Six Steps to Respond to Negative Online Reviews - From a Legal Perspective - 24 August 2017
A commercial lawyer with experience in travel, tourism and hospitality issues, has shared with an online gathering of travel and tourism leaders her effective steps to dealing with negative online reviews.Addressing a 23 August webinar of travel industry leaders, many of them from small businesses, Alyssa Antcliffe, the principal of Antcliffes Legal, told tourism industry leaders and brand managers that having an online presence and being accessible through online platforms is essential in today's digital world.The digital economy has been built on ratings and reviews to enable people to 'window shop' online. However, it only takes one disgruntled former client or customer to ruin a good reputation by posting a negative review, no matter how false or misleading that review might be, she said.Antcliffe added that, usually, what is published online is not intended to be malicious, but is someone's honestly held opinion."In these circumstances, if a comment is substantially true, or represents the honestly held opinion of the reviewer, then a business will have difficulty in bringing a successful defamation claim," she said.Antcliffe suggested that if you believe that you or your business is the victim of unfair, untrue and or defamatory remarks as a result of an online review you should act quickly to minimise the damage.She suggested six strategies designed to help minimise damage and avoid costly legal proceedings:Contact the website which has published the review to ask that the material be removed,Contact the client or customer who has left the review and try to resolve the issue that has arisen,Request that the client or customer remove the review or write a further positive review about the way the issue has been handled and resolved,Write a short and factual online response to the review addressing the issue, or inform the public that the reviewer's comments are unfounded and what the facts are,Update your website, publish an article, run a promotion or launch a new product. The aim here is to create online news and chatter that will divert attention from the negative review and add new positive reviews and announcements, and/orSeek independent legal advice.Depending on the issue being raised in a review you may wish to consult a lawyer first. They will be able to advise whether it would be appropriate to involve the authorities such as Fair Trading, the police or courts.Antcliffe made clear that the six strategies were not intended to be relied on as legal advice as further consideration of each individual's circumstances should always be thought through before any action is taken.Also in the webinar, Carolyn Childs, co-founder of, said it was vital not to respond to reviews while angry. Make the effort to be unemotional, level headed and empathetic when responding.Childs noted that an online response that addresses a complaint in a cool and reasonable way often transforms the negative review into a marketing positive for the travel brand.Research byBrightLocal shows that if your star rating increases from two to three stars on review sites, business goes up by around 33%.If you have any legal queries or are concerned about negative reviews you should contact your lawyer, said Antcliffe.

Fraud, Felons & Whistleblowers - An Interview with Convicted Fraudster Sam Antar

Ethics Suite, LLC - 23 August 2017
Ethics Suite Founder Juliette Gust talks to Sam Antar, a convicted felon and a former CPA. As the CFO of Crazy Eddie, Mr. Antar helped mastermind one of the largest securities frauds uncovered during the 1980s. According to a senior SEC official, "This may not be the biggest financial statement fraud of all time, but for outrageousness, it is going to be very hard to beat." Today, Sam Antar is a forensic accountant. His primary work focuses on identifying and investigating public companies engaged in securities fraud by performing an in-depth forensic analysis. He also advises law enforcement agencies and professionals about white-collar crime and trains them to catch the crooks. His clients include government agencies, law firms, accounting firms, independent investment research firms, hedge funds, public companies, and other organizations.Excerpt From Sam Antar's Crazy Eddie FAQs:What was your biggest threat to you while you were committing your crimes? The biggest threat was that a whistleblower from within the company would inform the government of our crimes. Lying to auditors, Wall Street analysts, and journalists was easy.A Convicted Felon's View of White-Collar CrimeETHICS SUITE: In your fraud essay, A Convicted Felon's View of White-Collar Crime, you wrote that "our society must primarily rely on the actions of whistleblowers to inform us about most frauds." Why do you believe this to be true?SAM ANTAR: Despite all the efforts over the last twenty-five years at making fraud more difficult, such as passing the Sarbanes-Oxley Act and requiring stricter internal controls, most frauds are still learned about from whistleblowers. Society must incentivize whistleblowers to come forward and protect them from potential retaliation.According to the Association of Certified Fraud Examiners 2016 Report to the Nations on Occupational Fraud and Abuse, "tips are consistently and overwhelmingly the most common method by which frauds are detected." Specifically, the study states that 39.1% of occupational frauds are initially detected from tips. The second and third most common methods of detecting fraud were by internal audits at 16.5% and management review at 13.4%. Only 3.8% of frauds are discovered by external auditors. Therefore, more fraud is detected by whistleblower tips (39.1%) than internal audits and management review combined (29.9%).ETHICS SUITE: Do you believe that companies should establish ethics hotlines?SAM ANTAR: Whistleblower hotlines help legitimate organizations self-police themselves to demonstrate to the public and regulators that they are serious about running an ethical business. Employees should be encouraged to report wrongdoing to management and management should be encouraged to respond responsibly. It is far better for management find out about internal wrongdoing and self-report it if necessary, than to suffer the humiliation of learning about it from a New York Times expose. If management ends up learning about internal wrongdoing from the media, it will have zero credibility.ETHICS SUITE: You also wrote that "most whistleblowers have an ax to grind." If so, do you think their reports should still be taken seriously?SAM ANTAR: After a 16-year crime spree, and two years of lying under oath to cover up my crimes, I cut a deal with the US Attorney's Office and the Securities and Exchange Commission to testify against my fellow co-conspirators. My testimony led to the convictions of Eddie Antar and other family members. It's common to attack the vulnerabilities of the person reporting the crime. All that matters are that the facts support the allegations.ETHICS SUITE: You stated that "ethics is a matter of convenience depending on the situation and pressures involved." A lot of people believe that in a small to medium business, everyone knows and trusts each other, and unethical behavior/fraud doesn't occur in those environments, only at big corporations. Do you agree with this philosophy?SAM ANTAR: All people are capable of committing crimes and everyone sins. Can anyone truthfully claim that they live without sin and temptation? We all decide which rules to abide by or break based on what suits us. People are most vulnerable to the people who they like and trust the most, whether it be family members, friends, co-workers, and employees.ETHICS SUITE: You say that "White-collar criminals fabricate false integrity to gain the trust of their victims." Can you elaborate on what you mean by "false integrity"?SAM ANTAR: Fraud is a crime of persuasion. White-collar criminals measure their effectiveness by the comfort level of their victims. Fraudsters use a combination of charm and deceit to achieve their objectives. It's far easier for a fraudster to get a potential victim to believe their lies, if they are likable. In addition, fraudsters seek to fabricate false integrity to gain the trust of their victims. The implied credibility that fraudsters gain by fabricating their integrity makes it less likely that their potential victims will question their behavior and more likely that potential victims will believe their lies.ETHICS SUITE: You said: "learn to exercise professional paranoia. Do not trust. Just verify." Can you explain what you mean by professional paranoia?SAM ANTAR: Fraud will always be with us. It's as old as humanity and it started with Eve trusting the serpent in the Garden of Eden. Many people erroneously believe that prostitution is the oldest profession. Fraud is the world's oldest profession.Frankly, trust is a hazard. Our society is built on trust and giving people the benefit of the doubt. The main pillar of our legal system is the "presumption of innocence." However, fraudsters consider trust and the presumption of innocence as vulnerabilities to be exploited in the execution of their crimes. Fraudsters will always have the initiative to commit their crimes. While their potential victims trust them, fraudsters prey on them.Manipulation is part of the human condition. People need to be conditioned to be less accepting and more skeptical. There is simply too much unexamined acceptance of information as truthful.Smoking GunsETHICS SUITE: In your essay Smoking Gun, you state: "Enablers of criminals are often quick to ask, "Where's the smoking gun?" or cry, "It's a fishing expedition." Can you elaborate on what you mean by enablers of criminals?SAM ANTAR: Enablers of crime can be witting or unwitting enablers. They can be the auditors who miss things and give you a clean audit, which gives you implied credibility. It could be employees who witness the misconduct and do nothing about it. It could be the directors who know their employees might be doing something improper and do nothing about it because they don't care or because they like the results.
Article by Jason Price

Getting into the Mind Set of Budget Planning Season for 2018

HeBS Digital - 23 August 2017
Moving into 2018, travel supply and demand remains strong and the digital channel will continue to influence selling and purchasing habits. The rise in OTA influence, decreasing brand loyalty, and the drive for personalization will be top influencers in the upcoming year. Be on the look-out for the Smart Hoteliers' Guide - it's never too early to start planning.Steady Supply Growth in 2017 and Beyond - Domestic and InternationalMost metropolitans in the US and Europe are seeing significant hotel room supply growth year over year. "Hotel development is near record levels," tells Stephen P. Joyce, president and chief executive of Choice Hotels to the Washington Post as he announces 350 new openings globally. Lodging Econometrics, a firm that tracks new hotel builds across the globe, reports robust hotel development activity now and in the upcoming year.Washington DC is adding an additional 14,000 rooms over the next twelve to eighteen months. Chicago, New York, Miami, Los Angeles and elsewhere are experiencing net new supply. Simply stated, "We're going through a building boom," explains Bill Fortier, senior vice president of development Hilton Worldwide to the Financial Times. The growth is across the country and benefit brands and independents. Now is a good time to build.Europe is no different. London and Partners reports 8,000 new room inventory opening in and around London this year alone, a 5.8% increase, and expect an additional 5,000 rooms in 2018. Indeed all 17 European cities tracked in the PWC European Cities Hotels Forecast shows strong growth in room supply with and expected additional 69,000 hotels rooms to come on market by end of 2017, up from over 150,000 in 2016. Hot spots include UK, Germany, Russia, and Turkey.While great news for the construction worker, mattress supplier, and elevator mechanics, the hotel marketer faces an increasingly competitive landscape.Strong Demand in 2017 and BeyondTravel demand remains steady for the remainder of 2017. Business travel remains robust, summer travel appears to have met expectations, and a generation of experience-hungry millennials are opting for travel adventures with their disposable income.Dublin, Amsterdam, Prague, are popular cities but so too are newcomers like Porto and Budapest both growing in popularity for business and leisure travelers, according to the PWC European Cities Forecast for 2017 and 2018. Paris is facing a nice rebound post politics and terrorism events across France. Analysis from Forward Keys, a company that predicts the number of overseas travel agent bookings to London, forecasts that in the first three months of 2017 bookings from American tourists will go up 25% and up 40% from China, when compared to the same period in 2016. Similar sentiments are expected in North America and may increase given suggestions to a weaker dollar by Q4.All Travel is LocalAll travel is local - just ask the hotelier in Tribeca in NYC, Knob Hill in London, Temple Bar in Dublin or in Cologne, Germany. The hotelier is best positioned to leverage the richness of the local destination. The hotel front desk and concierge can best inform and customize the stay experience. However this unique selling proposition has come under threat. Included in their $60 million annual advertising budgets each for Expedia and Booking are collaborations with local CVB and tourism boards. AirBNB is all about the local experience and, interestingly, seems to capture the imagination of unmanaged business travelers. Business travelers represented nearly 10% of Airbnb total business in 2016 and expect significant growth of the "bleisure" market segment for years to come.What Lies Ahead for HoteliersTo win the direct customer starts with a strategic plan matched only by an appropriate budget. The goal is not to outspend Expedia or Booking but to own your local market and win over that direct customer who is dreaming, planning, searching, or purchasing in your destination. A wholesale percent increase or decrease in the budget over the previous year is not the right approach. Data is the new currency so zero in on what your guest data is telling you and leverage this information in your marketing strategies. How well do you know your high value guests? Who are they and find more audiences like them and sell direct when they come to your hotel website. Own the guest acquisition, guest engagement, and guest retention journey that each guest goes through when booking online.When time comes to map out next year's plan, consider changes in room supply, economic and demographic shifts to your destination, and influences in travel consumer habits. Match these macro and micro influences with marketing tools and a sound strategy and marketing budget. Work with partners that clearly understand the direction of the industry. The best way to prepare and win the direct customer starts with knowledge. Get your hands on a copy of the soon to be published Smart Hoteliers' Guide to Budgeting for 2018 by HeBS Digital. Let's go win the direct online customer!
Article by David Lund

Hospitality Financial Leadership - Creating Hotel Financial Policies

The Hotel Financial Coach - 22 August 2017
Having a policy manual that covers all the important aspects of your business that relate directly to the financial function is a mission-critical building block for your hotel company. Not too many people would argue with that statement.Why then do most small hotel companies still not have a financial policy manual for its hotels and what do they need to do to create one? In this article, I will lay out why this project is on the backburner, how to construct a policy and a process for getting this project completed in short order.There are two main reasons why the creation and completion of this policy manual are so elusive:One, there is just no time. We are too busy buying hotels, repositioning them and running around from meeting to meeting to sit down and get serious about putting this manual together. Tomorrow is the word. But ultimately, we know tomorrow never comes. Things are changing so fast we do not have time to stop our world long enough to capture what should be the correct governance for our financial function. We know it is an important project but it never really gets to a boiling point, not to the point where we must act.The main reason there is no time is that we do not make the time for it and - let's face it - the COO and CEO are not exactly killing you daily because it is not done. It is kind of like your underwear drawer, out of sight and largely out of mind.Two, there are just too many cooks. That is right, too many opinions and not enough certainty about all the various aspects of the operational minutia of your business. You know what it is like when we get 10 people together to discuss how we should do something. We get the 10 people in a room and we have 12 different ways to do the same thing. Everyone has an "opinion.""It's not about making the right choice. It's about making a choice and making it right." -- J.R. RimThis is where your leadership needs to pivot. You know all the noise and ideas are great but what you need is to leave the conversation at the right point and have concrete direction. With policies, it is important to be brief and concise. Stay away from the procedural aspect of the exercise. If the discussion is on the policy for the bank reconciliation, you do not want to slip into "how to do a bank rec." You do want to state the purpose of the policy and the policy itself.Something like this:PURPOSE - To properly handle, control and process the monthly bank reconciliations.POLICY - All bank accounts are to be reconciled by the 25th calendar day of the following month.The standard reconciliation from an Excel spreadsheet is to be used.A paper copy of the reconciliation is to be produced each month.Review and approval in writing are to be completed by the 25th of each month by the controller.All supporting documentation is to be included with the reconciliation and/or the location referenced for bank statements, outstanding deposits, outstanding checks and all adjusting entries.The reconciliation must be complete and all relevant documents that support the reconciliation must be attached or easily found via reference, i.e., bank statements.The reconciliation is not to be completed by any employee that has bank account signing authority.The reconciliation is not to be completed by anyone who prepares the bank deposit.All outstanding checks are to be reversed once they are 180 days old.All bank statements are to be mailed to the attention of the controller.Here is a simple and straightforward way to get your policy manual project done and won. The motto for this project is "many hands make lite work." Give your project a fun name, like "Mission Possible." Get creative with this. Make it fun.First thing, put together an inventory of policies that need to be incorporated in your manual. Just like you did in college, you are going to start with an outline of major topics to cover:CashInventoryPayment Card Industry ComplianceEtc., Etc., Etc.In all, you want to have 25-40 different sections. Email me and I will send you a copy of my policy inventory outline and you can use it to get started.Once you have the outline, add the names of the policies you want to write and include in the manual. Here is where you can get democratic and get the buy-in up front from others. Strike a policy committee from within your company's structure. Include the relevant individuals you want and make sure you have good representation from the hotels and your corporate office. Eight to 12 people (not including you) is ideal.Once you have the group put together, organize your first call. Prior to the first call, send the list of policy sections to each member. In the email tell the members that you will assign each participant two-three sections of the policy manual and ask them to think ahead which sections they would like to head up. Also, ask them to think about other important sections that might not have made your list. Request these additional section suggestions be emailed back to you before the first call.Convene the first call and just prior to that call send out the latest enhanced inventory of policy sections. Include in the latest inventory of sections a player draft. In this draft selection, you have organized the players by your own last season points rank. The most junior or newest members get to pick their first section just like the major leagues do in sports. Complete the rotation until all the sections have been assigned. This should take about 15-20 minutes top. During this call, you can also review the purpose of the project and lay out a plan for the completion of the project.Once all the sections have been chosen by the players, let them know the next step is for them to populate their sections with policy titles. The call the next week will be to have each team member submit their policy titles by section. One section at a time with no discussion or debate at this point. The goal is to get a first draft list of policy sections and policy titles. The second call should take no longer than 20 minutes. Have each member send you their policy names by section through email after the call.In preparation for the third call, it is your job to get the list of policies consolidated. Here is where you take the lead and review, edit, discard and add policy titles. You communicate back to the individual owner of each section your approved list of policy names for their sections. This requires communication to each member ensuring they agree. They also get to hear from you firsthand on the policy project--especially the method for policy creation. Lay out the "purpose" and the "policy" template, framework and follow-up with each member and send them a policy sample like the one above for "bank reconciliation."This is the most critical step so far.It is an essential step because you want to be very clear with each member on the structure for policy creation. Brief, concise, and not a lengthy procedure. Ensure each member has an opportunity to express their concerns and suggestions. Be open to new ideas and individual concerns. Have approximately 150 policies. If you have too many, consolidate some. It is essential that each team member owns their list of policies.The third call is to share the edited list of policy sections and titles and the sample template. Prior to the call send the final policy sections and policy title list to each member and include their names with each corresponding section. At this point, you are turning over the creation of the policies to your team. You have organized the team, the list, and the standard template. Using the math above with an average of 10 members who have 15 policies each to write you set up a schedule for 15 calls. I suggest you do not allow this to extend beyond 5 months or 22 weeks. With holidays, reporting schedules and other business it is important to lay out a calendar that makes sense. The format of these calls is each member presents one policy to the group by reading it. The members can add their verbal comments, suggestions, and ideas but the debate is limited to five minutes per policy.You call the order of presenters and you are the timekeeper and gatekeeper. This call can be completed in one hour. The call is recorded and all members get the link after the call. Each week each member edits their policy and sends it to you for your final review and approval. If members cannot be on a call they have the responsibility of completing their policy and ensuring that another member will read it into the record. That member is still responsible to edit their policy and send it to you. Just stick to the timetable and week by week you will assemble a great policy manual that your team complied. Ownership and pride in the result in less than 6 months. As the quarterback of this project, you need to make sure each member has their ball and that they stay on track week after week.From this point, you have the makings of a powerful tool.With this power tool policy manual, you can now create an Internal Control Review process. More on creating that in a future article.If you would like a copy of any of the following send me an email at david@hotelfinancialcoach.comPolicy Inventory OutlineF&B Productivity SpreadsheetRooms Productivity SpreadsheetFinancial Leadership Recipe F TAR WFlow Thru Cheat SheetVisit my website today for a copy of my guidebook:The Seven Secrets to Create a Financially Engaged Leadership Team in Your
Article by Christopher Boinet and Anne Epinat

French hotel, tourist residence and apart-hotel leases are evolving

Deloitte Deloitte TH&L (France) - 22 August 2017
French commercial leases and contract law governing hotels, hotel residences, tourist residences and restaurants constitute essential legal and economic stakes. In this sense, the 2014 Pinel Law represents a major legislative change for landlords and tenants.France counts over 17 000 hotels, 2 400 tourist residences and thousands of apart-hotels and restaurants, many of which are operated under commercial leases. The legal and economic stakes are crucial for landlords and tenants, particularly when these properties constitute their main asset.Over the last three years, major reforms have taken place that change the status of commercial leases and contract law, untouched for decades. Lawmakers took inspiration from residential lease interactions, seeking to frame and rebalance the relationship between commercial landlords and tenantsThe Pinel Law ndeg 2014-626 dated 18 June 2014 and its decree of application dated 3 November 2014 revolutionised the commercial lease relationship in favour of the tenant. This constituted the most important legislative change in the commercial lease field in over 60 years - since the 30 September 1953 decree which laid down the applicable regulations in the area.Further, the Macron Law (ndeg 2015-990 dated 6 August 2015) notably relaxed the formalities for giving notice. In addition, Decree ndeg 15-282 dated 11 March 2015 requires seeking an amicable settlement before taking judicial action, and has a specific application for commercial leases and consequently for hotel leases.Lastly, Ordinance ndeg 2016-131 dated 10 February 2016 has, since the 1 October 2016, modified contract law and obligations, with consequences for commercial and hotel leases.A number of lessons can be drawn from the consideration of commercial leases concluded in the context of hotels, apart-hotels, tourist residences and restaurants.Highlight 1: Different lease rules for each type of propertyThe three different lodging types are not, in fact, necessarily subject to the same lease regulations.Commercial leases: reinforced obligations in contract conclusion and executionThe 10 February 2016 Ordinance (applicable from 1 October 2016) introduced in the French Civil Code the obligation to negotiate in good faith (new article 1104 of the French Civil Code) compensation for the breakdown in discussions and the protection of confidential information exchanged during negotiations. Much more, the Ordinance introduced a general right to information (new article 1112-1 of the French Civil Code).This is a sensitive point when delivering premises to the tenant of an establishment such as a hotel, a tourist residence, an apart-hotel or a restaurant. These amendments, which are public policy (i.e. they cannot be waived), reinforce the practice already established by case law.The major reform is now related to the admission of 'unpredictability', allowing judges to amend a contract in the event of a change in circumstances - unforeseeable at the time the agreement was concluded, and which render its execution excessively onerous for one party. In general, the Court of Appeal considers that it is not the 'unexpected' that must be taken into account, but the 'unpredictable', i.e. 'that which could not be reasonably foreseen by the obligor when contracting an agreement.'Here, cases spring to mind where rent may be overvalued at the beginning of the lease agreement and where the economic balance of the contract is thus rendered fragile. Rent levels may become excessive due to economic or technical circumstances beyond the control of the tenant.Lesson ndeg 1 The revision of a commercial lease by judges for reasons of unpredictability must take into account the rental value of the premises. Public policy, rental value is the key reference for commercial leases where it is difficult to determine the rent.Unpredictability, which supposedly enables judges to re-establish an economic balance in the parties' relationship, will come up against a rental value condition. This may remain excessive when compared to the 'unforeseeable' economic constraints encountered by the tenant who can no longer cover their costs.The new legal innovation of unpredictability - a veritable revolution compared to the applicable regulations thus far - here runs into a first hurdle for commercial leases (relating to hotels, apart-hotels, tourist residences and restaurants).The three-year termination option offered to the tenantPrior to the 2014 Pinel Law, it was possible to provide for a fixed-term rental period (e.g. nine years) in the lease, during which the tenant may not leave the premises.The Pinel Law, article L 145-4 of the French Commercial Code, amended, imposes a three-year termination option to be offered to the tenant, except in four cases, including:leases with an initial term exceeding nine years, leases for premises exclusively for office use and storage;leases for premises built for a single specific use.Consequently, nothing has changed for hotel leases relating to premises considered 'single use'.Neither has the Pinel Law amended the framework for tourist residences, which occupy a special place since the lease term is subject to specific provisions (article L.145-7-1 of the French Commercial Code and article L.321-1 of the French Tourism Code) that provide for a fixed-term lease of at least nine years.Lesson ndeg 2 Tourist residence leases are always fixed-term leases (nine years).Apart-hotel and restaurant leases can never be fixed-term leases and must give the tenant the option to terminate the lease agreement every three years.Hotel leases - for premises generally considered as 'single use' - can be fixed-term or not, depending on the agreement of parties. One could, however, question the 'single use' nature of certain hotels that are governed by co-ownership regulations and that offer studios which could be converted into an apart-hotel or a residential apartment block, thereby subjecting them to common law.For these three types of lodging, three regimes for the duration of commercial leases thus exist.The Pinel Law and the limitation on rent caps in the case of revised and renewed lease agreementsIn theory, commercial rents under common law are capped when the lease is revised or renewed. In the event of a rent review, and pursuant to article L.145-38 of the French Commercial Code (triennial review) and article L.145-39 (the increase in rent exceeds 25%, compared to the initial rent), resulting changes in rent can lead to steep rises for the tenant and an application of the entire increase from the first year onwards.The Pinel Law stipulates that the variation in the rent resulting from the exclusion of rent capping (nothing is specified when rents are revised downwards) cannot lead to an increase in the rent, for a year, of more than 10% of the rent paid during the previous year. With regard to lease renewal, this levelling also applies to leases entered into for a term of over nine years.This mechanism means that the rent resulting from the exclusion of rent caps is not actually limited, but is 'spread over' the first years of the renewed lease by limiting any increase in rent to 10% per year (compared to the last rent paid) until the fixed rent is reached.Lesson ndeg 3 This flagship measure of the Pinel Law does not apply to 'single use' premises. In principal, hotels are considered 'single use'.With regard to the renewal or revision of leases, rent levels are uncapped. The resulting change in rent can sometimes lead to a steep increase in rent for the tenant and a full application of such from the first year onwards, as before.The terms and conditions relating to increases resulting from the exclusion of rent caps are consequently different for apart-hotels, tourist residences and restaurants, on the one hand (spread in increments of 10%) and hotels, on the other (immediate application of the new rent). Again, the question surrounding the single use nature of hotels that are subject to co-ownership rules arises. In all cases, it is recommended that the lease rental value be thoroughly evaluated before any negotiations are undertaken.The Pinel Law and commercial leases: relaxation of the formalities for giving noticePrior to the Pinel reform, termination notice had to be given by writ. Lawmakers have since relaxed the formalities for giving notice. Consequently, pursuant to article L.145-9 of the French Commercial Code, termination notice can now be given by registered letter with acknowledgement of receipt, or by writ. The date of the termination is the date of the first presentation of the registered letter (article R.145-1 of the French Commercial Code).However, nothing has changed for a tenant who intends requesting a lease renewal. Only the writ remains valid.Lesson ndeg 4 Regardless of the type of operation (hotel, apart-hotel, tourist residence or restaurant), the continued use of writs is recommended, both for giving notice and for renewal requests, so as to avoid any unnecessary risk of litigation associated with the legal notices referred to in article L.145-9 of the French Commercial Code, and in particular dates of receipt of the registered letter.Highlight 2: The 2014 Pinel Law introduces new distributions of chargesThe Pinel Law and the suppression of any reference to the construction cost index published by INSEE (ICC) in the provisions relating to rent renewalsThe commercial rent index (ILC, including shopping centres) and the index of tertiary activities (ILAT, the benchmark for tertiary, business and logistics activities) have become the legal reference for framing commercial lease rent evolutions.Lesson ndeg 5 The ILC index was already widely used in commercial leases; consequently no real change has taken place. However, the cost of construction index (ICC) can still be used in sliding scale clauses. This may, however, pose a number of difficulties for reconciling calculation methods in the case of triennial rent reviews, requested in addition to annual indexation. The Pinel reform and the new distribution of charges between the landlord and tenantPrior to the Pinel reform, no legal provision on the distribution of charges between the landlord and tenant existed, and parties were free to split charges. Failing that, parties could refer to the French Civil Code regulations, which could prove to be a source of litigation.The decree dated 3 November 2014 changed the existing regulations by imposing a precise and limiting list of charges, taxes and fees to be annexed to the lease agreement. The landlord must provide the tenant with a summary of these expenses on an annual basis.Henceforth, article L.145-40-2 of the French Commercial Code stipulates that on conclusion of the lease agreement and every three years thereafter, the landlord must provide a provisional statement of repairs planned over the next three years, as well as a forecast budget and a summary of repairs carried out over the past three years, together with their cost.Furthermore, 'triple net' leases have come to an end (lease agreements net of all charges for the landlord, whatever these charges may be). Landlords are now prohibited from passing on to tenants the cost of heavy work required by article 606 of the French Civil Code, as well as any fees related to carrying out works 'intended to rectify obsolescence or bring into compliance', when such constitute major works relating to the structure of the building (article R.145-35 of the French Commercial Code). This is particularly the case for the installation of lifts or the widening of doors as part of compliance with the new accessibility standards for disabled persons.The landlord can allow the tenant to bear any charges relating to improvements, when the expense exceeds the cost of identically replacing these assets. The thorny topic of improvements (in hotels, apart-hotels, tourist residences or restaurants) and ensuing financial issues can result in a court battle and the intervention of experts to debate:the type and nature of the works in question, which is decisive in determining the party responsible;the cost of the works, which should be systematically assessed in order to obtain a comparison with the cost of the identical replacement of the assets in question.The burden of tax expenses and fees borne by the landlord can only be transferred to the tenant if they are directly or indirectly linked to the use of the premises, or to a service that benefits the tenant. In practice, this means that landlords are facing an increase in all types of costs and taxes for which they are responsible, as well as additional building management fees and annual administrative and accounting expenses.The regulations governing the distribution of charges covered by the new article L.145-40-2 of the French Commercial Code have become law.Parties cannot, therefore, derogate from the rules on the distribution of charges and taxes. Any clause contrary to these provisions would be deemed unwritten, in accordance with article L.145 - 15 of the French Commercial Code. Parties are recommended to remain vigilant when negotiating and drafting future leases and renewed leases to which the amendments will apply.Lesson ndeg 6 These new provisions are of paramount importance for hotel, apart-hotel, tourist residence and restaurant leases.Previously, the majority of leases traditionally transferred to the tenant the significant financial burden of renovation and compliance works. A priori, it is therefore the tenant who likely takes the initiative to amend the agreement in this respect when renewing a lease (see the following text, 'Hotel leases and works favourable to the tenant').Mandatory incoming and outgoing inventory of fixtures in commercial premisesHenceforth, the law requires a contradictory inventory of fixtures when:the tenant takes possession of the premises as the lease agreement is concluded;the leasehold rights are assigned;the leasehold rights are assigned;in the frame of the transfer of business " cession de fonds de commerce";the premises are handed back.The inventory of fixtures must thus be annexed in the lease agreement, or failing that, kept by each of the parties. In the event of disagreement, a court bailiff may intervene and draw up an inventory should this be requested by the most diligent party. Costs are then shared equally between the landlord and the tenant (article L.145-40-1 of the French Commercial Code).Lesson ndeg 7The inventory of fixtures (when properly done) is a key element for a lodging establishment open to the public. It makes it possible to verify that the landlord has correctly fulfilled the stricter obligation to deliver rented premises that conform to their intended use and that are properly maintained, in accordance with applicable case law (CA Rouen 17 mats 2016 - RG : 15/01605). This obligation is particularly important in the case of off-plan (BEFA) hotel, apart-hotel, tourist residence or restaurant leases at the time of delivery. Non-compliance regularly leads to litigation between landlords and tenants. The formalism of the inventory of fixtures is particularly important for each party. Indeed, it is recommended going even further and conducting a full technical audit of the premises.The Pinel Law and the pre-emption right in the event of a sale of the leased premisesUnder the Pinel Law, the tenant henceforth enjoys the benefit of a pre-emption right in the event of the sale of the premises in which their business operates (article L.145-46-1 of the French Commercial Code).Lesson ndeg 8 Since these provisions are not public policy, they can be circumvented in a lease clause. Nevertheless, and in addition to being legitimate, they could prove useful for tenants and would avoid certain issues of negotiation and tension.Extension of short-term leases The Pinel Law (article L.145-5 of the French Commercial Code) extended the period of derogating from the commercial lease status to a maximum of three years, compared to 24 months previously.Lesson ndeg 9This contribution is mentioned just for the record, since short-term leases are rarely, if ever, used for hotels, tourist residences and apart-hotels, all of which necessitate significant investment. They are also the exception in the restaurant world, since restaurant operators seek a stable location for their business in order to build customer loyalty.Highlight 3: Cases can be brought more easily before the Departmental Conciliation Commission The automatic transfer of leases in the event of a merger or split has become lawIn the event of a company merger or a partial transfer of assets, the lease is transferred, notwithstanding any provision to the contrary, to the newly amalgamated company or to the company benefiting from the transfer. This legal vehicle for transferring leases or businesses is relatively simple to put in place, and in this respect, the law has adopted the position of case law.Lesson ndeg 10Along with its favourable tax regime and its simplicity, this should encourage even more restructuring in the hotel industry (article L.145-16, al. 2 of the French Commercial Code).Lease assignment and vendor's guarantee limited to three yearsWhere a guarantee clause exists in connection with the lease assignment, the landlord must inform the assignor of any payment default within one month.Since the introduction of the Pinel Law, the duration of the assignor's guarantee to the assignee is set at three years after the lease is sold, which is very protective for all tenants.Lesson ndeg 11 This measure makes it possible to limit the joint liability of the assignor (article L.145-16, al.1 and article L.145-16, al.2 of the French Commercial Code). The law does not provide for penalties for failure to provide information within the prescribed period.Wider recourse to the Departmental Conciliation CommissionPrior to the introduction of the Pinel Law, the Departmental Conciliation Commission could only deal with disputes relating to the exclusion of rent capping in renewed leases. The law now has now extended the competence of the Commission to disputes relating to (French Commercial Code - article L.145-35):triennial rent reviews;charges and works.Reminder: The Departmental Conciliation Commission is one step prior to going before the courts in the location of the leased premises, if no amical agreement can be reached. Referral of a dossier to the Commission is voluntary.Lesson ndeg 12 This reform is a more general part of the development of ADR (Alternative Dispute Resolution) that aims to bring to the fore the amicable rapprochement of parties through mediation, conciliation and collaborative law... without recourse to litigation.Such methods are also intended as a means for parties to maintain communication, enabling them to reach agreement. These dispute resolution mechanisms undoubtedly constitute a 'plus' for the optimal operation of a lodging establishment (hotel, apart-hotel or tourist residence), where it is crucial that the operator maintain a lasting and constructive relationship with the landlord.Hotel leases and works favourable to tenantsIn the case of common law leases (apart-hotels and tourist residences), the tenant cannot undertake any works that alter the layout of the premises without first obtaining the express permission of the landlord.Hotel leases fall under a specific regime as they relate to establishments open to the public (ERP). The owner of a property in which a hotel operates cannot - notwithstanding any provision to the contrary - object to any works or improvements that the tenant - the owner of the business - undertakes at their own expense and under their own responsibility, when such works concern the eight cases listed in article L.311-1 of the French Tourism Code, even if such works entail changing the layout of the premises.A further particularity exists with regard to existing hotel safety regulations. Article R.123-3 of the French Building and Housing Code stipulates that 'builders, owners and operators of establishments open to the public are required both at the time of construction and during the building's operation to respect the preventative and security measures necessary to ensuring the safety of persons; these measures are determined in accordance with the nature of the operation, the size of the premises, the manner in which the building has been constructed, the authorised capacity and the ability of persons admitted to escape in case of a fire.'Joint and several responsibilityConstructors, owners and operators of buildings open to the public (ERP) are thus jointly and severally responsible for fire safety, which has far-reaching general and civil consequences for all involved.Lastly, within the context of a hotel lease, particularly with regard to emergencies or safety procedures, the hotel operator may do (almost) anything. When there is a particular urgency for works to be carried out, the two conditions of the landlord's formal notice and/ or judicial authorisation are abolished (judgment C. Cass 23 May 2013). An example would be the case of a hotel threatened with closure because the landlord - responsible for works ordered by the Security Commission - has not undertaken such works in the time allowed, under the terms of the lease. The tenant may immediately carry out these works without informing the landlord and without losing the right to reimbursement for the said works.

Budgets Are Coming: 7 Lessons from Game of Thrones

Tambourine - 22 August 2017
Just as winter (and a terrifying army of the dead) descends on Westeros in Game of Thrones, budget season is looming in the real world and hotel marketers all across the kingdom are arming themselves for battle.To help hoteliers prepare, we turn to the lessons, themes and quotes we've learned while watching the battle for the Iron Throne between power-hungry lords and ladies:1. GoT QUOTE: "When you play the game of thrones, you live or die" LESSON: Your budget is your armory. Ask for everything you need to surviveHoteliers usually only think dollar amounts when working on their budget. How much will this marketing technology cost? How much should we dedicate to advertising spend? How much will our hotel website design cost?But, here's the surprise: you are not restricted to only asking for marketing funds during budget time! If you need more marketing staff or outsourced vendors to help you achieve your hotel's revenue goals, then ask for them!If your hotel is in dire need of upgrades and updates in order to effectively compete with newer properties and win market share, then ask for them. If you depend on another department's performance to help you reach your targets, then ask to oversee them.Here's an example of what that request could look like:"For me to achieve the revenue targets set forth by ownership... I need $_______ in funding, specific hotel upgrades to be made, and _______ new staff (contractors). Plus, I would like ________ department to report to me."The road to achieving your property's revenue goals begins with your ability to ask for what you need. Show your management team that without these items, you won't be able to deliver the results they're looking for.2. GoT THEME: Three Dragons versus Everyone ElseLESSON: Focus on Quality, Not QuantityForget the mass of Lannister soldiers that Queen Cersei has under her belt or the thousands of eerie wights brought back to life by the White Walkers. All it takes are three massive, fire-breathing dragons to wipe them out completely.This year, vow to keep your budget uncluttered and uncomplicated. Your 2018 hotel marketing plan should be built on a few powerful initiatives, not on a mess of disjointed marketing tactics that just produce small bursts of wins and revenue. Build a strong budget that includes only marketing tactics that will have a measurable impact on your audience and the bottom line.3. GoT QUOTE: "Words are wind, my friend..."LESSON: Getting what you want takes proof Asset managers, hotel management firms and GMs are under more pressure than ever to deliver real bottom line results. However, many hotel marketers still shy away from being accountable for any revenue responsibilities. Instead, they lavishly tout their "rebranding initiatives," number of social media followers or new hotel photography. This continued disregard for numerical evaluation will put you in a difficult position next year, when you attempt to request a larger marketing budget. Without measuring your success, owners and managers will be more apt to cut back on marketing expenses and staff, believing that your intangible branding results can be achieved with less.So it's important to have complete fluency in the KPIs that affect the bottom line. As an example, if you know last year's marketing cost-per-sale (CPS), you should be able to extrapolate that against future revenue targets to determine the budget required and make statements like this:"Last year, we achieved a marketing CPS of X.To achieve next year's budget, I need $_______ ."But remember, you will also be expected to reduce your CPS over time as you learn and tweak your programs.4. GoT QUOTE: "You Know Nothing, Jon Snow."LESSON: You Have Data. Use It. This catchphrase, originally spoken by the red-haired Wildling Ygritte as she aggressively flirted with Jon Snow, has become one of the show's most popular. But, don't let it become your catchphrase. You should know everything about your marketing program results and not be guided by assumptions or gut feelings.You should rely on data culled from the right sources to guide all future hotel marketing decisions.And again, data is your ally when you need to ask for more marketing funds! Some data that you should always have on hand include key performance indicators, like DRR (direct revenue ratio), MCPB (marketing cost per booking) and your STR index vs the comp set. All of these numbers will show you, and your hotel's executive team, how much your marketing team is actually contributing to your hotel's revenue.5. GoT QUOTE: "Winter is Coming."LESSON: Apathy about 3rd party costs is dangerous For a while, it seemed like winter would never come to GoT, despite numerous warnings with this ominous phrase. Yet, it was still on everyone's minds. In hotel marketing, this means: Don't ever be too comfortable in the here and now. For example, if more than 15-20% of your revenue is coming from OTAs, you need to prepare for the eventual downturn and start investing in programs, campaigns and assets that will deliver higher margin bookings.When "winter comes" to the hotel industry and AOR goes from 75% to 50%, you don't want to have the majority of your bookings incurring a 20% OTA commission!6. GoT Quote: "A Lannister always pays his debts."Lesson: Ask Hotel Owners Exactly What They Expect From YouBefore you determine what marketing resources you'll need for 2018, you need to find out the exact amount your hotel owner (or hotel management company) expects your marketing team to contribute to the hotel's revenue.Don't move forward on a budget without knowing exactly what goals your team is beholden to. Get as much clarification as you can, including how many room nights, booked meetings, corporate bookings, etc. should be attributed to your marketing efforts. Ask management/ownership early on in the budget process, because this one question will give you clarity and insight to build out any other projected expenses.Don't waste time or make costly guesses, nor should you allow your hotel owner to determine how much they want to give you. Don't place your hotel marketing in a dangerous position of always being underfunded, but tasked with lofty goals. Instead, use your hotel owner's revenue goals to correlate the assets you need achieve them.7. GoT QUOTE: "I may be small, but I won't be knitting by the fire while others fight for me."LESSON: Don't surrender your property's destiny to 3rd parties Spoken by everyone's favorite young spitfire, Lady Lyanna Mormont of Bear Island, this empowering quote hits at the heart of every hotelier. OTAs have had their moment, but now it's time to take back control of your booking destiny. So, stop depending on third-party sites to fill the house. Instead of paying commission fees of 15-30 percent, invest in the right tools and technology for your hotel to pull in your own reservations. One place where hotels will see big ROI is by investing in their hotel's mobile experience. Offer a mobile-compatible booking engine. Have a responsive website and hotel marketing emails. Offer immediate online chat. Investing in mobile is paramount to your success in 2018.

Notes from the Hotel Data Conference 2017 Featured Articles - 21 August 2017
The Hotel Data Conference 2017 in Nashville saw record attendance and came this year amid great excitement of the solar eclipse. I met a cyclist on her way, and it looks as though American Airlines is getting into the spirit, too. Once again, for the ninth consecutive year, a very successful Hotel Data Conference has just ended in Nashville, Tennessee. It’s an all-hands-on-deck event for us at Hotel News Now, so I get to go over to enjoy this growing city’s hospitality. And Music City really is booming. There are cranes everywhere, some of them over an upcoming JW Marriott and other hotels ready to welcome the many flocking here to live, meet and savor.

PSD2: Demystifying the beast

The Analytic Hospitality Executive | SAS - 18 August 2017
The revised EU Payment Services Directive (PSD2) has been a focal point for the financial services industry over the last couple of years and its adoption is set to revolutionise the payment ecosystem in Europe. New entrants, innovative technologies and increased regulation are already posing major challenges to traditional banks as they need to do more than ever before to retain their revenue streams, meet growing customer expectations and counter the erosion of their competitive edge. So why is PSD2 such a game-changer?

Is There Such a Thing as a 'Brand Fail' Anymore?

MarketingProfs·Requires Registration - 17 August 2017
When Saturday Night Live devotes an entire sketch to lampooning your new ad, it's a sign that you've messed up in a pretty heinous way. That was the fate that befell Diet Pepsi in April, when the company attracted widespread derision for an ad depicting supermodel and reality TV star Kendall Jenner joining an absurdly comprehensive line-up of diversely beautiful young people in a fake protest event.

EB-5 Finance Lawyer: The Developer's EB-5 Handbook is now published

Hotel Law Blog | By Jim Butler - 15 August 2017
JMBM’s Global Hospitality Group® and EB-5 Finance Group™ are pleased to announce the publication of The Developer’s EB-5 Handbook for EB-5 Construction Financing, a “must-read” resource for developers who are considering using EB-5 financing to complete or enhance their capital stack for construction projects . This is the much talked-about and often (inappropriately) maligned EB-5 program, also known as the immigrant investment visa program.
Article by Robert Mandelbaum

The Components of Payroll

CBRE Hotels - 15 August 2017
Based on the results of CBRE Hotels' Americas Research's 2017 edition of Trends(r) in the Hotel Industry, hotel management was able to contain the growth of labor costs in 2016. On average, the combined cost of the salaries, wages, other compensation and benefits paid to both employees and contracted/leased personnel at the hotels in the Trends(r) sample increased by just 2.8 percent during the year. Given in the 3.6 percent rise in compensation, the 2.8 percent growth in total labor costs implies that hotel managers implemented cost saving measures such as reducing the total hours worked at their properties, or improving employee productivity.Despite their best efforts, labor costs still accounted for 90 percent of the 1.6 percent rise in total operating expenses from 2015 to 2016. Further investigation reveals that it was the non-benefit component (payroll) that was the main driver of labor costs during the year. Payroll by itself accounted for 66.8 percent of the 1.6 percent total operating expense growth rate.The CBRE Trends(r) survey tracks five payroll sub-categories within each operating and undistributed department of a hotel. The sub-categories are consistent with the 11th edition of the Uniform System of Accounts for the Lodging Industry (USALI). They are:Salaries and Wages: Non-ManagementSalaries and Wage: ManagementService Charge DistributionContract, Leased, or Outsourced LaborBonuses and IncentivesA sixth sub-category is used to track other compensation data that is not identified, but this totals just 0.6 percent of payroll costs.Analyzing the salaries, wages, service charges, contact/leased labor and bonus payments made by U.S. hoteliers in 2016 provides some insight into how they were able to contain the increase in labor costs to just 2.8 percent. The following paragraphs summarize our analysis of the 2016 labor cost data from 4,028 properties in the Trends(r) sample that provided detailed labor cost information in conformity with the 11th edition of the USALI. For the purposes of this analysis, we are going to refer to the entirety of non-benefit compensation as "payroll."Payroll ComponentsThe salaries and wages paid to non-management personnel comprised 63.8 percent of payroll in 2016, followed by the salaries and wages paid to management (24.1%). The remaining 12.1 percent consisted of service charge distributions, payments to contract/leased labor, bonuses, and unassigned payroll.Non-management salaries and wages measured as a percent of payroll was greatest at limited-service hotels (69.5%), while management salary and wage payments were the most at extended-stay hotels (29.8%). Given the high incidence of mandatory gratuities, it is not surprising the service charge distributions made up the greatest percentage of payroll at convention (6.6%) and resort (6.2%) hotels. All-suite hotels allocated the greatest percent of their payroll dollars to contracted/leased employees (6.7%). Resort hotels, the property type that achieved the greatest gain in gross operating profits (GOP) in 2016, also spent the greatest percent of payroll on bonus payments (4.4%).From 2015 to 2016, the payroll component that saw the greatest percentage increase was service charge distributions (12.3%). In many jurisdictions, management has limited control of these mandatory payments that must be made to employees. The increase in payments made to contact/leased labor (5.4%) exceeded the growth in salaries and wages paid to management (3.0%) and non-management (2.8%). The slowdown in GOP growth most likely contributed to the 5.5% decline in bonus payments made in 2016, compared to 2015.Incidence of ComponentsThe use of contract/leased labor is frequently cited by operators as a tactic that can be implemented to overcome labor shortages, and potentially control the rising costs of compensation. In 2015, 42.7 percent of the properties in the study sample reported payments made to contract/leased employees in at least one of their departments. In 2016, this number increased to 45.2 percent. Resort hotels reported the highest incidence payments made to contract/leased employees (67.5%), while extended-stay hotels appear to use contract/leased employees the least (35.7%).Among the operating and undistributed departments, the greatest use of contract/leased employees in 2016 occurred in the food and beverage department (33.7% of hotels), followed by the rooms (33.3%) and administrative and general departments (17.5%). The greatest increase in the use of contract/leased employees was observed in the food and beverage and rooms departments. Conversely, it appears that the use of contract/leased labor declined in the other operated, information and telecommunications, and maintenance departments.Overall, the incidence of paying service charges grew from 17.7 percent of the sample in 2015 to 18.1 percent in 2016. Resort hotels are the property type most likely to pay a service charge to their employees (62.9%). As expected, the distribution of service charges was most frequently observed in the food and beverage department (39.7%), followed by the rooms department (4.6%).While the aggregate dollar amount of bonus payments made by the study sample declined by 5.5 percent from 2015 to 2016, the number of hotels that paid bonuses during the year increased. In 2015, the properties that paid bonuses comprised 89.2 percent of the total sample. In 2016, this metric increased to 89.7 percent.Employees in the sales and marketing (91.6% of hotels) and administrative and general (80.1%) departments were mostly likely to be paid a bonus. This is consistent with the typical compensation agreements for general managers, as well as sales personnel. Least likely to receive a bonus in 2016 were employees in the other operated and information and technology departments.It is interesting to note that the percent of hotels reporting bonus payments made to sales and marketing employees increased from 2015 to 2016, while the percent of hotels reporting bonus payments made to administrative and general personnel declined. In 2016, the number of hotels that enjoyed an increase in rooms revenue was greater than the number of properties the achieved a rise in GOP. Most sales and marketing incentives are based on revenue achievements, while general managers are more frequently rewarded for growth in profits.Payroll PressureGiven the political and economic landscape for the next few years, it appears there will be more pressure on the payroll component of labor costs versus the benefits piece. Accordingly, hoteliers need to pay attention to the increased labor reporting standards introduced in the 11th edition of the USALI. With greater transparency, owners and operators are better able to analyze the many components of labor costs, and act accordingly.1 Before deductions for management fees and non-operating income and expenses.

The Threat to Hotel Financing That Nobody is Talking About

Hotel Business Review by - 14 August 2017
The hospitality capital markets have been liquid and strong since 2011. Rates have been low. Leverage has been reasonable but high. Underwriting has been practical and favorable. Lending has mirrored macro hotel operating performance, which has also been strong and improving since 2009.

Hospitality Financial Leadership - Measuring Labor Productivity Part 2

The Hotel Financial Coach - 8 August 2017
In food and beverage, you want to get obsessed about a similar measurement like you do in the rooms division. In F&B it is "hours per cover served."Right out of the gate you need to understand the definition of a cover and it has recently changed. A cover is now properly labeled as a "customer" and it is now calculated by dividing the total sales in all food and beverage items by the total number of customers. Before it was only food sales and you divided the number of people who consumed a food item by the total food sales. Now it is the total of warm bodies divided by total F&B sales. See Uniform System of Accounts for the Lodging Industry Eleventh Revised Edition(Hospitality Accounting/Financial Management) for more on this change.With productivity, the measurement is "hours per customer." That is what you want to get obsessed about. Unlike the cover in the rooms division, a "customer" is or can be more challenging to record consistently and correctly than a room sold. Be diligent with the food and beverage service staff to ensure they record their "customers" correctly in your point of sale system. Reviewing point of sale guest checks will tell you very quickly if this is being done properly and consistently. One other tip is to closely review the daily revenue report and look for average covers by meal period that do not make sense.Productivity in food and beverage is also best measured by dividing hours worked by customers served. Operations managers have no control over wages or pricing, but they do have control over schedules and this is where they should focus. The percentages and per cover/customer costs are important but the trump card is "hours per customer served." What you need to see is this measurement in all budgets, forecasts, daily reports and schedules. What is the F&B total productivity and how does it breakdown by outlet? You need stacks in each outlet that can stand on their own and you also want to see the consolidated results.In F&B there is a bigger challenge than rooms with productivity creation. In F&B because of the multiple departmental structures and the allocation of management, food preparation and stewarding, things must be set up a little differently. Again, you are going to need your payroll dictionary and different classifications based on job title.The first delineation is the people in operations who work on the floor vs. behind the scenes. All service staff for an outlet, both management and hourly, are considered "direct." The hourly and management for food preparation, stewarding and F&B administration are considered "allocated." To design stacks in F&B, use the following structure.Direct and allocated both need hourly and management positions:Any Outlet Hourly DirectAll Wait Staff, Host, Bussers, Bartender, Bar Waiter, Cocktail Servers, Sommelier, Supervisors, Bar Backs, Captains, All Floor Guest Facing Non-Management PositionsAny Outlet Hourly AllocatedCooks, Dishwashers, Helpers, Apprentices, Supervisors, Pantry, Attendants, Porters, Cleaners, Chef D'Partie, Butcher, Garden Manager, Secretary, Administrative Assistant, Office ClerkAny Outlet Management DirectOutlet Managers, Outlet Assistant Managers, Maitre D, BeverageManager, Assistant ManagerAny Outlet Management AllocatedExecutive Chef, Sous Chef, Pastry Chef, Outlet Chef, Banquet Chef, All Chef Positions - Executive and Jr.In banquets, there will be several additional hourly and management positions; however, the same hourly and management "allocated" positions will apply. Banquets Hourly DirectAll Wait Staff, Porters, House Person, Bus Persons, Bar Person, Bartender, Banquet Supervisor, Banquet Captain, Banquet Bar Supervisor, Office Coordinator, Payroll Coordinator, Revenue Clerk, Host, Hostess, Cashier, Banquet Secretary, Catering Coordinator, Administrative Assistant Banquets Management DirectDirector of Banquets, Assistant Director of Banquets, Banquet Manager, Assistant Banquet Managers, Conference Services Managers, Assistant Conference Services Managers, Catering Managers, Assistant Catering ManagersThe results of these groupings and classifications are well worth the effort. On the chart below see an example of single outlet productivity; banquets would also look the same:In food and beverage, you cannot get away from the allocation game. In your hotel, the most efficient way to manage your food cost and food labor is to have one main kitchen that prepares cold food, sauces, soups, pastries, banquets, and butchers the meat, etc. Then outlet kitchens prepare the final product, usually the protein through a combination of resources from the main kitchen's efforts and their own.The same idea is applied to stewarding and administration in the F&B division. Hotels that try to capture all the costs for food and labor directly for each outlet are ultimately not successful. They either spend too much time creating the separation and resulting duplication of efforts that the main kitchen scenario provides, or they pretend that they can capture the actual costs. Either way allocations of labor and cost of goods are inevitable.In the end the allocation method is ultimately the most efficient way to manage the labor in food and beverage. What you need is an effective way to measure and manage in food and beverage. The "direct and allocated/management and hourly" is the way to go.Inside the F&B consolidate statement you can see the individual outlet results, as well as the total for the allocated areas.What you want to see in your daily operation is productivity. Have a daily labor analysis produced so you can track and monitor the productivity. Include these summaries in the financial statements each month. From that analysis, you can see where the hotel is winning with productivity and where the hotel is not.In the scenario above for the month of May, I see the following:Banquets had a great month and are ahead of budget and last year, both hourly and management productivity is better with lower volumes of customers, well done.Room service had a poor result for May, lower volumes and more hours worked. This requires attention. What are we going to do about this ongoing challenge we have? How else can we provide our guests F&B services?The all-day restaurant also had a challenging month with the volume of customers flat to last year and below budget. I need to ensure my floor managers are adjusting the schedule where possible, sending people home early where possible. I need to emphasize again that every hour counts.The results in fine dining were mixed with an improvement over last year but below budget.Sundays are the problem and we need to look again at our need to be open on Sunday.Food prep is creeping up and it appears that little adjusting is being done. The new chef is more concerned with keeping his cooks happy with their hours than he is managing his productivity. I need to remind her again that labor productivity targets are part of her core responsibilities.The information segregation and the framework outlined above give you a lens to see what is happening in your operation. It is up to you to use it and to manage the team and move in the direction of incremental improvement. To get a copy of my F&B Productivity spreadsheet send me an email david@hotelfinancialcoach.comTo get a copy of my Rooms Productivity spreadsheet send me an email david@hotelfinancialcoach.comTo get a copy of my financial leadership recipe F TAR W send me an email david@hotelfinancialcoach.comTo get a copy of my Flow Thru cheat sheet send me an email david@hotelfinancialcoach.comVisit my website today for a copy of my guidebook: The Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotel www.hotelfinancialcoach.comCall or write today and arrange for a complimentary discussion on how you can create a financially engaged leadership team in your hotel.

Hotel Asset Management: Acquisition Process and Strategies

TFG Asset Management - 8 August 2017
Before assessing the opportunity, the HAM should understand the type of owner who will be buying the property. In this industry, the diversity of owners ranges from Real Estate Investment Trusts (REITs), individual owners, hotel owning companies to family offices.During the preliminary stages, the appointed HAM is required to set a grid of criteria to evaluate the potential acquisition, taking into consideration the owner's interests and objectives. Other criteria that the owners need to consider can be classified into financial, commercial and building facility terms.The financial aspect: Factors such as the cost of land or existing building, potential appreciation of the asset, past earnings and future forecast, present value, and a proper valuation are some of the primary requirements.The commercial aspect: Factors such as the property type, location, current and future competition, actual management set up (i.e. franchise, lease, or management contract etc.) and the positioning of the hotel or area within the local community.Building facility aspect: Factors such as the existing facilities of the hotels, configuration, concept, insurance and warranty etc.The HAM is also expected to conduct a re-valuation of the opportunity. A large asset management firm, such as TFG Asset Management, will also advise the owner on the main commercial factors to consider during the negotiation process.As part of the due diligence, the HAM should be able to provide an in-depth market analysis covering the changes in competitive supply and demand and assessment of demand generators, along with any other trends which can have a considerable impact on the land and/or property.The clearer the information presented during the due diligence, the easier it is for the HAM to point out the critical elements affecting the purchase of the asset.Additionally, the HAM should also be familiar with the potential zoning regulations affecting the project if any future changes are proposed to be made as part of the value enhancement of the project.On a property-level, historical performance metrics against the competitive set (ARI, RGI and MPI), positioning, and net earnings need to be reviewed thoroughly. The historical performance will also help the asset manager to quantify assumptions and forecast the future performance.From a strategic level, the HAM shall value the opportunity, not only from the discounted cash-flow perspective, but also to identify the main operational and revenue upsides of the project. Furthermore, it is imperative for asset managers to ensure that the EBITDA will be able to support the debt service if the investor is leveraging the operation.As part of the process, a building surveyor shall be appointed and supervised by the HAM. They will inspect the building (in case of an existing building) and provide a full technical due diligence.The appointed surveyor will certify if the building is maintained properly and that there are no potential hidden flaws that could lead to major losses in the future. The technical due diligence reveals all faults, some of which are not material.The HAM shall evaluate the report and highlight elements that will affect the operations of the hotel. The HAM will have to evaluate them and incorporate those insights into their Capital Expenditure model. Whether or not this will affect the final purchase price, will be subject to the owner's decision.This article summarises the general principles and critical keys to assess an opportunity and presents a process to evaluate an existing hotel building or land. In reality, the process is much more sophisticated and many external factors should also be considered, such as the impact of government regulations and potential developments in the neighborhood.Whether the objective of an owner is to optimise the rate of returns or maximise residual values, the most critical step is to ensure a wise purchase decision. By employing a credible asset management company the processes can easily be accelerated, as due diligence will be done more thoroughly, helping to minimise the owners' acquisition risk.

Sometimes Sunshine Sucks

Bill Geist's Zeitgeist - 7 August 2017
We've been spending an inordinate amount of attention on the machinations of Florida Tourism as of late. But, it's because the State has become an impressive case study of how a dominant Brand and product can so lose its way at the hands of self-absorbed legislators advancing legislation that sounds good on the outside, but is crippling on the inside.

EB-5 Financing Lawyer: What JMBM does to help developers with EB-5 financing

Hotel Law Blog | By Jim Butler - 6 August 2017
Client confidentiality precludes us from listing clients and projects we have assisted with this program, but suffice it to say that some of the best known names in the business are tapping into this funding source to fill out their capital stack at a favorable cost. And we have helped some of the biggest and highest profile players. JMBM has closed more than $1.5 billion of EB-5 financing and has sourced more than half of that for our development clients.

EB-5 Financing Lawyer: Why you do NOT want to form your own regional center

Hotel Law Blog | By Jim Butler - 4 August 2017
Although the EB-5 immigrant visa program has been around since 1990, the current trend of using it as a source of financing for hotel and other real estate started 20 years later – around 2010. We worked on one of the first hotel EB-5 financings for the W Hotel & Residences in Hollywood, and we have since worked on more than 100 EB-5 projects all over the country. Now, the use of EB-5 financing for construction has gone mainstream. High profile EB-5 financing closings include $450 million for the Century Plaza Los Angeles, $100 million for the Ritz Carlton & JW Marriott in downtown Los Angeles, $150 million for the Waldorf Astoria in Beverly Hills, and $1 billion for the Silverstein project at the World Trade Center in New York City (with a Four Seasons Hotel).

Tonight's Special: Discrimination and Harassment with a Side Order of Retaliation

Ethics Suite, LLC - 4 August 2017
A common reason why discrimination and harassment complaints often blossom from a problem to a catastrophe, is because of reactive handling. Instead, time should be taken to investigate a complaint in an objective, methodical, confidential and consistent manner. This means:Investigating immediately, resolving in a timely manner and documenting each step taken - in a way that you would not mind seeing described in the media or in court.Ensuring the "accuser" and the "accused" each get an opportunity to tell their side of the story and gossip is not tolerated.Taking decisive and appropriate disciplinary action and following up periodically to ensure the steps taken were sufficient to prevent future, similar incidents.How many of you (be honest, now) have had these knee-jerk reactions when listening to an employee allege this type of misconduct - even if you don't voice it?"They're exaggerating/overreacting.""They're too sensitive/high maintenance.""Who would harass THEM?"... And these reactions about the "accused"?"They don't mean anything by it - it's just their personality.""They're trouble, but also my best waiter/cook/chef/manager - what would I do without them?""I'm going to fire them immediately - I don't have time for this!"... And these reactions about how to handle the issue?"I'll just give them a warning, then I don't have to follow up later because I told them to stop.""I'll just fire them and tell the staff exactly why so it doesn't happen again.""I'll just fire them and not tell the staff anything at all."A review of court documents and media statements made in high-profile restaurant suits related to discrimination and harassment show a clear trend: early decisions made based on these reactions exacerbated the problem. In cases where top management tolerated or participated in the behavior, larger penalties were levied, and the businesses met with greater media coverage and public outrage. In at least one case, outraged patrons and a (still pending) EEOC suit forced a restaurant to close its doors for good.What's the lesson here? Regardless of how sublime your cuisine, failing to address issues of this nature can negatively impact or even close your business. Outside of colorful characters on TV and Twitter, the days of throwing plates, barking orders and epithets, foul language and sexual innuendo without consequences are over.Give your employees the tools they need to alert you to this type of problem and respond appropriately. It is, after all, your obligation to provide a safe and professional workplace environment for your employees. If you're not sure what to do, there is plenty of guidance on responding to allegations of discrimination and harassment written by attorneys, HR professionals, and other experts that is readily available on the web, including our previous article "Eight Ways NOT to Respond to a Whistleblower Report."

EB-5 Financing Lawyer: The 5 questions every developer is asking about EB-5 financing

Hotel Law Blog | By Jim Butler - 2 August 2017
The use of EB-5 financing has exploded over the past 8 years as an important funding source for new development – particularly for hotel developments. It is clearly now part of the “mainstream.” It is used by many institutional players, including government entities such as port authorities, major hotel brands like Marriott and Hilton, and some of America’s most successful and respected companies, such as Great Wolf Resorts, the Related Companies, and Silverstein Properties.

EB-5 Financing Lawyer: EB-5 construction financing term sheet for top developers

Hotel Law Blog | By Jim Butler - 1 August 2017
JMBM believes that for most developers, EB-5 financing is best structured as mezzanine debt or preferred equity, to optimize the total amount of financing and reduce the cost of the capital stack. Normally, senior construction debt (secured by a first priority lien) will be significantly cheaper than EB-5 money, but senior lenders (particularly if the subject project is a hotel) rarely lend more than 50% to 55% of the total cost of construction. Most of our clients like to use this cheap senior debt and then add some low-cost EB-5 mezzanine debt on top of it to get total loan-to-cost ratios up to 80% or more.

Digital Transformation Must Lead to Business Transformation

PR 2.0 | By Brian Solis - 1 August 2017
Who owns digital transformation within your organization? Is it the C-Suite, marketing, IT, HR? It’s now essential for all stakeholders – no matter their level or role – to become acquainted in the purpose of digital technology if orgs are to succeed in this new economy.

EB-5 Financing Lawyer: FAQs: Essentials of EB-5 construction financing for developers

Hotel Law Blog | By Jim Butler - 1 August 2017
EB-5 is a provision in the United States immigration laws. It is the fifth “Employment Based” immigration provision providing expedited visa processing (hence “EB-5”). The program is a win-win-win arrangement, giving wealthy immigrants the opportunity to earn a “fast-track” to US citizenship if they make a minimum investment of $500,000, and create a minimum of at least 10 new jobs in the United States. In return, communities get the benefit of economic stimulation created by this investment and the new jobs. And developers get a valuable source of financing for new projects that is otherwise more difficult to obtain and more expensive from other sources.

How asset managers, owners can succeed together Featured Articles - 1 August 2017
Hotel owners take the risk to invest big bucks into properties, which can put asset managers under pressure when working to deliver growth in EBITDA, but there are ways to balance it out and efficiently work together. Hotel owners take a big risk when they invest millions of dollars into their properties, expecting growth in their investments at the top line, and improved cash flow as well. At the same time, asset managers are under extreme pressure to deliver improved results and grow earnings before interest, tax, depreciation and amortization. Industry publications and reports indicate that more travelers have stayed in hotels this year than ever before. Occupancy has grown in 115 markets in 2016 and revenue has continued to increase. Therefore, owners expect to see cash flow increases.

Hospitality Financial Leadership - Reviewing the Hotel Budget

The Hotel Financial Coach - 1 August 2017
Budget season is fast approaching and I am writing this article to highlight some areas to look at when you are reviewing a hotel financial budget. Maybe you want to make sure you have all your ducks in a row before you submit your 2018 numbers to the corporate office or perhaps you are the one doing the review. This article will give you some ideas of what you need for your review, what to look for and where to find it.The only thing we know for sure about the budget is, it's wrong. ~ AnonymousBudgeting is first and foremost a business plan with numbers. It is the culmination of all the wants, wishes, aspirations and ideas laid out in nauseating detail for the coming year. Budgeting is also a game played by managers, executives and owners at all levels. Under promise and over deliver is the hotel's game because their incentives are linked to the budget. Missing the GOP (Gross Operating Profit) target for the year in the hotel is a big deal. Miss it two years in a row and--depending on what is in your management agreement--your brand might be out in the street.Having a good budget, one that is a stretch but not too much of a stretch, is what you want to have and in order to get it you need to know what to look for.If you do not have a map any road will take you where you want to go. ~ AnonymousThe first thing you want to have for review when looking at the budget is a P&L style report that lays out the following from left to right: next year's budget, the current year's latest re-forecast, the current budget and last year's actual. In addition, you will want detailed level data on the prior three-five years. What have the trends been on occupancy, rate, revpar, average F&B customer spend, expenses per department, productivity, average wage rates and year-over-year flow-thru in rooms, F&B, non-operating department and GOP? Your system should be able to produce this as long as you have the actual history under your belt. Take the time to prepare this report in advance of your review schedule and it will make life much, much easier.Something that looks like this example:xxxNext, you want to examine the YTD actual performance relative to the current budget and last year. This is where you will find the most common bait and switch routine coming from many of your constituents. Let's say you are reviewing budgets in mid-September. You will need the YTD August P&L with a detailed comparison to YTD last year and YTD budget. In this imagined scenario, the hotel is doing well in relation to last year with revenues up YTD August by $1 million and GOP is up $600K. The same kind of comparison shows up relative to the current year's budget. That is the bait.Now here comes the switchWhen you look at the year-end rolling forecast for the current full year and compare that to a full year, last year and the full budget, you will often find the prosperity you have seen YTD stop or, even worse, it will reverse. This is the sandbagger's biggest opportunity to tell his or her tales of woe. In defense of poor performance in the last four months of the year, you will hear amazing stories about one-time windfalls last year, events and business that were a once-in-a-lifetime deal, rebates and credits galore last year. In defense of the slippage to the current year's budget at year end, you will hear whining about expense timing, cleaning projects and lite accruals. These are the sandbaggers' stories and you have been warned.One sure-fire way to throw some water on the budgeting sandbaggers and their YTD performance vs. the Y-End numbers is to have last year's scenario laid out. What was their story at budget time last year relative to that year's performance and how did they finish the year? Sandbagging the budget is an annual event and it can be well worth the effort. If a sandbagger can downplay the last quarter's performance by $200K in GOP, next year's budget target is at least $200K less. A great way to deter the sandbagger is a final review of the budget mid-January. Most hotels can swing this with their brand and ownership should insist on it.Another tool you want at the ready is your group rooms report. What is the pace? In many hotels groups form the base of business. Understanding the group rooms picture is critical to the budgeting process. Where are you YTD with our pickup for next year, where were you last year at the same time? What is the year end crossover group rooms on the book's target for this hotel and how far do you have to go to get there? How does this compare to last year? What are the definite and tentative numbers each month? What are the associated rooms rates for each month? What about the banquet spend with minimums required? Where are the opportunities to yield and where are the need periods? What is the forecast for citywide events? You will want to have this group rooms report checked against the reservation/sales system. Sandbagging the group rooms is not uncommon. One way to test this is to look at last year's performance in the final quarter with the production of group rooms on the books. Hotels are notorious for busting the dam on group contracts going firm in the final quarter. Do not be sold on the story that next year's group performance is down. Dig into the details.Corporate room nights serve to provide base as well in many hotels. A corporate rooms production analysis is what you need to see. Who are the top 20 contracts? What was their production last year and YTD this year? What are the rates and what is the strategy for next year? Who are the top performers? Who is not producing their committed room nights? Who has last room availability? Who do you need to be aggressive on the rate with?Having a firm strategy on your corporate rooms business is a key component in many hotels. Adjusting this base up where possible in a market that is going up is what you want to look for. If your market is tight or retracting, preserving this base is very important.An incredibly valuable piece of information you want at the ready is the report that details all the corporate and regional brand related expenses that are included in the budget. The programs must be laid out along with a comparison to last year's actual spend and the current Y-End forecast by individual program. If you are reviewing a branded, managed hotel this report is critical. Brands sell management services. Brands endeavor to mandate programs and they want owners to pay. What is baked into your operating budget that the brand will end up charging you back for? Do these programs make sense? How much was in last year's budget by program and how much is the forecast spend for the current year? What programs are optional and which optional ones are included in the budget? Which programs are mandatory, how much are they and why?Understanding what is layered into your budget that comes from your brand is mission critical if you are an owner. If you manage the hotel you will want to have a firm handle on this as well. In many scenarios money is budgeted and never spent on corporate programs. Hotels love to include budget items per the brand's direction and sometimes when the rubber hits the road the hotel will not spend that money. It is a great way to inflate the budget and use the reason that it is a corporate program.In any hotel budget, the biggest cost is labor. To review any hotel labor budget, you need to be able to measure productivity. Is next year's budgeted productivity better that this year's performance? You better hope so. Why would anyone present a budget for their hotel and project lower labor productivity? How many rooms will we sell next year and how many hours of labor in the rooms department? How many customers will you serve in F&B and how many hours of labor will it take to serve each one? How many EFTEs do you have in each non-operating department and how does this compare to the current year and last year? Hotels are in the habit of adding bodies. If all you are looking at in your budget is dollars of payroll without the corresponding hourly statistics, EFTEs and productivity measurements, you are flying by the seat of your pants. Even if these stats are not included in your budget and actual financial statements, they are easily found and a supporting analysis of the budgeted labor with productivity is a must. If you need to review and ultimately approve a budget, you need to understand the productivity.On the other side of productivity, look at the average wage rates. Do they line up with reality? What is the plan for wage movement next year? Union contracts, local wage laws. It is all there. You just need to know what to ask for and where to find it.REVPAR index is another key document. What is the properties index YTD and last year? What is the relationship between rate and occupancy, groups and leisure? How does this relate to the 2018 growth projections for the hotel and the hotel's current REVPAR index position? Are we talking share or are we giving share? Are we gaining or losing share from occupancy or rate, groups or leisure? You should see a direct correlation between the hotel's strategy and the REVPAR index predictions for your market. The second report you will want to see and have a detailed look at is the supply and demand index for your market. What is the picture for the total market and how does the hotels position correspond: historically in the past three-five years, this year, next year and beyond? This report should also include new inventory for planned new hotels in the market place. You will want to see a picture that shows your hotel making gains in its marketplace. If not, then what are you doing to fix this?The staffing guide is another must-have document. What are the fixed and variable positions in the hotel? You will want to see this report laid out for the entire operation, both operating and non-operating departments. Look at a department like the front office and see the staffing formula laid out each day of the year. Look at an example: At the desk, you operate 7-24 and the first step is start with the fixed positions you require daily. Then add the incremental staff and hours needed to handle the arrivals, departures and occupancy at the different levels, separate group and leisure rooms. In this example, you have a 300-room hotel. You need two overnight staff regardless of occupancy and three AM and four PM staffs. That is your fixed front office staffing. After 100 arrivals, you need to add a fourth PM. After 165 arrivals, you need a fifth PM. With your AM staffs, you only need a fourth after 100 departures. With your overnights, you only need a third when weekend occupancy is above 200 rooms for additional security. A detailed staffing guide should be developed and the daily activity in your hotel serves to populate the drivers and, "Voila!" you have a powerful tool!Expenses need to be zero based. The biggest sin I see is hotels presenting a budget with low-balled revenues and poor flow thru. Depending on your market and its current performance and its historical performance you should see a picture emerge for next year well before you prepare the budget. An old GM of mine was fond of doing the budget in 5 minutes. He would know the historical annual revenue gains for the past three years, he understood the current market conditions and that no one knows what will happen tomorrow.He would say something like this, "In the last three years we have grown the top on average 7 percent each year and our flow to GOP over the same period has been 56 percent. So, let's not waste any time here. Next year I want to see 6.5 percent revenue gain and a 50 percent flow to GOP and let's let corporate and the owners tell us where we can find more."Simple, really: Produce a reasonable positive picture based on good performance and good overall management. Why would you produce a dog and try and sell it? So many hotels make this mistake on their first-round budget. Corporate and regional teams usually find these and get them in shape before they are presented to owners.More than anything your budget speaks to your ability to manage. How you manage the sales team, catering and banquets, the entire operation and ultimately deliver the GOP. If you do a budget and it lacks growth and/or flow, this simply points out where you need to get to work.Do not present your problems, present your solutions.To get a copy of my Rooms Productivity spreadsheet send me an email david@hotelfinancialcoach.comTo get a copy of my financial leadership recipe F TAR W send me an email david@hotelfinancialcoach.comTo get a copy of my Flow Thru cheat sheet send me an email david@hotelfinancialcoach.comVisit my website today for a copy of my guidebook: The Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotel (

EB-5 Financing Lawyer: How JMBM has helped developers close more than $1.5 billion of EB-5 construction financing for development

Hotel Law Blog | By Jim Butler - 29 July 2017
EB-5 financing is an important and viable source of construction financing for hotels, hotel enhanced mixed-use, and other development projects. Eight years ago, when JMBM started helping hotel developers with EB-5 financing, many worried about whether this is a legitimate and reliable financing source. Now, after billions of dollars of development have been funded with EB-5, this type of financing is regarded as mainstream. It is used by many institutional players, including government entities such as port authorities, major hotel brands like Marriott and Hilton, and some of America’s most successful and respected companies, such as Great Wolf Resorts, the Related Companies and Silverstein Properties.


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