with your leadership team around the money you would be well advised to accept the fact that it's an endless exercise. We must see that the idea of mastering the numbers is elusive. This imperfect reality is comforting and seeing the challenge we have as just another endless mountain to climb is very healthy.It's critical to always remember when we do a budget or forecast for our hotel or our department that the only thing we know for certain is it's wrong. Yes, wrong, it will never be right. Why then do we go through such an exercise if we know it's wrong? The answer is obvious; we want a system that produces information about where our business is going so we can manage accordingly. We confuse this with the misguided idea that my numbers need to be right.The fact that we will never master the numbers in our business is oddly enough in great company. Introducing the money's two sisters; we have guest service and colleague engagement. These three pillars operate in the same fashion. We confuse money and its absolute qualities with the real task at hand, creating a business plan in which we can communicate and achieve a superior financial result. Having and executing the business plan in all departments is the key. Knowing that the various parts of the plan have been created by the leaders inside each department means we know the resources we have to execute our mission relative to our projected sales. With the plan in hand, they can take their shot. That's exactly what we want them to do. Know the target, take the shot. Hit or miss, just take the shot.Guest service is a constant, never ending battle in our hotels. We accept the fact that it will never be mastered. There will always be challenges; training, standards, new colleagues, technology glitches, communication issues, guest expectations, business volumes, staffing challenges, value for money. I could fill the page with the endless demands that are part of creating and delivering guest service. The important aspect of these confronting circumstances is that we accept this reality. Knowing the job will never be mastered keeps us in the hunt, on our game. Hospitality and service are not an absolute, it's not a science. There is an endless list of ingredients and conditions that produce a different result every time. That's our business and we accept the challenge and meet it head on and perform. Knowing there will be new challenges tomorrow keeps us excited to see what shows up. It's comparable to playing a team sport where we get a chance to win every day. Even if we win our performance is full of areas we could have executed better. Somehow, we come back the next day and play again knowing were going to face yet another set of challenging circumstances with service. This captures the very essence of our business and it helps explain the addiction we all have to the hotel business and service.Colleague engagement is the never-ending practice of building a team to take on the challenges of our business. Creating and maintaining an engaged team in your hotel is the building block that allows the service the highest probability of being consistently delivered. We know that the creation and maintenance of engagement will never be complete. We will be forever charged with the task of creating and maintain engagement with our colleagues and leaders. The important thing to always remember and accept is the job will never be done. There will always be; turnover, lack of turnover, staffing level challenges, business volumes, resource issues, communication issues, last minute changes. I could once again fill this page and so could you with all the engagement challenges we have. What's most important is we accept the fact that the engagement job is never done. We don't give up and we fight every day to improve the landscape and win. That's a tough pill to swallow especially if you still have some rose color in your glasses. Knowing what our business is all about is knowing the game will never be mastered. For some of our leaders, this is the obstacle that stops their career. Who would want to work in an environment that resembles ground hog day? The same old served up day after day, the same challenges. Moving the needle in the right direction is the reward, building the team and their engagement is the reward.So how do these two sisters relate to the money, how do they correspond to the financial leadership inside your hotel?The money is "exactly" the same. The money piece will never be mastered in your hotel. As I stated earlier, the only thing we know about our forecasts and budgets is the fact that they're wrong from the getgo. Somehow, we have it all wrong in our thinking around the numbers. We naively believe we are entitled to get it right. Like it's grade 10 math with an absolute answer for each problem. With grade 10 math it's either right or wrong, we get a check mark or an x. That is where we confuse math with business planning. This confusion stops many of you in your tracks when it comes to playing; the money, the monthly forecast and annual budget game in your hotel. The whole idea behind creating financial leadership in your hotel is not to get the answer right. It's to produce; more operational questions, better financial communication with you leaders, higher engagement with their numbers and ultimately a strategy to more effectively manage your business. Like service and engagement, we are going to drop the ball from time to time. When we do we need to realize it's part of the deal and it's an opportunity to learn what went wrong. The error leads to a better result next time. If we can see this, we now have the numbers working for us. They now give us clues about our business we could not see before. That's the real purpose for the numbers, they point us in a direction. If we don't write a plan and then execute we have no comparative. Without the comparison, we are lost. "Without a map, any road will take you where you want to go". Far too often we use the result in our business to make someone wrong. Rather, we should be looking at the financial communication system and strengthening it."I've missed more than 9000 shots in my career. I've lost almost 300 games. 26 times, I've been trusted to take the game-winning shot and missed. I've failed over and over and over again in my life. And that is why I succeed. Talent wins games, but teamwork and intelligence win championships. I can accept failure, everyone fails at something. But I can't accept not trying." - Michael JordanThis quote by basketball's greatest player ever sums it up quite well. In your hotel, you have a chance to take a shot with every leader every month. Buy "not trying" in your hotel means you have no monthly departmental business plans. Each department is on the sidelines and they are not taking a shot, their shot. They are not taking a shot at getting better. They are missing their opportunity to fail and learn. Get them to complete their forecast, track their results, adjust their spending, review their monthly financial results, write their commentary. F TAR W. Practice and learn, that's what you do and above all else, you create an environment where it's safe for your leaders to take their shot and ultimately miss it. And then you encourage them to take another shot, learn and know that failing is the way to win. The financial game in your hotel will never, ever, ever, ever.......repeat "ever"300 times, be done, won or mastered. Accepting this reality with the financials and working with all departmental leaders to create teamwork and intelligence with the numbers is the ultimate way to succeed. You have the ability to create a financially engaged leadership team in your hotel. Just get everyone on the court and take a shot. Learn and take another shot. Just don't stop.I am going to wrap this one up with a great quote from Henry Ford. "Whether you think you can, or you think you can't--you're right."Financial leadership in your hotel is something that you can create and it's also true that it won't happen if you don't think you can. The right mindset is a powerful thing.Visit my website today for a copy of my guidebook: The Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotel

Purchase Price Allocations for Hospitality Assets

HVS - 11 May 2017
Introduction to Purchase Price AllocationsAs the name implies, the objective of a purchase price allocation is to allocate the purchase price of an asset to its component parts. Unlike a cost-segregation study, which allocates cost for tax purposes, PPAs allocate fair value for financial reporting purposes. More specifically, PPAs are performed for companies complying with Accounting Standards Codification Topic 805, Business Combinations (ASC 805) under US GAAP. Unlike appraisals for financing purposes, which are governed by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), PPAs are performed in accordance with the Accounting Standards Codification (ASC) promulgated by The Financial Accounting Standards Board (FASB); therefore, PPAs have intended uses and intended users that are distinct from financing appraisals.The fundamental objective of a PPA is to allocate the entity's purchase price to its tangible and intangible components for US GAAP basis reporting (not income tax reporting). The acquiring company will use the PPA to place the acquired assets on their US GAAP basis fixed asset register and balance sheet. With the exception of land, which does not depreciate, the allocated tangible and intangible asset values will serve as the basis of the assets' depreciation schedules for US GAAP reporting.Before the allocation can begin, the appraisers must determine whether the purchase price is consistent with fair value. If the purchase price is below the entity's fair value, then the sale is classified as a "bargain purchase," which FASB describes as an unusual and infrequent event. Assuming that the purchase price is consistent with fair value, the next step is to determine the fair value of each of the entity's tangible and intangible components.The Finer PointsFor some hotels, the purchase price can simply be allocated to tangible assets, such as land, personal property, and real property improvements. These assets can be valued using the sales comparison approach, income capitalization approach, and cost approach, as applicable. Land can be valued using the sales comparison approach or ground-rent capitalization approach, depending on market norms. Due to a dearth of comparable "dark" hotel sales, the real property improvement value is often ascribed based upon the depreciated replacement cost new (DRCN). Likewise, the personal property is often valued using the DCRN.For more complex hospitality assets, additional tangible or intangible asset (or liability) allocations may be necessary. These additional assets and liabilities might include in-place leases, favorable/unfavorable leases, advanced bookings, assumed debt, and goodwill.If a portion of a hotel is leased to third party, such as a restaurant or retail shop, that agreement should be analyzed. Lease agreements can create an asset, in the case of an above-market lease rate, or a liability, in the case of a below-market lease rate. Additionally, a lease that is in place at the time of the acquisition can have an intangible value to the buyer because that space produces a cash flow immediately, and there is no loss of rent or expense reimbursements while a tenant is found. Unamortized leasing commissions and tenant improvement allowances associated with tenant leases should also be analyzed. Additionally, if the hotel is situated on a ground lease, that lease agreement must be analyzed to determine if it is favorable (an asset) or unfavorable (a liability) to hotel ownership.The hotel's advanced bookings, management agreement, and franchise agreement should also be analyzed to determine whether these agreements are material to the acquisition, thereby creating an identifiable intangible asset or liability. For example, if the hotel has an agreement to host a large meeting on a long-term recurring basis, it might be necessary to ascribe value to that agreement. Similarly, the hotel's management agreement might create an asset or liability if the management fee results in an operating expense that is above or below the market norm. When the management agreement is terminable upon sale, there is neither an asset or liability. While the existing franchise agreement should be examined, the franchisor needs to approve the buyer upon a sale, and if the buyer is approved, a new agreement will be written between the buyer and the franchisor at the franchisor's current fee structure.Goodwill arises when the total fair value of the hotel exceeds the total value of identifiable tangible and intangible assets and liabilities. Goodwill is only observed in rare cases for hotels, primarily in situations where a hotel has an iconic status that results in an outsized purchase price. In addition to the tangible and intangible assets discussed in the preceding paragraphs, other potential assets or liabilities are evaluated on a case-by-case basis.Wrap-UpGiven the unique nature of both hospitality assets and ASC 805 PPAs, it is important to engage a valuation firm with experience in both areas. No two hotels, or PPAs, are identical; therefore, HVS professionals are happy to discuss the intricacies of a potential hotel PPA project with both the client and their audit partner. Additionally, HVS can often complete the PPA in tandem with the financing appraisal, creating a more streamlined closing process for the buyer because there is only one data request and one site inspection.

Take Steps to Protect Your Trade Secrets

Hotel Business Review by - 8 May 2017
Taking measures to protect your hospitality organization's trade secrets before filing or defending against a lawsuit may significantly increase your organization's chances of obtaining a favorable result in any lawsuit related to the misappropriation of trade secrets. While there are many ways to protect information, hospitality organizations need to be educated on what the law applicable to them considers to be "reasonable" steps that provide the secrecy that is required under the circumstances. This article explores how some courts have interpreted what is reasonable or adequate protection of information such that the information may qualify as a trade secret.

California Takes Aim at Industry with Housekeeper-Specific Safety Proposal

Hotel Business Review by - 8 May 2017
Responding to years of pressure from union advocates and their allies, the California Occupational Safety and Health Administration (Cal/OSHA) has proposed a first-in-the-nation, industry-specific rule aimed at hotel housekeepers. If enacted, this proposal would greatly impact the industry in California (as well as operators who conduct business in multiple states including California). In addition, as California tends to lead the nation in employment and workplace safety standards, operators in other states should monitor this proposal closely - what happens in California may come to your state next!
Article by Maxime Rieman

Business Risks in the Hospitality Industry

CoverWallet - 5 May 2017
When you are in the process of launching a food startup, it is important to take insurance into consideration, as it can enable you to mitigate the plethora of risks involved in starting your business and working with customers. Preparing ahead of time for potentially difficult scenarios is a great way to ensure future success. Without insurance, you face a variety of financial risks, when you should be focused on amazing food ideas.Here are the top 3 areas of risk that insurance could protect you from when launching your food startup:Customer Incidents.When starting a food business, it's critical to protect yourself against third party claims given the high number of interaction points with customers. Perhaps you have cooks on staff at your food startup and one accidentally cross-contaminates ingredients. If this happens, someone who eats your food may become severely sick and need medical treatment. If someone believes the food you served has negatively impacted them, they may elect to sue your business.Given the near constant interaction with customers on a daily basis, "third party claims" are very common in the food industry. Aside from food complaints, slip and fall cases are one of the most common claims food-businesses will face. General Liability Insurance can protect your food startup in the event of third party claims, such as bodily injury or damage to property of customers and non-employees. By investing in this insurance, you help protect yourself in the event of a customer incident.Location is Key.Property coverage is critical given the high potential cost to the business and common ways in which accidents occur. For example, in 2002 restaurant structure fires caused $116M in damages, and 65% of these incidents were caused by cooking accidents.Say your food startup is a lasagna-delivery service (which, let's be honest, it should be), you likely need to find a space with a commercial oven or invest in one for your space. Without this oven, your ability to create and deliver lasagna would be impaired, meaning lost income. Restaurant equipment may break down, or the restaurant itself may have to go through repairs, for example in the case of a fire. If your food startup has essential equipment or machinery, it is wise to protect them and also the property they are operated within through Commercial Property Insurance.Commercial Property Insurance protects your business property, both the location and objects in it, from theft, fire, natural disasters and other risks, depending on your policy. Additionally, it provides business income protection in the case that you're not able to operate due to a covered event. With this coverage, you can make sure that if suddenly find yourself without an operational oven, insurance will help you get back up and running in no time without severe financial damage.As a note, always take the time to understand what are considered to be covered events in your policy. Some people don't realize that damages related to flood, earthquake, loss of electricity and subsequent spoilage are usually not covered. As a result, your amazing lasagna delivery service would not only have to pause due to loss of power, but could also lose money on the extra-fancy cheeses going bad.Employees and Safety.Having a safe and healthy staff is necessary to operating your food business, and Workers Compensation coverage will cover the costs in the case there are accidents. If your food startup staff are operating dangerous equipment, there is the unfortunate possibility that someone will be injured, require medical attention or take time off of work. If you are a new business owner, considering current health care costs, you are at risk in the event a staff member files a claim against you to recompense them for time away from work due to injury.Workers Compensation is an insurance coverage which will pay for employees' care and lost wages in the case of a work-related injury. Without this type of insurance, you may find yourself facing significant financial consequences and running afoul of state law. Depending on which state your business operates in, Workers Compensation coverage may be mandated even if you have no employees, so it's imperative for you to check.When you are starting a food business, considering the different risks involved is a crucial step towards securing your financial and reputational future. Having the foresight to mitigate these risks by purchasing the proper insurance can provide you with peace of mind knowing that you have the necessary safeguards and a plan of action regardless of what lies ahead.


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