Hotel Management - 19 October 2017
Last week, City Developments, the majority owner of UK hotel group Millennium & Copthorne, made a bid to buy the company, which was valued at £1.8 billion. The firm’s independent directors had agreed to recommend the offer, at 552.5 pence in cash for each share. Not everyone has agreed to the valuation, however: A letter to Millennium’s independent committee of directions from shareholders International Value Advisers and MSD Partners said that the proposal “significantly undervalues” the company. The offer does not reflect a true value of the firm’s assets, the shareholders claimed, and the offer is a 32.5-percent discount on its true value as set out in its accounts rather than its share price.
CFO Magazine - 19 October 2017
Cash flow is the lifeblood of any business. And a key measure to track for a healthy cash flow is Days Sales Outstanding (DSO). DSO represents the number of days it takes for a company to convert its accounts receivable into cash. The sooner the company gets that cash, the stronger its cash flow and financial position is likely to be.
CFO Magazine - 19 October 2017
It may seem obvious that shareholders stand to benefit when outside directors on a company’s board have experience in the industry the company operates in. However, a forthcoming research paper contends, that doesn’t hold true in the case of highly diversified companies, where directors tend to “play favorites” by influencing over-investment in the industries they’re most familiar with.
hotelnewsnow.com Featured Articles - 19 October 2017
Federal conference spending surged ahead in fiscal year 2016, continuing the trend of recovery after a sharp decline in 2013, when there was a 62% drop. In 2012, the Office of Management and Budget issued Memorandum M-12-12, which requires all federal agencies to publicly list conferences costing more than $100,000 of taxpayer funds. Since 2013, spending has slowly been creeping back up, with the largest surge over the past four cycles seen in 2016. Federal agencies are not required to report on their spending on meetings of less than $100,000. The results we have compiled are limited to the most expensive conferences.
Hospitality Technology Magazine - 19 October 2017
The past five years have seen a huge shift within the hospitality industry. Hotels and restaurants are now nearly completely digitalized – from reservation platforms and apps and POS systems, to the complex corporate networks of large chains. These changes have brought enormous gains in efficiency but also enormous increases in cyber risk.
HFTP Connect - 18 October 2017
As a first-time participant to the HFTP Annual Convention (possibly the first from the Middle East area), I will be looking for all of the insights the event will provide during its three-day agenda later this month. I believe this convention will be the best of its kind (those of an educational and informative nature) and provide tremendous networking opportunities.
hotelnewsnow.com Featured Articles - 18 October 2017
As hoteliers look ahead to next year, they are setting spending priorities based on what they hope will lead to significant returns on their investments. Those with independent properties have the freedom to make decisions without brand requirements dictating every move, but they also must do so without the vastly wider knowledgebase of a brand. Instead of reacting broader industry trends, independent hoteliers focus on their individual properties and what they believe will hit the right notes with their specific guests.
Puzzle Partner Ltd. - 18 October 2017
It's no secret -- the process of building out your 2018 business plan and marketing strategy can, more often than not, feel like gambling. Are you going to wager all your chips (marketing dollars) on black or red, odd or even? Should you make a high bet, or an inside bet? What happens if your bet is a bust? Did you just gamble away the potential success of your business or product?What if we told you that you could minimize that perceived risk, while maximizing results? Typically, the missteps experienced in marketing strategies (especially those specific to content marketing) stem from the misunderstanding of preferred content streams and social platforms popularly used by the target consumer, their core values and their subsequent buying behaviors and motivation(s). The problem here is, if a critical misunderstanding exists, but a company goes full steam ahead on that misinformed idea using the bulk of their marketing budget, recovery isn't always a walk in the park. And no one is exempt from this experience; even industry giants such as Pepsi and Dove (to use recent examples) have felt the effects of poorly developed or executed, high budget marketing campaigns that promptly imploded on a very public scale, leaving their PR teams scrambling to pick up the pieces and re-strategize.Large-scale marketing campaigns can also take a great deal of time to develop, approve and implement -- leaving companies at the mercy of a marketing landscape that is, more often than not, rapidly shifting to align with evolving consumers. Basically, if you take too long to come to the table, there might be nothing left waiting for you. This is where the concept of Agile marketing comes into play. The Agile marketing methodology revolves around the efficient implementation of mini, micro-campaigns (or critical segments of a larger campaign) that are released in waves using a highly collaborative approach from your entire team. This allows companies to effectively test and gauge consumer response in smaller doses, without utilizing all (or the majority of) their marketing resources in one shot. With an increase in speed, transparency and adaptability of company process, team members can focus effectively on minimal increments of each project until they become suitable for release or testing amongst consumers. After all, it's frequently said that, within the realm of digital marketing, you need to be able to 'fail fast'. If what you're doing isn't working, you want to know now, not later. The Agile approach capitalizes on this understanding, and ensures you are never putting all your eggs in one basket, so to speak. Instead, you're setting yourself up to fail (and more importantly, learn) fast and adapt quicker than your competition, because you can discover an adjustment that needs to be made after a well implemented mini-campaign or test, almost immediately. Basically, to be agile within the marketing sphere, your business has to continuously leverage data and analytics to identify opportunities, roll-out mini campaigns and adjust existing campaigns or solve problems in real time. The entire approach is based on the traditional rugby 'scrum', where the ball is constantly being moved back into play while two teams are huddled together, pushing and crowding around the ball. In order to score, the ball has to be continuously passed backwards. Applying this format to Agile marketing, to be truly 'agile', a team has to be extremely collaborative at all times, with everyone playing their part in moving the ball (a strategy or campaign) forward to score (positive consumer response). A successful Agile marketing campaign requires everyone on the team to work towards a common goal, understanding that the process is, at it's core, entirely iterative and subject to continuous evolution. When a company is truly agile, they should be able to run hundreds of campaigns simultaneously, while constantly producing new ideas each week.The results speak for themselves. According to Mckinsey, "Even the most digitally savvy marketing organizations, where one typically sees limited room for improvement, have experienced revenue uplift of 20 to 40%. Agile also increases speed: marketing organizations that formerly took multiple weeks or even months to get a good idea translated into an offer fielded to customers find that after they adopt agile marketing practices, they can do it in less than two weeks." So, what does an Agile strategy actually look like?As a great case study example, the Extended Campuses of Northern Arizona University had always used a traditional marketing model, which consisted of annual budgets which fueled 50 or so marketing initiatives throughout the year. As the University become more aware of the rapid pace of the digital marketing realm, they realized they needed to change their process to adapt, remain efficient and relevant.That's when they discovered Agile marketing. Instead of relying on annual plans, they switched to shorter-term bursts of collective focus (one or two months ahead, versus an entire year). This shift in their marketing approach allowed them to be more responsive to their client needs, and move quickly to adopt necessary changes.Instead of assigning a project to a single individual, who then had to push the work through freelance graphic designers and wait through various approval/editing phases, they broke down big projects into smaller, prioritized segments. Within Agile marketing, this breakdown is called a "sprint". The segments were then assigned to individuals (chosen based on skills and availability) within the department, who were able to complete their contributions (creating the collective whole) with ease within two weeks. This not only minimized the time required to complete each project, but the University was able to reduce the amount of outsourced work, which helped to reduce costs. According to the reports, the University has been able to hire more full-time writers and part-time designers, and in 2013 the marketing department created more than 200 collateral pieces-- four times what it produced the previous year. The marketing team limits itself to one hour of meetings a week, with twice-weekly 15-minute "scrum" meetings which help team members to remain accountable and share information without wasting time. Their productivity is up 400%, and sprint tasks have a nearly 95% completion rate.Ask yourself, is your business in need of Agile marketing makeover?
Tnooz - 18 October 2017
Expedia Affiliate Network, alongside sister-brand Hotels.com, is the latest travel company to launch an accelerator programme. Hotel Jumpstart, as the initiative is called, will provide startups with mentoring, technology such as APIs, and workspace to help them grow their businesses. The scheme is being run with London’s Traveltech Lab, the incubator for early stage technology businesses and the Trampery, which creates spaces to foster creativity.
Larry Mogelonsky - 18 October 2017
Hurricanes Harvey, Irma and Maria; the Mexico City earthquake; the tragedy in Las Vegas; the wildfires in Napa and Sonoma counties… all are constant reminders of our mortality as well as our responsibilities as hoteliers to safeguard our guests. Calamities on an epic scale are always hard to fully comprehend, especially in the immediate aftermath, when things are so often hard to control. My first thoughts go out to the families who are directly affected by these horrible events, but rather than refuse to believe that this can happen at your property, we must contemplate the inevitable and formulate a plan.
Avendra - 18 October 2017
Avendra, the leading North American hospitality procurement services provider, today announced that its Board of Managers reached a binding agreement with Aramark Corporation (NYSE: ARMK) to acquire the company for $1.35 billion. Avendra is owned by founding shareholders Marriott International, Hyatt, Accor, ClubCorp and IHG.Avendra was launched 16 years ago by merging the procurement divisions of its founding shareholders. Today, Avendra is a leader in hospitality procurement services, serving 8,500 hotels and other hospitality businesses in the Americas providing a range of procurement and supply chain services to its customers, including hotels, golf clubs, universities, multi-family housing buildings, as well as other segments.Wolfram Schaefer, Avendra's President and CEO, said: "We are very enthusiastic about this evolution for Avendra. We think the combination of Avendra and Aramark, a company admired and respected around the world, will bring additional value to both our customers and supplier partners. Our process for creating valuable contracts and providing hospitality expertise will only get stronger and our commitment to world-class customer service will continue to be the foundation for all we do.""Most importantly, I want to thank the Avendra team for competing day after day at the highest level, with the utmost integrity," Schaefer continued. "Their unwavering efforts and continual focus on delivering value to our customers and suppliers propelled us to this day."As part of the agreement, Marriott, Hyatt, Accor and ClubCorp have agreed to commit to a 5-year procurement agreement with Aramark and Avendra.Leeny Oberg, Chairman of the Avendra Board and Executive Vice President and Chief Financial Officer of Marriott International, said, "Avendra has become very successful. From its beginnings serving founding shareholders, Avendra has added non-founder customers who now make up the majority of company revenue. Avendra's Board believed this was an appropriate time to take Avendra to the next level by considering opportunities, including sale of the company, to further increase the company's purchasing power. As part of Aramark, we believe Avendra will continue its growth, driving greater scale and value for the benefit of its customers."Eric Foss, Aramark's Chairman, President and CEO, commented, "We're excited to welcome Wolfram and the Avendra team to the Aramark family. Combining Avendra's powerful procurement capability with Aramark's leading supply chain management expertise will bring increased growth, buying scale, and improved service levels to both Avendra's and Aramark's customers, while strengthening our industry reach and competitive positioning."The transaction is subject to the expiration or termination of the waiting period under the Hart Scott Rodino Antitrust Improvements Act and satisfaction of other customary closing conditions. The parties expect the transaction to close before year-end. Once the transaction closes, Avendra will become an Aramark business unit headed up by Wolfram Schaefer.Goldman Sachs & Co. LLC is serving as exclusive financial advisor and Latham & Watkins LLP provided legal counsel to Avendra. J.P. Morgan acted as lead financial adviser to Aramark, while Simpson Thacher & Bartlett LLP acted as legal counsel.About AramarkAramark (NYSE: ARMK) proudly serves Fortune 500 companies, world champion sports teams, state-of-the-art healthcare providers, the world's leading educational institutions, iconic destinations and cultural attractions, and numerous municipalities in 19 countries around the world. Our 270,000 team members deliver experiences that enrich and nourish millions of lives every day through innovative services in food, facilities management and uniforms. We operate our business with social responsibility, focusing on initiatives that support our diverse workforce, advance consumer health and wellness, protect our environment, and strengthen our communities. Aramark is recognized as one of the World's Most Admired Companies by FORTUNE as well as an employer of choice by the Human Rights Campaign and DiversityInc. Learn more at www.aramark.com or connect with us on Facebook and Twitter.
Jumia Travel - 18 October 2017
The sanctions relief comes as a go-ahead to tapping key trade and investment opportunities in Sudan, across industries such as finance, agriculture, mining and tourism; with companies such as Jumia Travel now planning to revive business with hotel partners in the country. "Like any other business, the sanctions had largely affected our business in the Sudan, perhaps even feeling the pinch more as we are in the travel industry. With an already promising growth in tourism, we are happy to explore the massive business potential that lies in the sector," says an ecstatic Cyrus Onyiego, Jumia Travel's Country Manager Kenya.According to the World Travel and Tourism Council's (WTTC) report on Travel & Tourism Global Economic Impact & Issues 2017, Sudan's tourism sector has registered impressive growth in the past 6 years, with an annual average growth of 49.8% in visitor exports. This, besides directly supporting 1.8% of total employment (193,000 jobs) in 2016, and an expected increase of the same by 5.7% in 2017.Onyiego further notes that reviving Sudan-bound bookings on the online platform will provide increased visibility of the properties, resulting to added growth in revenues. "We believe by so doing it will go a long way in contributing to the employment rate in Sudan, as well as to the growth of the country's economy which is on its road to recovery."Sudan's sanctions date back to the 1990's after the country was accused of hosting Osama Bin Laden, sympathizing with terrorists as well as supporting terrorism activities. The issuing of an executive order by Obama to lift the bans on a probational case during his last days in office paved the path to restoration which has finally culminated to the clearance. With a naturally endowed ecosystem, defined culture and heritage; presently spotting a list of five tentative World Heritage Site, Sudan has an abundance of tourist attractions and unadulterated experiences which if tapped will be an invaluable source of revenue to the country.
Hotel Management - 17 October 2017
When hoteliers need loans, lenders look at many different metrics in order to calculate borrowing power. From NCF to NOI, RevPAR and beyond, Mac Dobson, senior vice president of originations at Aries/Conlon Capital, breaks down all the acronyms and terms hoteliers need to know. First, Dobson said hoteliers need to know their numbers upfront so that they or their intermediaries can ensure the accuracy and structure around them and improve results. “Get organized,” he said, adding that hoteliers should gather at least three years’ worth of profit-and-loss statements in Excel as well as a trailing 12-month statement. With those in hand, the following are what lenders look to and hoteliers should know about:
CHMWarnick - 17 October 2017
Contrary to what some may believe, the role of the asset manager during the annual budgeting process is not to be argumentative and combative with the operator, but rather:Share best practices;Thoughtfully and constructively, challenge thinkingInterject strategic direction; and,Align management and ownership objectives.CHMWarnick will actively participate in the budgeting process on behalf of ownership groups of more than 65 hotels with 28,000+ guestroomsthis year. We are pleased to share some key issues and resulting strategies that we plan to employ, as we embark on our 2018 budgeting efforts.What we know about 2018:Slow and steady on most counts...forecasting growth, for most KPIs, albeit at a decelerated pace. Challenge will continue to be keeping expense increases at a rate lower than projected income increases.Prognosticators are in alignment, with projections for occupancy, ADR and RevPAR growth, more or less in lockstep, as compared to wider spreads in the outlook for years past. But, every market is unique and we can't paint the whole Country with the same paintbrushOccupancy is generally at peak and has leveled off in most markets; Although, market-tomarket the story differs, each with its own supply story requiring individualized knowledge and attention, and may differ vastly from Nationally-based forecasts (Nation projections = flat to 0.2% decrease).ADR is still projected to grow on a National basis, but at a decelerated rate, averaging 2% annually; Industry still wrestling with inability to achieve more meaningful ADR growth at peak occupancy levels (National ADR projections = 2.2% to 2.5% increase).RevPAR is projected to continue to grow (fueled by ADR). National average increase is forecasted in the 2.0% to 2.4% range. Key in 2018 will be increasing "Net" RevPAR, after commissions, yielding higher profit from revenue growth. Caution, National averages are just that...RevPAR has already or will soon be turning negative in some markets!Expense growth has, and continues, to outpace revenue growth and may even exceed it in 2018; Leading drivers are labor (living wage initiatives, basic wage/benefits) and cost of customer acquisition. Management teams will have to work much harder to achieve profit growth, even in light of increased revenues.GOP on a per available room basis is reported by CBRE to have increased on average 7.9% between 2009 and 2016; Forecast for year-end 2017 and 2018 is 3.4% and 2.5%, respectively.Revenue management continues to grow in importance. After the GM, the Revenue Manager is arguably the single most important position in a hotel today; yet, skill and experience at the property level varies wildly. While a case can be made for sharing a Revenue Manager among two or more hotels (e.g., can afford a higher skill level, owners need to look skeptically at how such position "complexing" will affect their own hotel.Leisure has, and continues to be, a major force in the lodging industry's growth and success. This has manifested in stronger than historical weekend demand in many markets. Continue to look for opportunities here.Group rate growth still healthy, albeit there are some signs of slowing demand; Shortened booking window and increased intermediary costs are a continuing reality.Corporate demand remains stable, with U.S. consumer and corporate market on solid footing; Hotels pursuing volume account rate increases of 3% to 6% for 2018, as evidenced by RFP season results within our own asset managed portfolio.Government per diem rates are a mixed bag, with markets such as Washington, DC, scheduled to experience the highest per diem rates historically, while GSA has decreased rates for other markets.Supply growth is forecasted to be equal to, or slightly exceed, demand growth in 2018, a notable shift not seen since the last recession; 2018 will see the addition of eight new hotels with over 50,000 SF of meeting space, which has not happened in over a decade.Brand initiatives continue to focus on enhancing guest loyalty, lowering guest acquisition costs and generally improved control over booking. In 2017, many brands introduced loyalty rates on brand sites that were lower than those available through OTAs; many re-negotiated and were successful in lowering OTA commissions, while others forged new, and significant international business partnerships (Marriott/Alibaba Group). Most brands also adopted a 48-hour (or higher) cancellation policy, to reduce last minute cancellations/rate trade downs. Some brands are testing "urban" resort fees. We remain optimistic about many of these brand initiatives, but encourage owners to track and measure results in 2018, and watch out for increases in brand charges that may off-set positive impact.Brand breeding has not slowed. The world's 10 largest hotel companies combined have more than 115 brands, roughly one-third of which didn't exist a decade ago. New brand creation in recent years has been mostly be centered on lifestyle hotels (many millennial-focused) and "soft-brand" extensions of the major players (Tapestry by Hilton, Autograph by Marriott, Hilton's Curio Collection, Hyatt's Unbound Collection, Choice Hotels' Ascend Collection, Wyndham's Trademark Collection, among others). There are no signs of brand proliferation slowing down.Capital requirements will intensify as hotels generally age, and brands implement new standards to maintain competitiveness, while establishing new swim lanes for their multiple brands. Increased requirements on ownership to reinvest, even in newer properties to meet brand, market and guest requirements. In addition to keeping up with continually evolving brand standards, owners are also challenged from a capital standpoint, to keep pace with the cost of new technology.Invest markets have slowed considerably in 2017, and we expect continued slowing in 2018, given the slowing of foreign investment and where we are in the economic cycle. That said, pay attention to adaptive reuse, rebranding and focused-service developments.Industry under currents: Wages, health care, immigration, tourism, Airbnb, Google, North Korea, Trump effect (and we're not just talking hair trends)! Lots bubbling below the surface, but nothing indicating a downturn is imminent.Still in unchartered territory...industry still growing in an unprecedented streak of growth. In short, it's been a LONG cycle of extraordinary growth. But, as Alan S. Blinder (former Federal Reserve vice chairman) says, "economic expansions don't die of old age, they go on until something kills them."Active ownership is a must in this operating environment; whether direct or through an asset manager, expertise and active engagement are required to optimized profitability and investment returns. Just because we did something one way last year does not mean we must continue in the future. Every dollar of income and expense need to be scrutinized to maximize revenue and flow-throughIn light of the above, our focus remains on opportunities for enhancing revenue, and specifically implementing strategies for optimizing profits in 2018. In this regard, we offer the following as key topics of discussion as owners look to engage their operating teams and align performance objectives:Have an open discussion about National industry statistics and Brand guidance, and how each compares and contrasts to what is actually occurring at the local market level.This type of critical evaluation will enable owners and operators to get on the same page about the degree to which broad based guidance, whether originating from industry prognosticators, brands or otherwise, bears relevance on a given property. Take the time to gain consensus on local market realities, as well as National trends, that should be driving strategies at property-level.Revisit original underwriting proforma.All too often, owners assume that the management team is aware of the original underwriting proforma and the underlying investment goals upon which the deal was based. Budget season represents the opportune time to dust of the proforma as another tool for reacquainting the management team with the economics of the deal, above and beyond the "in-the-year-for-the-year" mentality. The 2018 budget is merely a stepping stone in a longerterm trajectory of performance expectations, and decisions made today can materially impact future results - this is a theme that bears repeating to elevate the team and foster strategic, long-term thinking.Shift conversations from "RevPAR" growth, to "Net RevPAR" growth (a.k.a. how can we grow RevPAR more profitably?)RevPAR growth is widely discussed as a leading barometer of health for the lodging industry. From brands to prognosticators, everyone has an opinion on year-over-year RevPAR growth, and management relies heavily on this guidance when developing the budget. This issue is exacerbated by management bonuses and HMA performance clauses that have a RevPAR Index component. At the property level, the discussion of growth should not be limited to top line, but also include strategies for growing RevPAR more profitably. Challenge operators to focus on opportunities for yielding a higher "net" RevPAR, through pricing, booking, business segmentation and channel management strategies. To quote a phrase we regularly use in our shop, "not all RevPARs are created equal", and there are real opportunities for profit enhancement for those to collectively work with their operators to uncover them.Focus on opportunities, always.Regardless of which way the tea leaves fall for this year's outlook, every year brings opportunity. Don't let your operating team adopt the "mood du jour" of the industry ("modest growth", "flat occupancy", "increased supply", "RevPAR decreasing in certain markets", etc.) but rather, center conversations around opportunities...they are always there if you look for them. Status quo is not an option.Back to basics (zero-base budgeting, that is).While we would argue that the entire budget should be developed from scratch each year, this is not the going practice; If, however, significant changes have occurred or are planned (additional meeting space, F&B re-concepting, etc.), or an operating department is particularly challenged, ownership should make a case for a zero-base budgeting approach in these specific areas. Challenging the team to think about changes that have occurred or may be necessary to positively impact performance, can spark a more strategic thought process, as well as result in improved future forecasting.What were the top lessons learned in 2017?This question is not intended to lay blame or rehash the past - good, bad or indifferent. This is intended to spark a strategic discussion about potentially emerging trends, risks taken during the past year and resulting outcomes, and really taking a critical look at how these learnings can be applied to the year ahead. Were there major surprises or unbudgeted events that are likely to impact the future (new tax assessments, increase in real estate taxes, increased wage rates)? Often when such events hit the P&L their overall impact may not be fully recognized if they occurred part way through the year. Request a list of significant events or impacts. The goal is to make sure all are accounted for the full year in 2018, which will not be the case if percent growth or POR/PARs are used as the basis for budgeted increases or decreases.Occupancy is flat...so where can we grow?Again, this speaks to breaking through the tunnel vision often caused by "statistics". Yes, National average occupancy is forecasted to be flat (or decrease slightly), but, there likely are opportunities to still grow, whether by stealing share or inducing new demand (e.g., creative packaging, improved group sales, etc.). Look to debunk averages, norms and preconceived notions during budget season. Perhaps further digging will reveal that occupancy can be improved though smoothing out transient and group booking patterns; or maybe your property is under performing on weekends relatively to the competitive set. In short, don't settle for "flat" anything, but rather, always probe for more.Brand InitiativesMake sure you understand all of the Brand initiatives recently implemented, underway or planned for the near future. Engage in dialogue with property management teams and ask them to translate what these initiatives mean, and how they will impact your specific hotel(s). Brand mergers, new comp sets, changing OTA commissions, loyalty rates and program costs, revised cancellation policies...there are so many moving parts that are important to understand and constantly monitor to be sure the impact can be measured and accounted for during the budgeting process.Brand Centralized ServicesThe list and description of assessed brand fees is overwhelming (think 100+ pages of disclosures!) and can be easily overlooked. It is important to work with the property team to understand changes to these fees, any caps on fees that may exist, and determine where these fees hit the P&L. Brands are constantly shifting costs to the hotels that once were part of the "base management fee" or marketing contribution; you need a detailed accounting for 2017 and a detailed projection for 2018. This is tedious work, but centralized fees should be audited closely (don't assume the calculations are correct) and push back where no value is added.Instill a sense of urgencyYour market may be healthy, your hotel may be doing well (or seemingly so). When setting the tone for budget discussions, remember these words from Grof Andras Istvan - "Success breeds complacency...Complacency breeds failure...Only the paranoid survive."Aspirational, yet achievable.As a final tip, perhaps for owners (and their asset managers), more so than their operating teams, make sure the resulting budget for 2018 is achievable. This is not to say that the budget shouldn't include stretch goals, some new strategies and a healthy dose of questioning the status quo, but ultimately, the operating team needs to be on board directionally and believe that results can be achieved. If not, the budget can become demotivating for the operating team. Instead of a challenge, it will become an excuse because it wasn't achievable from day one.Don't forget, CHMWarnick is here to help! Please call us at 978-522-7002 to speak with a client specialist to learn more about our services and how we have assisted clients from around the globe in achieving their hospitality investment objectives.
DataArt - 17 October 2017
The hotel industry is now entering "budget season" and making budget decisions this year may be quite an interesting process. There has been a dynamic shift related to the hotel operations landscape. A new type of hotel competitor has been gaining ground quickly, and now the guest is more in control of their stay than ever before. Having a comprehensive plan will increase the chance to garner a competitive advantage in such a vibrant environment.Fueled by new innovations, the hospitality market is evolving exceptionally quickly. Recently Oracle conducted a research initiative titled, "HOTEL 2025: Emerging Technologies Destined to Reshape Our Business". Among 150 hoteliers and 702 guests surveyed, it was revealed that more and more guests want to engage with hotels that offer the latest innovative technologies. The likelihood of this number continuing to increase is incredibly high as technology filters into every aspect of our work and personal lives. The challenge lies with hoteliers and their respective vendors determining the right combination of solutions that deliver either cost reductions or revenue gains as well as defining where to invest their CAPEX or OPEX dollars. We also mustn't forget about the guest. There are a plethora of technologies that are guest-facing - designed to help hotels build a better relationship with guests. Unfortunately, the exact ROI on these particular types of offerings is often hard to find. However, don't let that stop you from investing and implementing these technologies. People are always asking, "What is the ROI on the new engagement platforms?" We must then also ask ourselves, "What is the ROI on trust? What is the ROI on loyalty?"Some of the technology trends that are re-invigorating our industry and that should be considered for your 2018 budget:Mobile - BYOD (Bring Your Own Device) where people bring their mobile devices to watch (stream or cast) their own video content on the hotel TV.Digital Keys - "Keyless entry" allows guests to bypass the front desk, sends a notification to staff before guests arrive, and gives guests the option to book a variety of hotel amenities directly from the app.Data Analytics & Artificial Intelligence - Provides more personalized offerings such as suggesting services based on previous purchases or submitted preferences.Voice Activated Devices - Used as a channel of communication with the hotel (e.g., ordering room service or reporting issues with the room).Wi-Fi - This seems like nothing new, but bad Wi-Fi can sink a hotel's reputation.There is one glaring issue that often seems to be missed. This issue focuses on relevant expertise. As these new technologies are being adopted and implemented, the chance that you have on-property expertise and resources may be limited. Also, if you would like to expand the current offering and integrate it with other platforms such as analytics - you may not be able to perform these development initiatives in-house. Hotel companies need to fully understand the future development roadmap of the products they purchase and ensure that they meet their current and future needs. These new solutions will be part of the hotel technology ecosystem in short order, so you also need to prioritize your technology spend based upon your market segment and upon your typical guest profile. Some of these investments can be viewed as immediate requirement versus future needs. Ultimately, it is up to you, your marketing team, and your IT team to put together the tech budget that help you achieve your unique goals. You should also provision for consultancy and development services as the complexities of our business grow. The quality and speed of technology adoption are critical conditions in our highly competitive environment.Technology providers and solution design consultants, like DataArt, help hotel companies and IT vendors to partition the challenges. Further, they engage with optimized resources to help mitigate the risk related to the adoption of innovative and relevant solutions or platforms. The goal... to help hotels choose and integrate the technologies that will clearly reflect their values and aspirations back to the guest.
TOPHOTELPROJECTS - 17 October 2017
Last month it was announced that controversial carpool site Uber would be banned from operating in London. Transport For London refused to renew the ride sharing site's operating license, saying that "Uber's approach and conduct demonstrate a lack of corporate responsibility in relation to a number of issues which have potential public safety and security implications," and that the ban would come into place on September 30th. However, as predicted Uber immediately moved to appeal the ban under the court's 21 day appeal procedure, and it will continue to operate while the appeal is being processed. This was a major blow for the taxi-alternative, who have faced controversy worldwide for their business model, staff treatment and ruthless behaviour, sparking protest in cities all over the world from London to Buenos Aires. The ban prompted the abrupt resignation of the Uber's UK and Ireland director Jo Bertram at the beginning of October, just ten days after the ban was announced.As the prevalence of the sharing economy has grown, big names in this revolutionary yet polemic industry have faced significant backlash from regulators, unions and local councils. While the public will always be on the side of a bargain, traditional industries are scratching their heads as to how to compete with this new models, and the hospitality industry is one such sector that has had to seriously think outside the box when it comes to competing with sites like AirBnB who appeal to the tricky millennial demographic.What implications will the Uber ban in London have on sites like AirBnB? AirBnB has already made moves to placate British regulators in London, with the site limiting rentals to a maximum of 90 days unless they have been granted permission from the city council. Since they have started to enforce the ban, 90 day-plus bookings have drastically decreased. However, unlike cities like Barcelona, which is suffering from an over-saturated tourism market that is angering locals and forcing a crackdown on AirBnB's rental properties, London has seen a 6% increase in tourism in the past year, and with tourism contributing PS127 billion annually to the British economy, crackdowns like the one in Barcelona are less likely to happen in the English capital. Increasingly it seems like councils and business owners alike will have no choice but to embrace the sharing economy instead of trying to fight it.The following projects in London should be on your radar:Park Regis Shoreditch LondonThe 70,000 sqft project for Seven Capital will create a 125 bed boutique hotel on a stand alone island site and utilising in part the original facade of a late Victorian warehouse [MORE INFO...]Westin London QueensbridgeThis is a major development in the City of London facing the river Thames [MORE INFO...]Arundel Great CourtThe Hotel would be part of the development - it will be a last minute decision if there will be a hotel or not [MORE INFO...]More information about London Hotel Projects can be found on TOPHOTELPROJECTS, the specialized service provider in the exchange of cutting-edge information of hotel construction in the international hospitality industry.
hotelnewsnow.com Featured Articles - 17 October 2017
The nature of natural disasters, like the hurricanes that struck Florida and Houston, is that they are unpredictable. But hoteliers can take steps to insulate their assets before, during and after the storms. This hurricane season—typically from 1 June to 30 November 30 each year, with peak season being from mid-August through mid-October—has been particularly active. For the first time in recorded history, the United States and its territories were hit with three back-to-back Category 4 hurricanes—Harvey, Irma and Maria. While it is still too early to tell, estimated damage associated with these storms could cost hundreds of billions of dollars and take many years to repair.
Hotel Management - 17 October 2017
Wells Fargo Corporate Banking, part of Wells Fargo & Company, formed the Hotel Franchise Finance division to provide real estate financing to multiunit owners and operators of franchised hotels in the select-service and extended-stay segments. Leading this new division is Scott Andrews, a 17-year banking veteran of the hotel financing industry. Andrews, based in Scottsdale, Ariz., will report to Nick Cole, head of the restaurant finance and gaming division at Wells Fargo Corporate Banking.
Lodging Magazine - 17 October 2017
Reserve funds consist of liquid assets set aside for future projects or unexpected costs. Typically, hoteliers contribute to reserve funds on a scheduled basis so that they can accrue interest and grow in value. Reserves are usually kept in cash so they can be accessed quickly in the case of an emergency. Many hoteliers create reserve funds specifically for PIPs, with experts indicating that most properties set aside around 4 percent of profits annually—though that is rarely enough to cover costs.
hotelbusiness.com·Requires Registration - 17 October 2017
There is nothing magical about avoiding a bed bug lawsuit. Lawsuits are the same as war in the sense that they represent the parties’ failures in diplomacy or dispute resolution. Lawsuits, like war, are for the most part, avoidable.
JMBM - 16 October 2017
Importance of budgetsIt's hard to overstate the importance of a budget in the relationship between a hotel manager and owner. The budget is the way that a manager describes, in black and white, how it plans to operate the owner's property; it is the document that translates operating standards into action, and how the owner can expect to profit from the manager's efforts. It is also an important opportunity to be sure that the operator is giving due consideration to the owner's financial expectations and/or exit strategies.Many of the larger independent management companies present a budget with little opportunity for dialog. In significant part, they diminish the direct impact of asset and property management teams. This means people sitting in an office 3,000 miles away make key budget decisions for properties that they have not seen or on markets they have not visited, based on STR reports and raw data. Generally, one would think that the property-level asset management team would be the best to guide the budget process because of their hands-on knowledge - not the corporate budgeting team.Budget challenges owners faceUnless owners have a wealth of operating experience or hire experienced asset managers, they will likely be at a severe disadvantage when they review budgets. Consider typical challenges of the budget timing and process:Managers typically deliver budgets to owners in early- to mid-November, which leaves only 45 to 60 days before the beginning of the new fiscal year. While an owner may be able to analyze and comment on the budget and propose changes, the process itself is lengthy and makes it difficult to complete in a timely manner. Operators have scheduling conflicts during that busy period, and typically take two to three weeks, or more, to prepare a response for the owner's review. Managers work on budgets almost year-round, and larger management companies have staffs that are dedicated solely to creating budgets. They have developed expertise in creating a budget that owners can only match by expending the necessary time and expertise, which takes a commitment that many owners don't understand; after all, didn't they already engage a manager for its expertise?No matter the level of owner approval rights - which range from what might be complete control to very limited influence - managers run the budget process and establish the assumptions underlying the budget, making it difficult to make changes. Leveling the playing field requires owners to engage asset managers to conduct a "shadow" budgeting process.The budget for any single year will impact budgets for years to come. While budgets are generally "zero-based," a budget for any given year is more realistically derived from the budget for the prior year, and budgets ultimately contain a variety of "legacy" items. While the old budget should, reasonably, provide a setting for the new budget, a variety of factors should (but often don't) get adequate consideration, including new labor agreements or laws, renovations and their implications, new supply, addition of new product internally (such as restaurants or bars), and outside influences, such as changes in the convention market and other drivers for the hotel market.Operators rarely provide great detail on the most significant cost to owners - labor expenses - and therefore do not give owners the opportunity to identify potential savings. Similarly, operators often give greater weight to occupancy than rate, which may actually reduce the profitability of a hotel.Owners should be proactive in the budget processBecause budgets are provided so late in the year, and with so little time to review, owners should do more than simply wait for them to be delivered. Owners should take steps not only to be ready for to review and comment on the budget promptly, but to become more involved in the entire budget process.So what should the owner do? First, treat the budget process like the manager does - as a continuing, proactive process, not a reactive exercise. Start considering how the budget should be shaped long before the manager delivers its proposal. Owners should consider providing objectives to the operator at the start of budget process as a way of expediting the process. In others words, provide the operator with a standard that ownership will accept in advance.Some good questions for owners to askOwners should look at the hotel and its results for the current year , and consider some key issues:What worked at the hotel? Where did the hotel stand out, whether it be in occupancy, achieving a high room rate, managing expenses, food and beverage or meeting revenue, and so on? New operator policies on staffing, new brand standards that can add hundreds of thousands of dollars to hotel operating costs.Just as importantly - perhaps more importantly - what didn't work? Was occupancy unreasonably high? Was the hotel unable to compete with its peers on rate? Did the hotel derive meaningful revenue from its restaurants, spa or other facilities? Are there new marketable products that need to be added to the hotel, such as F&B outlets or conferences centers? Should some facilities be leased or operated by third parties, like parking and restaurant operations?Remember that revenue per available room, the most common yardstick for a hotel's profitability, only tells part of the story. Is the hotel catering to the right mix of clients in order to meet and exceed budgets and owners' financial expectations?Does the current budget actually reflect current operations - how closely did the budget's forecast expenditures and revenues match results? This simple question may lead an owner to give greater, or lesser, weight to a manager's assumptions. Asset managers often meet with owners and operators monthly to cover payroll, costs and revenue assumptions. Analyzing those trends currently gives owners an advantage over waiting until budget time to evaluate operator performance.Did the manager propose revisions to the current budget? Did the manager revise the budget without approval? Has the manager (or brand, if the hotel is under a franchise) proposed or implemented changes to its programs? Managers and brands regularly revise centralized services, shared services, marketing programs, personnel, compensation and benefit programs and so on. All of these changes will need to be incorporated into a budget, and an owner should consider their impact early. Owners should also question whether there are changes planned for the coming year to make sure the manager incorporates those into the budget.Are there changes that the owner wants to implement in the coming year? Should there be changes to staffing, revenue management, programming or operations?Having addressed these issues early, an owner is in a position to approach the manager early in the budget process to make the manager aware of the issues that need to be addressed in the budget or, at a minimum, to respond promptly and effectively to the manager's proposal.Finally, the owner should require the manager to meet with the owner and its representatives to discuss the budget. Simply submitting comments is unlikely to be enough to effect real change; there needs to be interaction between the owner and manager.ConclusionWhile some owners have the resources to take these steps, most owners do not, and should consider engaging advisors, including experienced asset managers, to assist in the process. In addition, while a manager's failure to meet budget projections is rarely a breach of a management agreement, the budget process is a key element to the manager's performance; where issues exist with a manager's performance, legal counsel should be consulted to ensure that all of the owner's alternatives are considered.At the same time, waiting until receiving the budget is a practice doomed to failure. Using a golf analogy, the reason that golfers keep score on every hole is so they can clearly understand their performance long before the game is finished and can make adjustments after every hole. Likewise and owner needs to evaluate his operator's performance weekly and monthly. They should not wait until budget time to see whether the operator has passed or failed.The JMBM Global Hospitality Group works hand in hand with owners and their asset managers and other advisors during the budget process. We work to craft management agreements that ensure that the budgets are meaningful in content and delivered in time to allow for true analysis. After the management agreement is completed, we assist in analyzing the performance and responsiveness of managers to protect owners on an ongoing basis.
The Hotel Financial Coach - 16 October 2017
The flip side of this is: Don't change or make the people wrong--it is the system that's wrong and the system needs to be changed. Then we will get another result. Keep working the system five percent at a time. Always be re-programming your system, i.e., what version of Windows are we on?We tend to look at the chaos at work and in our own lives and we want to blame someone or something for it. It is the victim crying out that we have been unjustly punished and sentenced to suffer in the mess we are in. We need to rise above this and look at the system we use; see the system that exists and change it.Unlock the systemWhat is the next thing in the system that needs to be re-programmed, what is the next thing that needs upgrading and strengthening? Do not play the fool's game and expect a wholesale complete re-vamp of your system. Constant incremental improvements win the race.In the following situation I will use the example of the monthly commentary:As it stands now, department managers are providing useless information on what happened last month and the upcoming month's information is the same. It seems they write in a different language that I can't understand. I am held hostage by their lack of commitment to this and they do not care. Do you hear the victim? Let him out of his cage.Back to owning it:The system I have is one where the department managers are made wrong on a regular basis because they are not living up to my expectations. Really, this is the case. What have I done to strengthen my monthly commentary system? What new software releases have I made to "our" commentary system? I own this mess and I am going to straighten it out and strengthen it. Make changes every month to make the commentary better.Owning it:My new system release this month entails a 1-1 with three of my biggest commentary customers (department managers) where we review the basics of a good commentary, one that does not regurgitate the numbers. A commentary that explains the variances based on a review of the assumptions for the month and what actually happened. Ah - a little light.... We agree to the format. The managers are actually relieved to have a blueprint to use. Why didn't anyone tell me about this before? Next month I will do three more customers.My system just got 5 percent better. What will my next system upgrade be? Maybe I will co-host a 20-minute workshop on creative writing. I know my public relations manager is a keener and this is something he would love to do. I just need to ask him to help me....Systems are everythingDo not ever stop releasing new versions of your system. Every month we get to upgrade and strengthen our systems. The window opens every month.What upgrade will we release this month?What! A month goes by and no new software release. Come on! Be Microsoft, release an upgrade!If you would like a copy of any of the following send me an email at firstname.lastname@example.orgHotel Financial Policy Manual - Inventory of "Sections"Hotel Financial Coach "Services Sheet"F&B Productivity SpreadsheetRooms Productivity SpreadsheetFinancial Leadership Recipe F TAR WEnhanced Flow Thru Cheat SheetVisit my website today for a copy of my FREE guidebookThe Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotelwww.hotelfinancialcoach.comCall or write today and arrange for a complimentary discussion on howyou can create a financially engaged leadership team in your hotel.Contact David at (415) 696-9593.Email: email@example.com
Business Travel News (BTN) - 16 October 2017
The U.S. Supreme Court has agreed to review an antitrust case against American Express, following a June petition by 11 state attorneys general, according to the U.S. Supreme Court website. The court will hear arguments in early 2018 and rule by June, according to Bloomberg. The case challenges Amex's rules that bar Amex-accepting merchants from steering customers to forms of payment that cost merchants less per transaction.
CFO Magazine - 16 October 2017
Although there are countless operating initiatives we can pursue to create value in business they all can be characterized in one of three ways. First, we can make investments that deliver a return over the life of the investment above the required return on capital. Second, we can improve the profitability of existing activities by some combination of price and cost management. Third, we can improve asset productivity and deliver more profit or cash flow per dollar of assets.