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  • HFTP Research Report: Pre-opening Expenditures in Hospitality

    A study of the pre-opening budget; the timeline for these expenditures; timeline for onboarding of staff; and the selection, installation and training of the technology component. By Agnes DeFranco, Ed.

  • New Global Directors Join the 2018-2019 HFTP Board

    The HFTP 2018-2019 Global Board of Directors was installed during the association's 2018 Annual Convention and introduces new directors Toni Bau, Carson Booth, CHTP and Mark Fancourt. These extensive director profiles give insight into the distinguished professions and personal goals of HFTP's newest association leaders.

  • Internal Controls and the Important Roles They Play in Eradicating Fraud

    Although I have been preoccupied with getting in the education sessions purely related to hospitality finance, technologies and hotel pre-opening, I made sure to participate in Fun with Fraud and Enchanting Employee Embezzlement in Clubs and Hotels presented by Jerry Trieber, CPA, CHAE, CFE, CFF, CGMA, HFTP Global past president and director of audit services/support at HEI Hotels and Resorts.

  • Members Only: 2018 HFTP Compensation and Benefits Report

    By Tanya Venegas, MBA, MHM, CHIA. Results to the biannual survey conducted by Hospitality Financial and Technology Professionals (HFTP). Information includes data on compensation and benefits trends for finance and technology professionals in the club and lodging industries.

HVS Market Pulse: Newark/Jersey City, New Jersey

HVS ·19 April 2019
Notable Newark DevelopmentsNearby in Lyndhurst, the Meadowlands Sports Complex will be expanded with the American Dream Meadowlands development, a mixed-use project consisting of a 2,557,000-square-foot shopping/entertainment center, 1,500,000 square feet of Class-A office space, a 50,000-square-foot warehouse/distribution center, and a mass-transit facility. Construction of the long-delayed project is slated for completion in late 2019.The $120-million renovation of the former Bell Building at 540 Broad Street will feature 265 residential units and 80,000 square feet of office and retail space.One Theater Square, a 23-story rental property with 243 apartments, was the first ground-up apartment building in Newark in more than 50 years. Leasing began in late 2018, and the building is anticipated to be fully occupied in the spring of 2019.Recently opened hotels include the Tryp by Wyndham Newark Downtown (April 2018) and the Home2 Suites by Hilton Newark Airport (January 2019).Economic development officials report roughly $2 billion in total investments. Although Newark's hotel market has historically been exclusive to demand generated by the Newark Liberty International Airport, the city is experiencing a renaissance and transitioning toward more tourism given its easy access to across the Hudson.Notable Jersey City DevelopmentsJournal Squared, a retail and three-tower luxury residential complex that initially broke ground in October 2014, will include some of the tallest buildings in the city (at 54, 60, and 70 stories each). According to Kushner Real Estate Group, the entire development should be completed by 2024.The Harborside neighborhood of the city's waterfront has been transformed by Mack-Cali Realty Corporation over the last four years to include a $75-million, multi-phase plan with luxury apartments, shopping outlets, and dining establishments.Ironstate Development and Kushner Real Estate Group are constructing a new, multi-unit residential development at 235 Grand Street; the 549 apartments are scheduled for completion in 2019.Hotel projects under construction include the Holiday Inn Express & Suites (89 rooms) and a boutique, independent property (18 rooms).Much of the new development in Jersey City is clustered in the Downtown and Journal Square districts, which are proximate to transit hubs. Although considered a relatively young hotel market, development picked up in 2017 with the opening of the Hyatt House, Residence Inn by Marriott, and Holiday Inn Express & Suites, with additional new supply planned.The driving force behind the development of Newark and Jersey City remains the proximity to Downtown Manhattan and the excellent access provided by trains, ferries, and the Holland Tunnel. The residential and commercial booms that Newark and Jersey City are experiencing suggest that the reputations of both cities are improving. Continued demand growth should bode well for area hotels.HVS continues to regularly consult in this city, with nearby offices in both New York City, NY, led by Anne Lloyd-Jones, MAI, CRE, and in Wilmington, DE/Philadelphia, PA, led by Jerod Byrd, MAI. Both Anne and Jerod are ready to assist you on any consulting need you may have. Drew Noecker with HVS Brokerage can also discuss any Northern New Jersey asset you may be considering selling in 2019.

HVS Market Pulse: Memphis -Rehabilitation, Revitalization, and Restoration

HVS ·18 April 2019
For many years, deteriorating, neglected, and vacant properties littered the city after an exodus of residents to the suburbs, leaving Memphis desolate with deserted storefronts along abandoned streets. Many buildings were demolished and converted into parking lots. However, in recent years, the city has been bustling with development and revitalization in the South Main, Pinch, Uptown, and Medical Districts. Major restoration and redevelopment projects include the Crosstown Concourse, Beal Street Landing on the riverfront, Overton Square, and Downtown Trolley System, to name a few. The restoration and adaptive reuse of structures, such as the re-purposing of the Pyramid sports and entertainment arena into a retail and hotel development; conversions of blighted and neglected buildings, such as the Tennessee Brewery, Chisa Hotel, and Toof building into apartment buildings; and the redevelopment of the Hickman building into The Commonwealth, a commercial and residential development in 2018, are a some of the efforts being made to rejuvenate the city.In Downtown Memphis, from Front Street through Beale Street to G.E. Patterson, there are ongoing renovations and rehabilitations of hotels, as well as restorations and adaptive reuses of existing structures into new lodging facilities. The former Econo Lodge along North B.B. King Boulevard recently underwent renovation and reopened as the Hotel Indigo in December 2018; the adaptive reuse of a former Greyhound bus station on Union Street into a Hilton Garden Inn hotel was completed in January 2019; and the Madison hotel was rebranded as the Hu Hotel in January 2019.There are other developments to look forward to in 2019. The former Sleep Inn along North Front Street is being renovated and rebranded as the Moxy. The adaptive reuse of the Memphis Central Station tower as a hotel affiliated with the Curio Collection by Hilton is part of a larger, $55-million development that will transform the seven-acre train station into a mixed-use development, offering 200+ apartments, the Malco Theatre, and a renovated Amtrak station. A 1916-built warehouse in the South Main Street Arts District is being redeveloped into the Arrive hotel, and the 1911-built Tenoke Building along Jefferson Boulevard is being redeveloped into the Aloft hotel.Other new developments include a Hyatt Centric at the revived One Beale Street, which resumed planning in 2014 after a hiatus during the Great Recession. Plans call for a $225-million redevelopment of the foot of Beale Street, featuring the hotel, restaurants, 280 apartments, and up to 420,000 square feet of office space across two towers. A 200-room hotel is also planned for the Union Row development south of Downtown Memphis. The phased project could carry a total budget of up to $950 million, with the first phase set to cost $510 million and featuring the proposed hotel, nearly 800 apartments, 110,000 square feet of retail space, and 350,000 square feet of office space. In December 2018, the Center City Revenue Finance Corp. (CCRFC) approved a tax increment financing (TIF) district that would last 30 years and contribute up to $100 million to the project.Memphis broke ground on the long awaited and much-anticipated renovation of the Memphis Cook Convention Center Convention in January 2019. With a budget of $175 million, the renovation completion date has been set for the fall of 2020. In addition to the convention center renovation, the proposed $200-million redevelopment of the vacant 100 North Main high-rise includes a planned 550-room, 26-story Loews convention headquarters hotel, which is expected to bolster convention and meeting demand.Corporate relocations should provide an additional boost to Downtown Memphis's hospitality sector. Service Masters relocated its headquarters to the Peabody Place building in 2018, and Mimeo and FedEx Logistics plan on moving their headquarters in the near term. With many more commercial, residential, and hotel redevelopment projects still in the pipeline, Memphis should solidify itself as a tourism and business center of the Mid-South with a dynamic hotel market.

Europe Hotel Transactions Bulletin - Week Ending 12 April 2019

HVS ·15 April 2019
BGAM acquires Hilton Milton Keynes from Starwood CapitalLondon-based owner-operator Bowling Green Asset Management (BGAM) has acquired the former 138-room Hilton Milton Keynes, situated 60 miles north-west of London, from Starwood Capital, who had acquired the property in early 2018 from Hilton spin-off Park Hotels & Resorts as part of a seven-hotel portfolio. Newly named the MK Hotel, the property will be rebadged under a yet-to-be-revealed brand following an agreement with a global hotel company and a 12-month renovation. This acquisition brings BGAM's portfolio to five properties, all of which are situated in rural UK locations.Invel and Pangea acquire majority stake in Aphrodite Hills Resort, CyprusJersey-based Invel Real Estate Management Limited, alongside Greek real estate investment company NBG Pangaea REIC and another undisclosed major institutional investor, have acquired a majority stake in Aphrodite Hills Resort Limited and Aphrodite Springs Public Limited, for a reported EUR50 million. Covering 580 acres of land, an 18-hole championship golf course and over 750 luxury villas and apartments in combination with other facilities, Aphrodite Hills is one of Cyprus' most exclusive resorts. The resort also includes the 290-room Aphrodite Hills Hotel by Atlantica. Aphrodite Springs comprises some 150 hectares of land adjacent to Aphrodite Hills Resort and will be developed into a golf course as well as residential and mixed-use properties. The investment partners aim to continue the expansion of the resort and deliver additional housing on the resort.Dublin Citi Hotel sold to Singaporean investorsThe 27-room Dublin Citi Hotel and the adjoining Trinity Bar, located on Dame Street in the heart of the Temple Bar district, was acquired by Singaporean businessman Dr Stanley Quek and his business partner Peng Loh for a reported EUR12 million (EUR444,400 per room). The buyers have previously bought other Irish hotels such as the Trinity Lodge on Frederick Street, Dublin, for EUR7 million in 2016 as well as the Sheen Falls hotel in Kenmare for EUR17 million in 2018.Exe Liberdade Hotel in Lisbon sold to Swiss LifeA fund managed by Swiss Life, one of the largest life insurance companies in Europe, has acquired the Exe Liberdade hotel in Lisbon from private investment vehicle D. Loule 112/126 SA. The 163-room hotel is located just off the Marques de Pombal square, one of the most central and important plazas in the city. The hotel is reported to be operated through a lease with Barcelona-based hotel operator Hotusa.

HVS Asia Pacific Hospitality Newsletter - Week Ending 12 April 2019

HVS ·15 April 2019
Japan Hotel REIT Investment Corporation Acquires Hilton Tokyo Odaiba for JPY62.4 BillionJapan-based Japan Hotel REIT Investment Corporation ("JHR") has acquired Hilton Tokyo Odaiba for JPY62.4 billion. Located approximately 8.5 kilometres from Marunouchi business district, Hilton Tokyo Odaiba is a full-service hotel with easy access to Shinagawa, Ginza, and various local attractions including Tokyo Disney Resort, Shiokaze Park, Tokyo Tower, LEGOLAND Discovery Center and Madame Tussauds Tokyo. Set on the waterfront with breath-taking views of the city skyline over Tokyo Bay, the 453-key hotel features Japanese, Western and Chinese restaurants, a bar, an executive lounge, 24-hour business center, a fitness center, a swimming pool, a spa and 22 meeting rooms. The hotel market in Odaiba area is expected to benefit from the 2020 Tokyo Olympics and Paralympics. After the acquisition, JHR will pursue to enhance the attractiveness of Hilton Tokyo Odaiba in cooperation with Japan-based Hotel Management Japan Co., Ltd. ("HMJKK"), the operator of the hotel. The new addition brings JHR's portfolio in Japan to 43 hotels with an asset value of JPY374.5 billion in total in terms of acquisition price.M&L Hospitality Partners Hilton to Expand into Melbourne, AustraliaUS-based Hilton Worldwide ("Hilton") has signed a new management agreement with Singapore-based M&L Hospitality ("M&L") to operate a new AUD100 million hotel, Hilton Melbourne Little Queen Street, in Melbourne Central Business District, Australia. This marks Hilton's first hotel and M&L's second hotel to be developed in Melbourne. Situated on the corner of Bourke and Little Queen, the hotel is a redevelopment and preservation of the heritage-listed Equity Chambers building. M&L will add six storeys to the existing building and build a second tower of 16 storeys on the 1,162-square-metre site. Slated for completion by late 2019, the 244-key hotel will feature a restaurant, a bar, a fitness centre, an executive lounge and five meeting venues. The new addition brings Hilton's portfolio in the Asia Pacific region to 106 hotels.Indonesia's New Yogyakarta International Airport to Begin Operations in End AprilThe new Yogyakarta International Airport (YIA) is set to complete its first phase of development and begin operations at end of April with six international flights, two return services from Singapore, and four flights to and from Kuala Lumpur. Located in a coastal area of Kulon Progo regency, the planned 210,000-square-metre facility, costing Rp 6.1 trillion (US$432.64 million), is set to ease traffic at Adisutjipto International Airport which serves approximately 8.4 million passengers annually. YIA will have a 3,250 metre by 45 metre runway, which will be able to accommodate wide-body aircraft and 300 landing slots, a 12,900-square-meter terminal equipped with four air bridges, and will have a capacity of 14 millionpassengers per year. According to state-owned airport operator, Angkasa Pura I, the airport will be fully completed by the end of the year and there are plans to relocate 30% of domestic flights and all international flights from Adisutjipto Airport. Airlines from Qatar, Turkey, United Arab Emirates, Japan,and Australia have expressed their interests to move to the new airport.Ascott To Expand its Portfolio with 14 Additional PropertiesSingapore-based serviced residence owner-operator, The Ascott Limited ("Ascott"), has recently secured contracts to manage 14 properties with over 2,000 units across eight countries including China, Germany, India, Indonesia, Japan, Malaysia, Thailand and Saudi Arabia. With these deals, Ascott will open its first Ascott The Residence in Germany, as well as three additional properties under its co-living brand, lyf. Slated to open in 2022, Ascott Riverpark Tower Frankfurt will feature 100 rooms designed by renowned architect Ole Scheere. The 131-unit lyf Fukuoka, located within the city's major retail and recreational centre in Japan and the 160-unit lyf Shanghai China, located in the central business district of Hongqiao, are targeted to open in 2020 and 2022 respectively. Finally, lyf Raja Chulan Kuala Lumpur in Malaysia will be situated in the Golden Triangle and is set to open in 2020. With these three new additions, Ascott has eight lyf properties with over 1,600 units under development in Singapore, China, Japan, Malaysia, Thailand and the Philippines. Ascott is the serviced residence arm of Singapore-based real estate company, Capitaland Limited.China's Qingming Festival Attracts 112 Million Domestic Visitors This YearAccording to the data published by China's Ministry of Culture and Tourism, domestic tourists' arrivals recorded approximately 112 million visitors, up 10.9% year on year (y-o-y) while tourist revenue generated a total of RMB47.89 billion, up 13.7% y-o-y, during the Qingming Festival (Tomb-Sweeping Day), a long weekend that began on April 5, this year. Short-distance visits made up more than 60% of all trips. According to the survey, According to the survey, 54.33%, 32.36%, 38.24%, 37.23% and 42.91%, of respondents visited museums, art galleries, libraries, science museums, and historical and cultural districts, respectively. A growing number of tourists opted to visit Red Tourism attractions such as historical museums and memorial halls, registering a y-o-y growth of 55.2%. A variety of public and cultural activities were held in different places of the country to promote civilized tourism.

Hotel Valuation Index Middle East 2019

HVS ·10 April 2019
The Hotel Valuation Index is a hotel valuation benchmark developed by HVS. It monitors annual percentage changes inthe values of typical four-star and five-star hotels. The HVI combines the various factors affecting the economy and region at large with hotel-market specific demand and supply dynamics to derive indicative values and future growth trends. For this first edition of the HVI Middle East, we have analyzed 14 key hotel markets in the Middle East with a total inventory of approximately 175,000 rooms in the four-star and five-star market. Additionally, our index allows us to rank each market relative to the Middle East average as well as Asia and Europe averages.

HVS Asia Pacific Hospitality Newsletter - Week Ending 5 April 2019

HVS · 8 April 2019
Singapore's Integrated Resorts to Grow with SGD9 Billion InvestmentSingapore's two integrated resorts (IRs), Marina Bay Sands (MBS) and Resorts World Sentosa (RWS), are set to receive a SGD4.5billion expansion each, almost two-thirds their initial investment in 2006. In exchange, the exclusivity period for the IRs' casino licenses will be extended to end-2030. While a completion date has not been announced, the investment plan for MBS consists of a 15,000-seat indoor entertainment area and a fourth tower featuring approximately 1,000 hotel rooms, a sky roof with a swimming pool, event spaces, and food and beverage outlets. Meanwhile, RWS will feature a new waterfront lifestyle complex, two new hotels with up to 1,100 rooms, as well as two new themed areas in Universal Studios, namely Minion Park and Super Nintendo World. The waterfront promenade will undergo a rejuvenation, and the S.E.A. aquarium will be expanded and rebranded into Singapore Oceanarium. The project is expected to be completed in 2025 with new attractions opening annually from 2020. Additionally, MBS and RWS have the option to deploy an additional 2,000 square metres and 500 square metres, respectively, to their gaming areas, subject to the payment of additional land costs. MBS is owned by US-based IRs operator, Las Vegas Sands Corporation; while RWS is owned by Singapore-based Genting Singapore Limited, a company of the Malaysia-based Genting Group.Dusit Thani and Central Pattana to Jointly Develop Dusit Central ParkThailand-based multinational hospitality company, Dusit Thani Public Company Limited ("Dusit Thani"), has announced that they will jointly develop a mixed-use project, Dusit Central Park, with Thailand-based retail property development and investment company, Central Pattana Public Company Limited ("Central Pattana"). Dusit Central Park sits on the intersection of Silom and Rama IV Road and covers approximately 440,000 square metres with an estimated development cost of THB36.7 billion. The development will be conducted over three phases. Phase one will feature the 39-storey, 250-key Dusit Thani Bangkok while phase two will include the 90,000-square-metres Central Park Offices and the 80,000-square-metres Central Park Shopping Complex. Both phases will be completed by 2023. The final phase will consist of the 159-unit Dusit Residence and 230-unit Dusit Parkside, both of which will be managed by Dusit International and will be available for long-term rent or leasehold. Dusit Central Park is slated for completion by 2024.Scoot Debut in LaosSingapore-based low-cost airline, Scoot Tigerair Pte Ltd ("Scoot"), has launched its inaugural flight to Laos, making Scoot the only airline offering direct Singapore-Laos flights from April 2019. The new routes will be operated three-times-weekly by Scoot's A320 aircraft with capacity of up to 180 seats. The flights operate on a circular routing departing from Singapore to Luang Prabang, followed by Vientiane, before heading back to Singapore. Previously, this route was covered by sister airline SilkAir, also a subsidiary of Singapore Airlines. The new addition increases Scoot's network to 67 destinations across 19 countries and territories.China's Star-Rated Hotels Report Average Occupancy Rate of 60.86% in Q3 2018According to the statistics provided in China's national hotel management system, a total of 9,230 star-rated hotels were reviewed by provincial tourism administrations in the third quarter of 2018. These includes 59 one-star hotels, 1,567 two-star hotels, 4,434 three-star hotels, 2,351 four-star hotels and 819 five-star hotels. All these qualified star-rated hotels generated a total revenue of RMB51.522 billion, indicating a generally flat year-on-year (y-o-y) increase. Food & beverage and room revenues contributed RMB19.636 billion and RMB24.87 billion, representing 38.11% and 48.27% of the total revenues, respectively. The average room rate (ARR) of all star-rated hotels was RMB341.76 per room night, up by 0.44% y-o-y; average occupancy rate (AOR) was 60.86%, up by 0.46% y-o-y; revenue per available room (RevPAR) was RMB208.00, up by 0.91% y-o-y; and average operating income per room was RMB36,358.80, up by 2.74% y-o-y.Laos to Introduce Electronic Visa in June This YearLaos' Ministry of Foreign Affairs has announced the launch of electronic visa (E-visa) service in June, enabling all international visitors to apply for a single-entry visa online with a planned maximum stay of 30 days. Travellers who wish to visit Laos on multi-entry visas or stay longer than 30 days are still required to apply for an entry visa at a Lao embassy or consulate. Currently, travellers have to apply for a visa-on-arrival (VOA) at airport checkpoints and at major land border checkpoints. Fees vary according to the nationality with Canadians paying the highest fee at USD42, while other nationalities pay between USD30 and 35. Through the new E-visa scheme, the government aims to facilitate and attract more international visitors to Laos. This initiative is in line with its policy to prioritise in developing the tourism industry for economic growth, and to modernise and streamline public services. This announcement comes after the launch of a joint tourism campaign, Laos-China Year 2019, on 28 January 2019.

HVS Anarock India Hospitality Industry Review 2018

HVS · 5 April 2019
After a long hiatus Indiawide ADRs in 2018 grew at 6.25%, resulting in a RevPAR growth of 9.6%. We anticipate RevPARs in 2019 to grow by 9.5% on the back of growth primarily in ADR.
Article by Sheetal Singh & Court Williams

Understanding the Resistance to Change Within the Hospitality Industry

HVS · 4 April 2019
Frustrating, painful, draining, scary, exciting, unsettling, and exhausting are some of the words people, who are on the receiving side of change, use to describe their experience. It is a highly personal and emotional experience for most of us. Now imagine needing to serve guests cheerfully in a hospitality setting while you are experiencing these negative emotions. As a result, the toll change takes on hospitality professionals is greater than for most other industries.It is, therefore, critical that we understand the resistance to change as well as, have a plan to convert the "resistance" to "commitment" towards change.Hospitality is one of the oldest industries and yet, not much has changed with regards to how we serve our guests since the time of inn-keeping. Yet, we all acknowledge the need to innovate, evolve and respond to the changing guest tastes. Prolific brands, constantly changing technology, shifting guest service culture and evolving customer expectations, all require that we build a workforce that is accustomed to a culture of constant change and innovation.David Garvin and Amy Edmondson would call such an organization, a learning organization. However, building such an organization requires that we build commitment to change into our DNA. This requires a deeper understanding of why people resist change.The resistance to change may sometimes be passive, where individuals do not actively support change by procrastinating. As a result, slowing the change process and hoping the change effort fails. Active resistance on the other involves individuals being more vocal against change, as well as, involves individuals engaging in behaviors that are meant to derail the change process. Whether active or passive, according to Rick Maurer (the resistance to change usually stems from three top reasons-they don't get it, they don't like it or they don't like you)."I Don't Get It"How can one support something they do not understand? While those of us closely working on the required changes and its implementation are familiar with the need for change and what it may require, we often fail to realize that it may not be as simplistic or easy for others to grasp. Change creates a lot of uncertainty. Depending on the scope and scale of change it may sometimes mean that the world as we know it may not be the same.This is, especially the case if the change is radical and fast paced. We all like familiarity. Familiar gives us comfort by way of telling us that things are the way they are supposed to be. It is, therefore, important to help people understand why things should not be the way they were.For example, when the leadership at Kodak decided to move away from traditional film cameras towards digital technology in 2003 its shareholders as well as employees failed to understand why they had to forego their dividend or current way of doing things (Palmer, Dunford, & Akin, 2009), respectively. It was not clear to them why a company that had done so well for decades in the business of traditional film cameras had to suddenly change course. As a result, the lack of support from various stakeholders ensured that Kodak was unable to keep pace with the market and loose its position in an industry it once led.What Can Change Leaders Do?Building a strong case for why change is necessary and clearly communicating what it would involve is most critical to ensure that people do not resist change because they do not understand it. Especially, if the change is radical and fast paced, creating a sense of urgency for the change is the key. Being prepared to answer questions such as, why is the change required? Who will it effect? How long will it take?, would be an important part of creating that sense of urgency.Most importantly, involving everyone who will be affected by change not only creates clarity about change it also ensures that teams are not engaging in sense making based on incomplete or incorrect information, leading them to wrong conclusions. Communicate, communicate, communicate."I Don't Like It"The reason most of us do not like change is emotional. As mentioned earlier, change creates strong emotional reactions in individuals as well as team. Firstly, the uncertainty created by change generates fear of loosing their job or having to deal with the new (role, culture, people etc.) that they may not be familiar with. Secondly, individuals experience a sense of helplessness as they feel they are unable to control their circumstances, environment and as a result, outcomes.Finally, humans are creatures of habit and we tend to like our routines and rhythms. These routines give us a sense of comfort. We not only get attached to the people and environments, we also get attached to the routines. As a result, letting go of these routines gives us a sense of loss and grief.For example, in the case of Kodak, while the shareholders were resistant to the change for financial reasons, the employees were possibly fearing losing their world as they knew it. It is likely they feared not fitting into the digital future for lack of skills. Those staying on would also have to deal with loosing colleagues, they had worked with for years, to layoffs. Finally, despite the resistance it is likely the employees knew that the change was inevitable, and it gave them a sense of helplessness.What Can Change Leaders Do?The biggest fear that haunts the workforce with regards to change is the fear of losing their job. Change agents need to ensure that all the decisions relating to retention and layoffs are made based on an open, fair and objective criterion (giving people a sense of fairness) in a participative way (giving people a sense of control), and communicated openly as early as possible (reducing the uncertainty people experience). Additionally, providing the necessary training as well as emotional support is critical to making sure people are more open to change."I Don't Like You"The person who introduces the change or is seen as the face of the change in an organization is as important as the communication required to introduce the change. Employees do not like any new ideas or changes introduced by someone they do not like, know, understand and most importantly, trust. As a result, any change introduced by a new leader who is yet to establish trust within the organization may be equated to an invasion and the leader, an invader.Trusting the individual or parties that propose the change is essential for employees to show openness or commitment to the change effort. Trust in a person shows that we believe that the person in question will make decisions that are in our best interest (integrity based trust) and that this person is capable of doing all that they say they intend to do (competency based trust).Right after Carly Fiorina joined HP in 1999, she introduced several well-needed structural and cultural changes to the organization(Palmer et al., 2009). Even though timely and much needed, some of these changes were not widely accepted by the HP team. The subsequent merger with Compaq in 2002 that was led by Fiorina met a lot of resistance. Despite her best efforts, Fiorina failed to win over the disgruntled employees post-merger.Subsequently, Fiorina was ousted in 2005 and most of the structural changes she made were undone by the new CEO. While the board had other reasons to resist the merger, the employees who were still unhappy about the changes led by Fiorina in 1999, found it particularly difficult to put their faith in the merger.What Can Change Leaders Do?The best way to build trust is by creating open channels of communication. People are more likely to doubt you if they believe that you are hiding something. Fairness is another prerequisite to making sure that people trust your intentions to make the decisions that are in their best interests. Giving people voice and hearing them further creates a culture of openness and fairness that allows you to build trust with a team.Decide carefully who the face of the change will be, who will be communicating the message, who will people associate the change with. It is important that the change leader is a good communicator, trusted and liked by most who are likely to be affected by the change being introduced.ConclusionReaction to change is usually emotional and may stem from reasons that may not be as obvious to the change leader. Resistance to change may be reduced and the commitment towards change strengthened by firstly, focusing on creating clarity about the change so that team members can understand it. Understanding change is important before team members are willing to adopt it. Secondly, addressing all the emotional reactions to change instead of ignoring them will further open the teams to the new efforts.Fear, sense of loss, and helplessness may be reduced by using open communication channels and participative decision making. Finally, ensuring that the change leader is trusted to make sound decisions as well as carry them out, further reduces any worries team members may have about the change effort. The message about the change is important, the person delivering the message is equally important for the message to be accepted.Key Take-AwaysCommunicate clearly, openly and at the earliest with all those affected by change, establishing a clear need for change and answering questions.Invite participation from the team members who will be affected by change before making critical decisions. Give team members voice.Select change agents who have a good rapport with the team members and are trusted, to implement the change.Provide support in the form of brown bag lunches and coffee talks to address smaller issues before they become big and threaten to derail the change effort.This article was co-authored by Court Williams, CEO, HVS Executive Search. Mr. Williams has over 29 years of retained Hospitality Executive Search experience. He began his career in the restaurant industry after graduating from Cornell's Hotel School gaining operational experience prior to launching a career track in Human Resources with an international restaurant company. Having experience in executive recruitment from the brand side, he decided to work on the hospitality side. This led him to a career in retained executive search. Mr. Williams has expertise in leading senior hospitality executive searches across all functional areas including Board Director, CEO, Operations, Human Resources, Marketing, Finance, Development, Culinary and Supply Chain. Dr. Singh, an award-winning researcher, corporate trainer, and coach, Dr. Singh is a Professor of Leadership and Change Management for the OMBA program at Robert H. Smith School of Business, University of Maryland, where she received her Ph.D. in Organizational Behavior and Strategy. Dr. Singh runs her own consulting practice, OTI Advisors LLC, providing leadership development Services to hospitality firms and is a partner with HVS Executive Search, heading its Organizational Development practice. With a strong background in organizational development and executive training, Dr. Singh specializes in Leadership Development, Change Management, Executive Coaching, Executive Onboarding, Succession Planning, and Employee Wellness, as well as Retention Strategy. Dr. Singh has spent the last decade studying entrepreneurs, leadership, and emotional labor in hospitality firms and start-ups. Her research and organizational development work was motivated by her dedication to support individual & organizational performance and wellbeing. She completed her undergraduate work in Commerce at Delhi University and in Hotel Administration from the Institute of Hotel Management, Delhi, India. Dr. Singh can be contacted at 202-330-7069 or Please visit for more information.Extended retains the copyright to the articles published in the Hotel Business Review. Articles cannot be republished without prior written consent by from the Hotel Business Review with permission from

HVS Asia Pacific Hospitality Newsletter - Week Ending 29 March 2019

HVS · 1 April 2019
Ascott Residence Trust Acquires Felix Hotel in Sydney for AUD60.6 MillionSingapore-based hospitality real estate investment trust company, Ascott Residence Trust ("Ascott Reit"), has acquired the 150-key Felix Hotel located in Mascot, Sydney, for AUD60.6 million (SGD58.8 million). Recently completed and opened in February 2018, the freehold limited-service business hotel will be rebranded as Citadines Connect Sydney Airport upon completion of the acquisition in May 2019. The 12-storey property will feature 150 guestrooms with size ranging from 18 to 40 square metres, a sky bar, a sky lounge, outdoor terrace and conferencing facilities. Citadines Connect Sydney Airport represents Ascott Reit's debut business hotel in Australia and its first property to be managed by its sponsor, Singapore-based serviced residence owner-operator, The Ascott Limited ("Ascott") under the new Citadines Connect brand. The new addition increases Ascott Reit's portfolio in the nation to over 900 units across six properties.Hotel Properties Enters Joint Venture for Hotel and Condominium Project in Osaka City, JapanSingapore-based company investment holding company, Hotel Properties Limited ("Hotel Properties), has entered into a joint-venture with Japanese real estate firm, Tokyo Tatemono Co ("Tokyo Tatemono") to acquire a 75 per cent stake in a new hotel and a 25 per cent co-ownership interest in up to 450 condominium units located in Dojima 2-chome, Osaka City, Japan. A total investment of approximately JPY20.85 billion (SGD257 million) will be funded through a mix of internal funds and external bank financing. Planned for development on a freehold site spanning approximately 4,828 square metres, the hotel and condominium will be developed within a 50-storey mixed-use project with a total gross floor area of 80,000 square metres. The Dojima site is situated within Umeda/Kita district, the transport and business hub of the city, and is within walking distance from Umeda as well as Osaka Station. Subject to the granting of planning approval for the redevelopment of the Dojima site, the construction of the project is expected to take about four to 41/2 years.Singapore's GIC Acquires a 25% Equity Stake in citizenMSingapore's sovereign wealth fund, GIC Private Limited ("GIC"), has acquired a 25 per cent equity stake in citizenM, a Netherlands-based fully integrated hotel real estate developer and hotel operator. The investment, of an undisclosed value, takes citizenM's enterprise value to EUR2 billion (USD2.3billion). Two existing shareholders, Netherland-based APG Group ("APG")and Netherlands-based private equity firm, KRC Capital ("KRC"), along with GIC and citizenM founder Rattan Chadha, have committed a total of EUR750 million (USD846 million) of equity for future expansion. Chief Investment Officer of GIC Real Estate, Lee Kok Sun, cited citizenM's well-received value proposition of affordable luxury in urban markets as a reason for its investment. citizenM opened its first hotel in Amsterdam Schiphol in 2008 with an idea to disrupt the traditional hotel industry by creating a luxury hybrid hotel for today's modern travelers. It has since grown to include 15 hotels with another 15 in the pipeline globally.Air New Zealand to Launch New Direct Service Between Auckland and SeoulAir New Zealand ("ANZ") has announced plans for non-stop service between Auckland and Seoul in South Korea, starting from 23 November 2019. This will represent ANZ's sixth destination in Asia, after Hong Kong, Shanghai, Singapore, Taipei and Tokyo. Operated by Boeing 787-9 Dreamliner aircraft, the airline will fly three times per week to Seoul's Incheon International Airport and up to five times a week during the peak holiday period from late December to mid-February. The new service, with a flight time of approximately 12 hours northbound and over 11 hours southbound, will offer a better connection as compared to the present route which takes more than 16 hours from Auckland to Seoul, and 20 hours including a seven-hour stopover for the return journey. Currently, travellers departing from Auckland have to stopover at Tokyo's Narita International Airport and connect to another flight operated by Korean carrier, Asiana Airlines ("Asiana"), to Seoul. ANZ operate domestic flights within New Zealand and international flights to Australia, the South West Pacific, Asia, North America, South America and United Kingdom.China Sees Booming Hotel Construction PipelineAccording to the latest report by Lodging Econometrics (LE), current hotel construction pipeline in China comprises 2,761 hotels with a total of 580,635 rooms, recording a year-on-year (y-o-y) growth of 12 per cent and 6 per cent, respectively. Currently, there are 2,044 hotels with 411,032 rooms under construction in China, up 17 per cent and 10 per cent y-o-y, respectively. 351 hotels with 76,063 rooms are scheduled to commence construction in the next 12 months, down 4 per cent and 5 per cent y-o-y while 366 hotels with 93,540 rooms are in the early planning stage. By end of 2018, 619 new hotels with 109,524 rooms have opened in China, accounting for 23 per cent of all hotels worldwide. LE expects that new hotel openings will continue to grow in the following years, with 671 new hotels (125,396 rooms) and 691 new hotels (132,108 rooms) envisaged to open in 2019 and 2020, respectively.

Europe Hotel Transactions Bulletin - Week Ending 29 March 2019

HVS ·29 March 2019
Park Hotels & Resorts sells the Hilton NurembergPark Hotels & Resorts, established as a REIT in 2017 in a spin-off from Hilton Worldwide, has sold the 152-room Hilton Nuremberg in Germany for EUR15.6 million (EUR103,000 per room), representing a reported cap rate of 3.5% on the hotel's 2018 NOI. The hotel is anticipated to undergo a capital expenditure programme of approximately EUR9 million. Over the last 18 months, Park Hotels & Resorts has sold 15 non-core assets for around $590 million.Sheraton Warsaw sold to Patron CapitalBenson Elliot and Walton Street Capital have sold the 350-room Sheraton Warsaw to London-based Patron Capital. Part of the previous JV with Benson Elliot and Walton Street, Schroders Hotels will stay in as Patron's JV partner in the deal. The property, located within close proximity of the city's embassy district, recently underwent a EUR6 million refurbishment to upgrade the rooms and public areas, as well as securing planning permission for an additional retail unit on the ground floor.Circle Square Hotel in Manchester sold to AvivaUK-based Aviva Investors has entered into a forward-funding deal to acquire the mixed-use development at Circle Square, Manchester, for PS45 million, from a joint venture between Bruntwood, Select Property and Greater Manchester Pension Fund. The project will comprise a 158-room hotel built on top of a 1,000-space car park, with agreed lease terms of 25 and 35 years, respectively, whose tenants are yet to be confirmed. Completion is scheduled for August 2020.Fergus Hotels acquires remaining stake in Cala Blanca Suites in MallorcaMallorca-based hotel chain Fergus Hotels has acquired the remaining 74% stake in the Cala Blanca Suites hotel in Mallorca. The 175-room hotel, located on Mallorca's west coast in Santa Ponsa, was repositioned from a three-star to a four-star hotel in 2013 following Fergus taking over the hotel's operation.Learn to use Hotel Valuation Software from Steve Rushmore and the Glion Hotel SchoolSteve Rushmore - Founder of HVS - has launched an online training course: Hotel Market Analysis and Valuation Using Hotel Valuation Software. This software developed by Steve and HVS is designed to perform hotel market studies, forecasts of income and expense, and hotel valuations. Steve has partnered with the famous Glion Hotel School in Switzerland to produce the course which will quickly bring you up the learning curve to fully understand how the three software models work. Using a combination of videos, readings and interactive exercises with the actual software, you will be able to complete the course in your free time. The professors at Glion, along with the other students taking this course, will be available to answer your questions and help you finish the program. Upon completion, you can keep the software and you will receive a certificate from the Glion Hotel School which can be an important enhancement to your resume.Click Here to watch a video describing the course.

HVS Market Pulse: San Diego, CA

HVS ·27 March 2019
TourismTourism is an important factor for San Diego area hotels and the local economy. San Diego's numerous beaches and beach towns, including Mission Beach, Pacific Beach, Ocean Beach, and La Jolla, attract large numbers of visitors annually. According to the San Diego Tourism Authority, overall visitor numbers increased 2.2% in 2018, compared to 2017 data. In 2018, 35.7 million visitors passed through San Diego, with over 17.7 million staying at least one night. Visitor spending increased 6.1%, totaling over $11.5 billion in 2018. Aside from the sun-soaked beaches, three major attractions bring families to the greater San Diego market.SeaWorld is a marine animal theme park featuring animal shows and a variety of rides. In the summer of 2017, SeaWorld debuted its next-generation replacement for the original "Shamu" shows, dubbed Orca Encounter. Reportedly, this boosted attendance figures in the first quarter of 2018, with SeaWorld Entertainment Inc. reporting a 15% increase from the same quarter in 2017. Revenues across all SeaWorld parks climbed 16.5% to more than $217 million during the same period. [1]LEGOLAND is a theme park that focuses on Lego bricks, a popular children's toy.Balboa Park is a 1,200-acre, urban, horticultural and cultural resource park containing vast open spaces, natural vegetation zones and green belts, gardens, and walking paths. It contains 15,000 trees and 14 specialty gardens; nearly 100 arts, education, recreational, social, and sports organizations; 17 museums and cultural institutions; the San Diego Zoo; and Old Globe Theatre. There are also many other recreational facilities, including a golf course and several gift shops and restaurants, within the boundaries of the park. It entertains more than ten million visitors per year.Although present year-round, the peak season for tourism in San Diego is from May to September. Leisure demand is typically strongest during key weekends and during the summer vacation period.Convention CenterThe San Diego Convention Center (SDCC) is the premier facility for conventions and trade shows in San Diego, hosting nationally and internationally renowned events such as San Diego Comic-Con International, the American College of Cardiology Scientific Session, the National Safety Council Expo, Cisco Live, and the Esri User Conference. Operated by the San Diego Convention Center Corporation, the venue attracts national and international associations and corporate events. The SDCC opened in 1989 and underwent an expansion that roughly doubled its size in 2001. The facility measures 2.6 million square feet, including 615,701 square feet of total exhibit space, 284,494 square feet of lobby and pre-function space, 204,114 square feet of meeting space, and 184,514 square feet of outdoor space. The remainder of the space comprises hallways, kitchens, executive offices, and other back-of-the-house facilities, as well as parking. In 2018, SDCC hosted 68 conventions, an increase of seven conventions over those in 2017. Overall attendance grew 12% to 610,848 attendees. Given the significant amount of meeting and group demand in the market, proposals to expand the center have been brought forth; however, the last two expansion attempts have not received enough support from the citizens of San Diego to secure the appropriate amount of funding. A 2018 initiative to raise San Diego's hotel tax to fund this proposed expansion failed to collect enough valid signatures to earn a spot on the November 2018 ballot. [2]Local Economic ClimateApple Inc.'s announcement in December 2018 that it would add a 1,000-employee campus to San Diego's Golden Triangle Area over the next three years [3]is a testament to the strength and attractiveness of the local economy. According to the San Diego Regional Economic Development Corporation, the region's largest employment gain in 2018 occurred within the professional and business services sector, which added 12,600 jobs. [4]This contributed to the declining unemployment rate across San Diego County. The diversity and versatility of the local workforce are two attractive factors that attract businesses.Lodging MetricsHotel demand and occupancy has been steadily rising since 2010, resulting in peak occupancy levels over 79% in 2017 among hotels in the city of San Diego. Average rates (ADR) began rebounding in 2011, following the recovery in occupied rooms, and have increased year-over-year since then. In 2014, market-wide ADR growth reached levels not experienced since the prior demand peak of 2007; this strong performance was driven by an increase in the number of attendees at key annual conventions, such as Comic-Con International, and healthy tourism levels. Occupancy increased 2.1% in 2018, while ADR grew 3.5%, resulting of a RevPAR increase of over 5.7% from the previous year, despite the addition of 1,387 rooms in 2018 (including the 400-room InterContinental Hotel), demonstrating the market's ability to continually absorb new room supply. [5]New SupplySeveral new hotels opened in 2018, notably the 400-room InterContinental Hotel in Downtown San Diego, across from the International Cruise Ship Terminal. A 98-room TownePlace Suites by Marriott opened Downtown in June, and California's very first Moxy opened in December to much fanfare. This Millennial-minded, 128-room hotel has plenty of playful touches including the innovate lobby "trike," where guests receive their digital room keys. The hotel's food-and-beverage program is anchored by Bar Moxy, offering items such as a signature welcome nitro-cocktail, local craft beers, and coffee from San Diego Coffee Co. Artist Paul Nandee's mural, featuring distinctive lettering and character creations constructed with cubist angles, adorns the back of the hotel and adds to the hotel's creative flair.By the end of 2019, five new hotels are expected to open in San Diego, adding over 900 rooms to the market. Some of these hotels are highlighted in the map below:In greater San Diego County, eleven hotels (totaling over 1,600 rooms) are currently under construction, according to STR, including the four above-mentioned hotels. The southern border town of Chula Vista has three hotels under construction, including a Homewood Suites by Hilton, a Hampton by Hilton, and an Ayres Hotel.ConclusionSan Diego is experiencing a period economic strength and expansion. The federal government and related entities will remain cornerstones of the market, while the tourism, health sciences, wireless technology, and biomedical engineering sectors should continue to expand. Given the anticipated increases in government funding of the area's military installations, the ongoing expansion throughout Downtown, a strong convention calendar, and other positive corporate news, the outlook is optimistic.[1]Weisberg, Lori. "SeaWorld Attendance and Revenue Leap." Los Angeles Times, Los Angeles Times, 8 May 2018.[2]"Convention Center Fund Fails to Make Nov. Ballot." 10News, ABC 10 News San Diego, 9 Aug. 2018,[3]Luke, S. (2019). Apple Eyes UTC Area for New Campus in San Diego. [online] NBC 7 San Diego. Available at:[4]San Diego Economic Pulse August 2018. San Diego Regional Economic Development Corporation.[5]"Hotel Boom Appears to Have Staying Power for 2019." NBC 7 News San Diego, 10 Jan 2019,

HVS Market Pulse: Boulder, CO

HVS ·26 March 2019
New SupplySince 2015, four new hotels (681 rooms) have opened within Boulder's city limits, increasing the total number of hotel rooms to almost 2,500. This represents a sizable increase of around 32%; however, in the years leading up to this increase in supply, Boulder experienced a decline in room supply, as several older hotels were closed and redeveloped. As such, the net change in room count is closer to 15%. Furthermore, there are a couple of proposed hotels in very preliminary planning phases of development, including a project on University Hill, as well as a possible University of Colorado - Boulder campus hotel and conference center; however, neither of these projects is currently moving forward.An area within the hospitality sector that is realizing growth is the rental of homes and residential units through online home-sharing programs, such as Airbnb. According to fourth-quarter 2018 data from AirDNA, Boulder had an estimated 1,777 active rental units listed on Airbnb or HomeAway, compared to 1,125 units in the first quarter of 2016. AirDNA reports that roughly 70% of these units represent single-family homes, with the average rental unit containing 2.3 bedrooms and accommodating approximately five guests on average. This segment is expected to continue to realize growth given the anticipated lack of new hotel supply in the near term.Market PerformanceThe addition of new, upper-midscale to upscale hotels and the exit of older economy to midscale assets have positively affected Boulder's lodging market in terms of overall performance. Market occupancy and average daily rate have continued to increase since 2013, despite the entrance of new supply, with average annual growth registering roughly 4.0% for each metric. This has resulted in above-inflationary RevPAR growth, with overall market RevPAR surpassing the $140 mark, based on recent HVS work in the market. This continuous growth, despite the recent increase in supply, illustrates the overall strength of the market. Furthermore, continued growth in the commercial sector from companies like Google and Apple will continue to allow this market to perform at near or above historical levels, which are significantly higher that national and state averages.Market ComparisonBoulder has an estimated population of 107,125 (U.S. Census Bureau July 2017); however, this population swells by more than 30,000 during the academic year with the arrival of students at the University of Colorado - Boulder. Comparable markets in the western U.S. include Flagstaff, Arizona; Bend, Oregon; Bozeman, Montana; and Missoula, Montana.A comparison of number of available hotels rooms to the population (with and without students) illustrates how the hotel supply in Boulder is under-positioned for a city of its size.ConclusionBoulder, Colorado, has always been a strong hotel market and on a short list for many hotel developers and brands. The lack of available land and difficult development environment has historically limited hotel development in the market. However, numerous new development and redevelopment opportunities are now available that should allow Boulder to benefit from an increased hotel bed base. These opportunities for new hotels would have very limited impact on existing hotels given the solid demand base and healthy market dynamics, while generating needed tax revenue for the city.
Article by Xin Kok

In Focus: Singapore, The Reinvention of Co-Living

HVS ·25 March 2019
The Republic of Singapore is a metropolitan city-state and island country in Southeast Asia with a total land area of an estimated 714.3 square kilometres. It is situated at the southern tip of the Malayan Peninsula, between Malaysia and Indonesia. With an economy supported by its growing population of approximately 5.6 million, Singapore rose as an economy in the latter half of the 20th century and today serves as a global commerce, finance, and transportation hub.

HVS Market Pulse: Colorado Springs, CO - Downtown Poised for Revitalization

HVS ·25 March 2019
Initially, the CEDC fronted the initiative dubbed "City for Champions" by promoting four projects to increase tourism and rejuvenate the city's sagging economy; however, five projects emerged in 2018 after the planned Sports & Events Center was reengineering to create two venues--the Colorado College indoor Robson Arena and Downtown's CityGate outdoor Weidner Stadium. Also planned is an Air Force Academy Visitors Center. Due to lack of progress on the aforementioned three proposed venues, a one-year funding extension was requested by the CEDC. It will be a race against the clock for these three projects to meet the required progress hurdles by late 2019. Already under construction and on track for funding are the remaining two planned developments--the U.S. Olympic Museum & Hall of Fame at CityGate Downtown and the Sports Medicine & Performance Center at the University of Colorado Campus. Beyond the City for Champions projects planned for Downtown, additional new office, multi-family residential, retail, and hotel developments are in the planning stages. Should these large-scale projects secure financing, Downtown could reemerge as a renewed city core replete with live-work neighborhoods, pedestrian and park areas, office tower complexes, retail and restaurant districts, parking facilities, entertainment venues, attractions, and new hotels, truly representing a comeback story for the City for Champions.

HVS Market Pulse: Los Angeles, CA

HVS ·22 March 2019
Excluding office submarkets in Orange County and Riverside County, Los Angeles is home to one of the largest office markets in the country, after Manhattan, with over 200 million square feet of office space. The bulk of this supply is in Downtown L.A. and other West L.A. submarkets, such as Century City, Hollywood/West Hollywood, Santa Monica, and LAX. High barriers to entry related to new construction continue to keep office vacancies low and asking lease rates high. About 23 major office space projects are currently under construction in the city, representing 3.8 million square feet of office space, or a 2% increase in supply, which is anticipated to enter the market in the next 18 to 24 months. Given the limited increase, no major changes in vacancy rates are expected, while the average asking lease rate should continue to increase at the rate of inflation.As noted previously, over 50 million people visited Los Angeles in 2018, representing an increase of approximately 3.1% over 2017. This represents the eighth consecutive year of tourism growth for the L.A. area, attributed in part to higher visitation levels from travelers originating from Mexico, China, Canada, U.K, and Japan; in fact, Los Angeles is now the #1 most visited U.S. destination by Chinese travelers. Visitation in 2018 generated over 30 million hotel room nights. While the bulk of visitation occurs during the summer months when temperatures are most ideal for tourism, visitation has been increasing during the winter months and during shoulder periods, as well. With L.A. serving as host to the 2022 Super Bowl at the now-under-construction L.A. Stadium at Hollywood Park, as well as the 2028 Summer Olympics, it is certain that tourism will continue to rise for the market. Additional expansions and improvements at LAX, as well as above-expected growth in arrivals at L.A.-area airports, bode well for the future of tourism.With over 30 high-rise buildings under construction or proposed in or near the Downtown submarket alone, Downtown L.A. continues to play in a league of its own. While these projects encompass various types of developments, including office, hotel, and residential, it is no surprise that the bulk of new hotel supply that is currently under construction in the L.A. area is in this submarket, with approximately 1,500 rooms. Most recently, the City approved nearly $100 million as part of a $1.25-billion project led by AEM that includes the expansion of the convention center, as well as an 850-room expansion of the existing JW Marriott hotel at L.A. Live. Once completed, the expansion will allow the market to better compete with other convention center destinations.Last, but certainly not least, the hotel sector in L.A. has made great leaps and strides over the last decade. Rising from what now seems like a depressing 65% occupancy in 2009, to solidly hovering near 80% occupancy over the last four years, we are now in a new era for hotels in this market. For years, the market has remained undersupplied by hotels because of strict and challenging development rules. Conversations with developers reveal that it usually takes at least three years to take a hotel from idea to a groundbreaking due to a lengthy entitlement process. With typical construction periods of 18 to 24 months, any new hotel projects in the market can easily take five years. As such, both existing hotels and those now entering the market continue to benefit from limited increases in supply, which coupled with steadily rising demand levels, has pushed RevPAR levels to new records, rising nearly 70% over the last nine years (compared to 49% in the top 25 markets across the nation). Despite rumors of hundreds of hotels being proposed for the L.A. market, the reality is that annual increases in supply have remained tame given the challenging development process. In 2017 and 2018, the L.A. market experienced an average increase in supply of 2.7%, with another yearly increase of 3.0% expected in 2019 and 2010. While demand levels have generally kept pace with the increases in supply, 2019 is poised to experience a slight dip in RevPAR levels while the market works to absorb these steady increases in supply, which have not only begun to affect occupancies, but have also placed downward pressure on average rates. Nevertheless, over the long term, the fundamentals remain strong. The multitude of demand generators, related to both the leisure and commercial segments, in L.A. should continue to benefit hotels, and while any near-term dips may surprise some that have not seen negative growth in the last nine years, we have to remember we are now speaking of a significant healthier and deeper hotel market than ever before, fueled by a robust economic engine.HVS continues to regularly consult in California, with Consulting & Valuation offices in Los Angeles and San Francisco. Luigi and his team are ready to assist you on any consulting need you may have. Drew Noecker with HVS Brokeragecan also discuss any California-area asset you may be considering selling in 2019.

Canadian Lodging Outlook Quarterly 2018-Q4

HVS ·21 March 2019
If you would like a detailed hotel performance data for all of Canada, STR offers their Canadian Hotel Review. The Canadian Hotel Review is available by annual subscription. For further Information, please or +1 (615) 824-8664 ext. 3504.HVS Canada performs major portfolio appraisals and single-asset consulting assignments and valuations from coast to coast. Our professional team is expert in appraisal work, feasibility studies, market studies, portfolio valuation, strategic business planning, and litigation support. The managing partners in both the Toronto and Vancouver practices have their AACI, MAI, and MRICS/FRICS appraisal designations, and all associates are candidate members of the Appraisal Institute of Canada. HVS partners and associates are also members of the Appraisal Institutes of Alberta, New Brunswick, and Nova Scotia. Our bilingual associates enable us to work in French, which is of utmost importance in the provinces of Quebec and New Brunswick.

Technology in the Hospitality Industry - Have We Gone Too Far?

HVS ·21 March 2019
The hospitality industry is changing, and is rapidly becoming super high-tech. While we can argue that this benefits guests--and it certainly benefits vendors--how much is it taking away from the guest's personal experience? Theoretically, it should improve the customer experience, particularly through the use of data collected by using the various technologies. Let's look at how guests actually feel, especially the Baby Boomers who look set to remain the most prolific travelers for the next two to three years, and see if the numbers support the theory that technology has improved the hospitality experience.Since the early days of hospitality, the industry has operated on the principle of customer service before everything else. The warm welcome afforded by the Maitre 'D on arrival at a restaurant, the personal service provided by a friendly concierge, and a rapid check-in from the Reservation Desk have all helped make guests' experiences unique and fulfilling.With the advent of technology, however, many activities previously performed by live humans have been replaced by automated methods, mainly in the attempt to streamline functionality and improve service. But is it really an improvement, or has the industry gone too far? Do these changes enhance the guest's experience, or have we forfeited the true meaning of the word "hospitality" in the process?How Times They Have a-ChangedThe changes wrought by technology are far-reaching, and affect every aspect of our 21st century lifestyles. Hospitality is one industry where this is dramatically true, in so many more ways that the man in the street realizes. From start to finish, the experience is now facilitated by technological factors, many of which go relatively unnoticed. Here are some of the ways times have changed through the incursion of technology.With the rising popularity of online reviews, hospitality guests now have the ability to research any venue to see what others have posted. Both review websites and social media platforms have become active gateways to global opinion, and travelers use these extensively to help them decide where to book. Research from Search Engine Land shows the reviews for companies in the hospitality industry are considered 48% more important and valuable than in other industries, which indicates the target audience takes online reviews exceptionally seriously.Once a traveler has made their choice of destination, they can now search for the best hotel deals at the click of the mouse. Technology is shaping how lodgings and restaurants are found and booked, and aggregator sites such as Hotwire, Expedia, and are just a few of the digital platforms available for making online reservations. These have taken off extensively, with research showing one half of millennials, 26% of Gen Xers and 12% of Baby Boomers consider themselves "travel hackers," which means they believe they know all the best ways to use technology for good deals. Chatbots on booking websites enable the user to ask questions without even getting up from the sofa.On arrival at their destination, guests no longer need to wait in line for the key to their room. They can now check in and out using electronic kiosks, online and mobile check-ins. Automated payments and the use of smartphones for keyless entry, making requests, online purchases, or even placing room service orders makes self-service an attractive option. For anyone who thinks this is overkill, just try manually checking into a Las Vegas hotel on a Saturday at noon! The benefits of automation will soon become crystal clear.One of the more remarkable technological disruptions hotel guests have had to deal with in recent years includes the introduction of smart appliances. Just as homes have been revolutionized through the implementation of smart technology, high-end accommodations are expected to have all the bells and whistles available. In 500 "connected" Hilton hotel rooms, for example, guests can now control all the functions of the room from a single device. Connectivity operates primarily through the chain's mobile app, and manages the room's lighting, temperature and TV. Guests can stream SHOWTIME shows for free through the app, without needing to input credentials or create a subscription. Anyone who prefers not to download the app can operate the same controls using a simplified, in-room remote device.Apps are big in every way at present. A well-designed app can combine every aspect of the guest experience, from notifications about special deals to managing their loyalty program account. When a guest uses an app to book a room using a group conference rate, for example, the system can automatically send the conference itinerary and a map of the meeting spaces to his or her device.In theory, hotel rooms equipped with Alexa, Siri or the like could enable guests to make voice-activated requests for room service, place an order, call housekeeping to ask for more towels, or request their car brought out of Valet Parking. And, of course, there's the use of robotics and artificial intelligence to do things like handling the vacuuming of the room, preparing meals, and restocking the courtesy bar. Chowbotics is one company that has led the way in pioneering a whole new industry, through the creation of "Sally the Robot." These robots can be located in a hotel lobby or guest-accessible kitchen area, and prepare meals such as salads, bowls and ethnic cuisine. While doing so, they also count calories, deliver precise portions, and serve up great food--all at a press of a button.Many new smart-technology companies like Handy are taking Asia by storm in the hotel segment, by offering a complimentary device that provides 24/7 connectivity to hotel guest services and other travel information from any location.We have also seen the emergence of cost-saving technologies that not only focus on guest loyalty but also reduce fixed costs and overheads. Newspapers, for example, have always been a "thorn in the side" of hotels and hotel companies, in terms of wastage and the challenge of importing these papers, especially for international guests. One unique company that has utilized technology well in this field is UK-based Gold Key Media, which offers a unique way of delivering newspapers and magazines. The company does this by offering a choice of options, including downloading direct from the hotel site itself. It also provides a customized, white-labelled platform for every venue, which offers value-added features such as restaurant booking and concierge requests.Realizing the Benefits Offered by TechnologyIt's easy to assume guests prefer the "human" touch, but we should be careful of making such assumptions. In addition to the statistics that show an undoubtedly positive response to technology, there are other benefits to be gained from the shift.Security, for instance, is of paramount importance in the digital age, in terms of guest identities, address information, and financial data. Biometric authentication offers the most secure method of proving identity that's currently available, and the hospitality industry has been quick to realize the need for this level of safety. With the use of fingerprint-activated room entry and facial recognition methods such as those used by the Nexus, Global Entry and TSA Pre-Check programs, this technology is still in the early stages, but future hospitality application is likely to include behavioral biometrics. Even if some guests don't have a particularly positive reaction to the introduction of more stringent security measures, they mostly understand the critical need to have them, and they appreciate hotels paying attention to the matter.Then there's the benefit of data, which is already transforming the hospitality industry. Improving a guest's experience depends on the ability to identify the individual guest's preferences. The best way to determine these is by collecting data from first-, second- and third-party sources, combining and analyzing it effectively. The use of the various types of technology generates huge quantities of data, which when properly analyzed and managed, enables hospitality companies to personalize their service in a way guests have never seen before. Analysis of voided checks in hotel restaurants and bars, for example, can help management identify the cause of problems and take steps to improve prevent future guest dissatisfaction and losses. Tracking how often individual guests book hotel stays, the average length of a stay, their typical room service orders and the films they watch gives hotels the opportunity to personalize offers from meal choices to entertainment. This makes the guest feel doubly welcome and valued, and supports the belief that they are more than simply a number to the hotel.Location-based services can also enhance a traveler's experience tremendously. Remember the days when eager Boomers lined up at the concierge's desk to get advise on places to visit? How much faster and more reliable is an app that automatically delivers a list of local tourist attractions to the device of a returning guest on arrival, based on data about their age, language and preferences?The issue of climate change continues to hang over our heads like the proverbial Damocles sword, and even the most obtuse guest is aware these days of the need for energy efficiency. The use of technology such as motion sensors to regulate lighting and temperature provides a seamless way to ensure guests don't waste resources, and it sure beats having to call down to the front desk and have a concierge come up to the room to change the temperature. While these controls have existed for a fairly long time now, the ability to manage them from a smart device even before the guest reaches the room has undoubted benefits for them.What the Numbers SayWhile it could be easy to convince ourselves that technology isn't everything and hospitality guests really still want a personal experience, the numbers say otherwise. Baby Boomers remain the biggest target market for hospitality in 2018, with statistics from the AARP(formerly the American Association of Retired Persons) showing that this group expected to take 4 to 5 trips during 2018, compared with millennials who typically take 4.2 leisure trips each year, people between 31 and 35 years who take 2.9 trips and 46 to 65 year-olds who take 3.2 trips a year. The Boomers aren't shying away from technology, either, in spite of what we're led to believe by some media. According to the 2017-2018 Portrait of American Travelers Study from MMGY Global, almost all the Baby Boomers surveyed had used online resources to gather information for travel. AARP research, meanwhile, showed Boomers had used both direct websites as well as online travel agency sites to make reservations.A 2017 report from Oracle Hospitality shows two-thirds of U.S. hotel guest respondents felt it was either "extremely important" or "very important" for hotels to continue investing in technology to enhance the guest experience. At the same time, however, almost 60% of guests preferred speaking to a human at the front desk or concierge office.The Last Word (for now!)In the final analysis, it seems travelers of all ages are keen to make the most of online hotel reservations and reviews. They understand the need for (and value of) using technology to support the guest experience, and although they are rapidly embracing many aspects of this brave new world, they still need to be able to consult with a human being if required. All of this indicates that while a hotel offering a truly connected experience is likely to be full of very happy, empowered guests, we can't quite replace the human touch completely just yet. While technology will continue to play an important role in all aspects of the guest experience we do need to make sure that we do not bypass the human emotional experience that can get lost in the world of smarter and faster applications of hotel technology.Hospitable guest interaction by management and staff can lead to a more engaging and emotional experience, however, than technology can ever deliver. Let's hope we don't entirely lose that aspect of our great industry over time.

HVS Market Pulse: Chicago Ascending

HVS ·21 March 2019
Of the eight new hotels that entered Downtown Chicago in 2018, the largest individual hotel was the 336-room Aloft Streeterville, the largest Aloft in North America. The Hotel Zachary, a Tribute Portfolio affiliate, opened across from Wrigley Field just in time for MLB's Opening Day. It is part of Hickory Street Capital's $250-million, mixed-use development surrounding Wrigley Field that also includes a Class-A office building, an open-air plaza, and more than 100,000 square feet of mixed retail and restaurant space. Some notable hotel redevelopments and conversions in the last year have included the Hotel St. Jane, formerly the Hard Rock Hotel; the St. Clair Hotel, a Red Collection affiliate, formerly the Red Roof Inn; and the long-stalled Hotel Julian, which after years of sitting vacant on Michigan Avenue reopened in late 2018. A trend that continues to gain steam is the development of micro-hotel properties, with hotels focusing on a welcoming public area and a strong food-and-beverage component. This is evident in hotels such as the new Moxy River North, which opened in June 2018. The average guestroom measures less than 200 square feet and features only the absolute necessities. Both the Found Hotel and the Wheelhouse Jones (hybrid hostel hotels) also offer very small guestrooms or shared rooms with a greater focus on the public areas of the property.Although the Loop and River North have long been popular spots for hotel development, the new supply pipeline suggests that developers are moving away from these highly competitive areas. Hotels expected to open in 2019 are located primarily in the South Loop and West Loop neighborhoods. The Sophy Hotel opened in Hyde Park in 2018, kicking off this neighborhood trend. With fewer than 1,500 rooms under construction for a 2019 opening, this represents the smallest percentage increase in new supply in the last five years, and even fewer rooms are planned for 2020. Chicago continues to be a strong, stable force in the Midwest, and although RevPAR will likely decline in 2019 with fewer conventions, tourism and commercial demand will help insulate the market from losing this strong momentum.Gain more insight ino the Chicago market by joining Stacey and her team as they share their ample market intelligence and facilitate conversations with local experts to share market perspectives and expectations at our HVS Chicago Hotel Investment Summit on April 5, 2019. HVS continues to regularly consult in this city, with both a Consulting & Valuation office, led by Stacey E. Nadolny, MAI, and a Convention, Sports and Entertainment office, led by Tom Hazinski, in the Loop. Stacey, Tom, and their teams are ready to assist you on any consulting need you may have. Drew Noecker with HVS Brokerage can also discuss any Chicago-area asset you may be considering selling in 2019.

HVS Market Pulse: Pittsburgh's Transformation

HVS ·20 March 2019
Developments are well underway in Pittsburgh. Over a dozen hotels have recently opened or are under construction in Downtown Pittsburgh. The market experienced an influx in hotel supply in 2016/17; the new rooms were mostly absorbed by the market in 2018 with the help of strengthening employment and an uptick in Marcellus Shale activity. New companies, such as Serendipity Labs and Facebook, signed leases and opened in the Strip District in 2018. A 130,500-square-foot development, Three Crossings Riverfront West, was completed in 2018, as well.Additionally, Delaware-based Buccini/Pollin Group was announced as the lead developer of the former Pittsburgh Penguins arena site. Buccini/Pollin is expected to create a master plan for the 28-acre redevelopment that will feature a myriad of retail, commercial office, and entertainment space, as well as additional hotel supply and 1,000 residential units. Overall, the mixed-use development project is anticipated to cost over $500 million.While the transformation of Pittsburgh has been impressive over the last 30 years, Pittsburgh is not poised for immediate and robust growth until the city can attract the right demographic. A major blow to Pittsburgh's economic growth was the loss of the bid for Amazon's HQ2. However, when looking at the larger picture, Pittsburgh has registered economic improvement over the last decade, and the strength of the current employers and increase in high-tech startups in Pittsburgh illustrates a promising future. While some reports have indicated concern related to the need for a highly skilled, college-educated workforce, UPMC is expanding at an unprecedented rate, Carnegie Mellen University is producing talent ready for high-tech jobs in Pittsburgh, and numerous multi-national companies are still committed to Pittsburgh and all that the city has to offer. Thus, Pittsburgh's transition to one of the largest high-tech hubs in the country should provide for a competitive advantage.

HVS Asia Pacific Hospitality Newsletter - Week Ending 15 March 2019

HVS ·18 March 2019
Japan Airlines' New Low-Cost Carrier, ZIPAIR Tokyo, to Launch Flights in 2020Japan Airlines ("JAL") has announced its new low-cost carrier ("LCC"), ZIPAIR Tokyo ("ZIPAIR"), which will cater for medium- to long-haul destinations. The first two connecting routes will be from its home base, Tokyo's Narita airport, to Bangkok's Suvarnabhumi airport and Seoul'sIncheon airport. Serviced by Boeing 787-8 Dreamliners, the carrier is set to commence operations in the summer of 2020, just in time for the Summer Olympics in Tokyo which will be held from July 24 to August 9, 2020. ZIPAIR will be JAL's second LCC business in Japan. The airline also operates the short-haul LCC, Jetstar Japan ("Jetstar"), a joint venture between JAL, Australia's Qantas Airways, Japan-based Mitsubishi Corporation and Japan-based Century Tokyo Leasing Corporation ("CTLC"). There are plans for ZIPAIR to increase its fleet by two 787-8s annually for the next four years, bringing it to a total of 10 aircrafts. While the initial focus will be on shorter routes in Asia, ZIPAIR will eventually target US west coast destinations from Narita.Accor and SBE to Debut Hyde Brand in Gold Coast, AustraliaFollowing France-based Accor's ("Accor") acquisition of a 50% stake in US-based SBE Entertainment Group ("SBE") in October 2018, Accor has selected Australia as the first Asia Pacific market to expand its partnership with SBE with its ultra-trendy luxury lifestyle hospitality brand, Hyde. Slated to debut on Queensland's Gold Coast in March 2019, Hyde Paradiso will be a fashionable playground, inspired by Los Angeles' famous Sunset Strip. The venue will open all day as a contemporary beach-themed hub of relaxation before evolving into a lounge and dining venue during the evenings. Accor and SBE has also recently launch a new luxury hotel brand collection, House of Originals, in places including Sanderson and St. Martins Lane in London, 10 Karakoy in Istanbul, and the Shore Club in Miami Beach. Sam Nazarian, founder and CEO of SBE, revealed that the SBE's portfolio will grow to over 50 hotels by 2020. Accor boasts a portfolio of 1,005 hotels with approximately 196,600 rooms across 22 countries and a pipeline of 415 hotels with approximately 82,600 rooms across 19 countries in the Asia Pacific region.Rejuvenation of The Spit Gold Coast in Queensland, AustraliaThe Spit Gold Coast, Queensland, Australia is slated for rejuvenation with the development of Australia's biggest Ocean Park. Almost 140 hectares of The Spit's 201 hectares is set aside for the park, as detailed in the latest draft master plan, and is set to rival some of the best parks in the world, including New York's Central Park (340 hectares) and Hyde Park London (142 hectares). The draft plan features a 4,000-square-metre restored shore rainforest, more than 800 accommodation rooms, a light rail extension to Sea World, a super-yacht marina, an Aboriginal cultural centre, improved cycle and walkways through the dunes, and potentially a cruise terminal. Parts of the park are earmarked for commercial development, but with a three-story height restriction imposed by the Gold Coast City Council. The final master plan is expected to be released in mid-2019.Six Senses Opens in CambodiaInternational hotel and spa management company, Six Senses Hotels Resorts Spa ("Six Senses"), has debuted their flagship resort in Cambodia with the opening of the Six Senses Krabey Island. Consisting of 40 private pool villas, the new resort is located on a 12-hectare private island, located five kilometres from Ream National Park in the Gulf of Thailand in Southern Cambodia. The resort is accessible via a 10-minute drive from Sihanouk International Airport and a 15-minute speedboat crossing to Krabey Island. Other facilities include two restaurants, a bar, an ice cream parlor, a Six Senses Spa with gym, and rooftop yoga pavilion. Six Senses, with its portfolio of 16 hotels and resorts, 37 spas and sister companies, Evason and Raison d'Etre, was recently acquired by UK-based InterContinental Hotels Group plc ("IHG") for USD300 million in February 2019.HKCTS International Investment Signs Detian Waterfall Project in Guangxi, ChinaChina Travel International Investment Hong Kong Limited ("HKCTS International Investment"), an affiliate of The China National Travel Service (HK) Group Corporation ("HKCTS"), has recently completed the signing of Detian Waterfall Project. With a total investment of RMB1.45 billion, the project will be operated by HKCTS International Investment. Located on the Sino-Vietnamese border in Daxin County, Chongzuo City, Guangxi Zhuang Autonomous Region, China, the Detian Waterfall adjoins the Ban Gioc Waterfall on the Vietnamese side. It is known as Asia's largest transnational waterfall and national AAAAA level scenic spot in China. By leveraging the local rich resources and huge development potential, the project will help to enhance HKCTS's business base and market power in natural and cultural attractions which will also contribute as a new revenue generator. Looking ahead, HKCTS International Investment aims to uplift products by focusing on waterfall landscape, eco resort experience, transnational culture appreciation and night entertainment to further meet the market demands.

Canadian Hotel Development Cost Survey 2018

HVS ·18 March 2019
IntroductionIn 2018, the Canadian lodging market reached a new record high for RevPAR. Although regional performance differed widely, more developments are in the pipeline in 2018 that any year since 2013. After the global financial crisis hit the Canadian lodging market in 2009, causing a 12.3% contraction in RevPAR, the industry in general has been on an upward trajectory. In fact, RevPAR growth for the country has been registered for 106 consecutive months--the longest period of sustained growth on record.Strong metrics in many hotel markets, availability of competitive debt financing, and yield-seeking investors have led to the development of new assets. The development of new hotel projects gained momentum in recent years; nearly 30,000 new hotel rooms across more than 250 projects, currently in various stages of the planning process are in the new supply pipeline for 2018. While it is unlikely all projects will see their way to development, HVS forecasts supply growth to average 2.0% per year over the next three years.HVS has been tracking hotel development costs for the last three decades by collecting data of actual hotel build costs and proposed hotel construction budgets during our assignments from coast to coast to coast. This is the first year that HVS Canada has published the Canadian Hotel Development Cost Survey and the diverse sample of hotels reflects our growing presence in all ten provinces and three territories in Canada.Our 2018 survey reports per-room hotel development costs based on data compiled by HVS from hotel projects proposed and under construction from the beginning of 2015 through the end of 2018, and data from surveyed respondents who opened a new hotel during that time period. We have chosen to group the results into five product categories: economy hotels, midscale/upper-midscale hotels without food and beverage, extended-stay hotels (includes both midscale and upscale hotels), upscale select-service hotels, and full-service hotels.The HVS Hotel Development Cost Survey presents the average development cost per room in each product category. Development costs change from year-to-year, market-to-market, and site-to-site and as such the results are best used as a broad measure of generally applicable metrics or ratios; special consideration needs to be given to specific projects, building materials, and locations. Our goal in sharing this information is to provide developers, appraisers, consultants, and other stakeholders in the market with support for preliminary cost estimates of hotel development projects, as well as to show a cost comparison across the different product categories.Demand Outpaces Supply Growth Nationally, Continuing to Fuel Positive Hotel PerformanceAccording to STR, Canadian Hotels reported a 2018 year-end ADR of $163 and an occupancy of 67%. This marks yet another record year for RevPAR in Canada as it has exceeded the 2008 record of $85 each year since 2013. RevPAR growth reached its fastest clip in 2017 at 7.7%. In 2018, RevPAR growth moderated to a still notable 5.3%.Supply growth over the past decade has been limited across the country and the best-performing markets have significant barriers to entry. Improvement in top-line performance has not always translated into more proposed supply as operating costs have continued to climb in many markets and competition with other developments has driven up the cost of labour, both construction and operational talent, as well as the cost of the best development sites. Canada is fairly notorious for its long winters and pronounced seasonality, both of which have limited the markets' ability to dramatically grow occupancy. Many markets, fortunate to have significant unaccommodated demand during peak periods, are now pushing room rates higher, which has resulted in significant RevPAR increases since 2013.Hotel Development Cost CategoriesThe Uniform System of Accounts for the Lodging Industry (USALI) provides industry participants with a common language for analyzing the financial performance of a hotel. However, a consistent format for development budget is sadly lacking. As consultants preparing feasibility studies and as appraisers developing opinions of value for construction financing, we have reviewed hundreds of hotel development budgets. We are often asked for input on hotel development budgets and find that a lack of common language for identifying relevant cost items is indeed a challenge for industry participants.For the purposes of preparing the HVS Hotel Development Cost Survey, we have broken the elements of a hotel development budget into five categories: land; hard construction and site improvements; soft costs; furniture, fixtures and equipment (FF&E); and pre-opening and working capital. We find these categories to be meaningful for hotel professionals when undertaking an analysis related to hotel feasibility and valuation. The classifications are also broad enough that professionals with different expertise can work with and understand them. While our category structures are not an accounting practice, they do provide a basis from which to analyze and compare proposed projects.The following chart shows our five categories and the typical items that each includes.LandOftentimes, the dollar amount of land in a development budget can be based on actual acquisitions, appraised value, or as equity contributions by parties to the deal. For many projects, the land may have been acquired several years prior to the development. When evaluating the feasibility of a project, the land cost is most relevant when it is an actual acquisition price or is based on the "as is" market value of the site.Pre-Opening and Working CapitalOperating reserves, pre-opening, and marketing costs are important items to include in development budgets. Sometimes these costs are omitted from the budgets that we review and are amortized in the profit and loss statements instead. It is critical to acknowledge these costs as part of the potential feasibility of a new hotel.Our hotel development cost categories are not meant to be all-encompassing but to reflect the typical items in a development budget. In construction accounting, development budgets are generally presented in far greater detail than for general investment analysis. For the purposes of considering the overall feasibility of a proposed hotel, we find our hotel development cost survey categories to cover the major components of hotel construction costs. Nonetheless, individual accounting for specific projects can still be affected by tax implications, underwriting requirements, and investment structures.Data Collection and Sample SizeIn 2018, HVS collected actual hotel construction budgets across all ten provinces in Canada. While not every construction budget was included (due to a variety of reasons, including incomplete data, skewed data, or unique development attributes), the construction budgets sampled span the country and are from 2015 to 2018. Construction costs vary greatly in different parts of the country and each development is different. In this sample, the highest development costs per key were recorded in Fort McMurray. Given the strength of this market, when these developments were underwritten as one of the top performers nationwide, the developers made a conscious decision to proceed as the performance in the market supported the investment decision at that time. Whereas in most other markets, the same development costs would have been value engineered or the project been abandoned. Not surprisingly, the next highest development costs were in major cities with strong fundamentals and high barriers to entry, such as Vancouver and Toronto. The lowest costs per room were evident for economy hotels in highway-adjacent or tertiary markets.Our sample, which is the basis for this year's survey, includes more than 55 reliable budgets and actual costs produced between January 2015 and December 2018. The distribution of the sample source by provinces is broken down in further details in Exhibit 4. The top three provinces in the dataset were also the top three provinces for proposed development activity: Ontario, Alberta, and British Columbia. Exhibit 5 shows that 90% of the surveyed budgets were for branded hotels while approximately 10% were for independent hotels. As shown in Exhibit 6, our sample was well diversified in terms of chain scales, with upscale and midscale hotels having the most development activity.We also examined the chain scale breakdown of our data set against the national data from STR. According to STR, nearly 30,000 rooms and 250 hotels are in the planning stages. Our sample is generally in line with the STR's national figures for breakdown by chain scale, with midscale and upscale hotels being the top two segments.Per-Room Hotel Development CostsAs noted previously, this is the first year HVS Canada has published a Hotel Development Cost Survey and we have included five development cost categories. The averages in Exhibit 7 reflect a broad range of development projects across Canada, including projects in areas with low barriers to entry and in higher barrier to entry markets that include urban and resort destinations.As illustrated above, economy hotels' average development cost per key was around $140,000, and these hotels have the lowest percentage of soft costs and FF&E out of total development cost when compared to other types of hotels in the sample. Midscale hotels as well as extended-stay hotels each demonstrated an average development cost per key of approximately $180,000 and $170,000, respectively. Upscale hotels show an average development cost per room of approximately $190,000, representing over 27% of our sample size by number of rooms.Finally, full-service hotels established an average development cost per key at $456,300. However, it should be noted that this chain scale was the product category with the least development activity. Notably, while the land cost for most chain scales was generally near 10% of the total development costs, for full-Service hotels the cost was 14.3%. Given that these developments are generally reserved for higher barrier to entry markets and are competing for some of the best sites this is perhaps an unsurprising result.Overall, there is a general consistency in the development cost ratios across the chain scales. In addition, FF&E costs increase when compared to economy hotels and to full-service hotels. The only exception is pre-opening and working capital. Since this cost category includes operating reserves and pre-opening recruiting, which can vary extensively from developer to developer, pre-opening and working capital categories maintain more idiosyncratic nature that varies by developer and development rather than by chain scale.The table below outlines the range of development cost ratios by building component and the average cost across chain scales.The lower and upper range of each of the cost categories by product types is displayed in Exhibit 8.The average total development cost and median total development cost per room by are detailed in Exhibit 9. The table illustrates that most product types had a close to symmetrical data distribution with averages that were generally in keeping with the median. However, in the full-service hotel segment the average is significantly higher than the median, which indicates that the data in that segment was right-skewed with perhaps few high-cost projects pulling the average much higher than the median.The totals for low and high ranges in each cost category do not add up to the high and low ranges of the sum of the categories. None of the data used in the survey included a project that was either all at the low range of costs or all at the high range of costs. The total costs shown in the preceding table are from per-room budgets for hotel developments and are not a sum of the individual components.ConclusionThe budgets analyzed in this survey were provided directly by developers and owners in 2018 and reflect new hotel openings from 2015 to 2018. The survey combines the data from actual construction budgets organized across five product categories with a diverse geographic representation, various building materials, and varying chain scales. Given the unique nature of each development, including location, quality of product, construction materials, and developer's role in the development, costs can vary widely by project and region. Development costs are assumed to be characteristics of a typical development site and include generally applicable site preparation work and servicing. We recommend that users of the HVS Hotel Development Cost Survey consider the per-room amount in the individual cost categories only as a general guide and adjust to their local markets and conditions when considering a particular market and trying to determine a preliminary cost.Key factors influencing development costs include:LandLabour (including developer or general contractor on project)Construction MaterialsFacilities/Amenity OfferingDevelopment Cost Charges & Municipal Controls (including density)Branding and Chain scaleDevelopment timelineDevelopers and contractors are the best sources for obtaining costs for a specific hotel project. It is also advised that developers consult more than one source in their hotel development process to more accurately grasp the true costs of development. As always, HVS remains available to assist in this process.All individual property information used by HVS for the development cost survey was provided by owners or developers and are assumed to be reliable. Data from individual sources are not disclosed.

HVS Market Pulse: Detroit, MI | By Brandon Leversee

HVS ·18 March 2019
Detroit's image of a proper rust-belt city in the depths of despair during the Great Recession and the subsequent filing of bankruptcy in 2013 has been reshaped into an inspiring story of resilience and resurgence. Detroit's economy is strong, with unemployment decreasing every year since 2014 and an employment base that continues to diversify. While the economic mainstays--General Motors, Ford, and Fiat Chrysler--still thrive in the city, other major employers belong to the financial and healthcare sectors; moreover, the technology sector continues to grow.The strengthening of the local economy has positively influenced Detroit's hotel market, as both occupancy and average rates have increased year-over-year since 2011. In fact, Detroit was bested only by Nashville, San Francisco, and Los Angeles in terms of average annual RevPAR growth from 2009 to 2017. Furthermore, 2018 was another positive year for Detroit, as RevPAR continued to rise at a pace well above the national average.The new image of Detroit, coupled with a strong lodging industry, has spurred multiple hotel developments Downtown. In recent years, redevelopment projects included the Foundation Hotel (currently the market leader) and the Aloft Hotel (the David Whitney Building redevelopment). Continuing this redevelopment trend, three new hotels opened in the last twelve months. The Siren Hotel, a boutique, 106-room hotel opened in March within the former 92-year-old Wurlitzer Building. More recently, the 110-room Element Detroit at the Metropolitan officially opened its doors in December 2018 after undergoing a $33-million redevelopment of the 93-year-old building. The most anticipated of recent redevelopments in Downtown Detroit was the luxury, boutique Shinola Hotel. After nearly two years of construction, Shinola (a local luxury watchmaker) and Bedrock LLC (a local development group) opened the 128-room hotel on Woodward Avenue.Buildings continue to be redeveloped and skyscrapers are rising as Downtown and Midtown Detroit continue to be revitalized. In 2018, Bedrock LLC broke ground on the $909-million development on the site of the former J.L. Hudson's department store; upon completion, it will be Michigan's tallest building. Furthermore, work began on the $830-million Monroe Blocks mixed-use development in Downtown Detroit, another project by Bedrock LLC. Those two projects, along with the $313-million redevelopment of the 1926-built Book Tower and the $95-million addition to the One Campus Martius building, are part Bedrock's development efforts totaling over $2 billion.With the completion of the nearly $900-million Little Caesars Arena (the new home of the NHL Redwings and NBA Pistons) in 2017, Detroit became the only city in the United States with four major professional sporting teams located in its Downtown core. The new arena ranked third in the U.S. in concert ticket sales in 2018. The outlook remains positive as multiple developments continue to reshape Detroit's image for the better in 2019. Although no new hotels are slated to open in 2019, many hotel projects are in the early development phase, with openings expected in 2021. Despite the looming threats of tariffs that may affect the automotive industry, the diversification of Detroit's economy is anticipated to benefit the local lodging market.

HVS Asia Pacific Hospitality Newsletter - Week Ending 8 March 2019

HVS ·11 March 2019
KKR Acquires Coles Group's Hotel Portfolio for AUD200 millionAustralia-based global investment firm, KKR & Co. Inc. ("KKR"), has acquired Australian publicly listed company, Coles Group's ("Coles") Spirits hotel business through its subsidiary Australian Venue Co. ("AVC") for an estimated AUD200 million. AVC, which traditionally manages a portfolio of restaurants, bars and dedicated event spaces, will now also manage the daily operations for 87 Spirit Hotels while Coles will retain management of the retail liquor stores attached to the hotels. Both companies will set up a joint venture company, Queensland Venue Co, for the ownership of both hotels and liquor stores. The Spirit Hotels portfolio comprises 87 hotels, of which 76 are located in Queensland, seven in South Australia and four in Western Australia. The Retail Liquor business comprises 253 stores, of which 243 are located in Queensland and 10 are attached to Spirit Hotels' venues in the states of South Australia and Western Australia. Coles' retail liquor stores outside of Queensland will remain unaffected by this transaction.Accor Acquires Australian Hotel Brand, TribeFrance-based hospitality group, Accor Hotels Group ("Accor"), has acquired Australian Hotel Brand, Tribe, and has launched it as its 34th brand. With only one existing property, a 126-keyhotel in Perth, Australia, which opened in 2017, Tribe has planned ten other openings with a total of more than 1,700 rooms across Europe and Asia Pacific by 2022. Tribe hotels are developed to "increase the sense of space, enhance the decor, and improve the customer perception", providing amenities such as under-bed storage, smart TV, complimentary Nespresso coffee capsules and T2 teabags, 24/7 Grab & Go station, the Tribe Foods area - a cafe by day and bar by night, bicycle rental services, fitness centre and co-working areas. As a lifestyle and midscale brand, this acquisition complements Accor's other brands and partnerships in its lifestyle segment such as Jo&Joe and 25Hours. Accor currently operates over 4,800 hotels, resorts, and residences across 100 countries.Tourism New Zealand Launches Regional Campaign for Singapore MarketWith Singaporeans' increasing interest in New Zealand as a holiday destination, Tourism New Zealand has launched a new regional campaign for Singapore market. This comes after the first-ever global brand campaign inaugurated by Air New Zealand ("Air NZ"), in January 2019. The new campaign will focus on two North Island destinations namely Wellington and Wairarapa, as well as three South Island destinations: Nelson, Marlborough and Canterbury. These regions were selected due to their connectivity, natural produce, and local offerings. This initiative is supported by Tourism New Zealand's key airline partners, Air NZ and Singapore Airlines ("SIA"). Steven Dixon, regional manager South & South-east Asia for Tourism New Zealand indicates that approximately 30 to 55 per cent of Singaporeans to New Zealand are repeat visitors. Singapore is among the top ten countries of visitor arrivals to New Zealand with an increase in visitor arrivals of six per cent year-on-year.Oakwood Partners Boutique Corporation for Thailand ExpansionSingapore-based serviced apartment operator, Oakwood Asia Pacific Limited ("Oakwood"), wholly owned by Singapore-based Mapletree Investments ("Mapletree"), has entered into a strategic partnership agreement with Thailand-based real estate developer, Boutique Corporation ("Boutique Corporation"), to develop and build new Oakwood-branded properties across key destinations in Thailand. The two properties, slated to open in April 2019, will be a 198-key and a 76-key property located in Patong area of Phuket and central Pattayarespectively. This collaboration also marks Oakwood's first foray into resort locations. Oakwood and Boutique Corporation have had a well-established collaborative relationship since the opening of 112-key Oakwood Residence Sukhumvit 24 in Bangkok more than 10 years ago. Oakwood Asia Pacific Limited currently operates a portfolio of 39 properties in 21 cities across 10 countries. Boutique Corporate currently operates a total of 800 keys, with another 1,250 keys in the pipeline.Singapore Changi Airport's Jewel Opening in AprilChangi Airport's new 10-storey mixed-used development, Jewel Changi Airport ("Jewel"), will open its door on 17 April 2019. The development will feature more than 280 retail and food and beverage outlets over 134,000 square metres. Key features include an early Check-In Lounge which will serve 26 airlines, a left luggage service, a 130-key Yotelair hotel, and a Forest Valley indoor garden with two walking trails and the tallest indoor waterfall in the world. A key attraction in Jewel will be the 14,000-square-metre Canopy Park that will open in mid-2019. Similar to a giant tree house structure, it will have a 50-metre-long walkway suspended 25 metres above ground, a 250-metre-long bouncing net suspended up to 8 metres above ground, and play attractions including mazes and slides. The development of project Jewel is estimated to cost SGD1.7 billion.

HVS Market Pulse: Rochester, MN - Medicine at the Forefront of Development

HVS · 8 March 2019
The DMC plans have been broken into six development sub-districts: Discovery Square, Heart of the City, Downtown Waterfront, St. Mary's Place, Central Station, and UMR & Recreation Area. The largest concentration of development is in the Discovery Square sub-district, which is expected to comprise up to 2,000,000 square feet of new development; this sub-district will be anchored by the Mayo Clinic and will act as the epicenter for the DMC initiative. Discovery Square is anticipated to support collaborative work within the biomedical, research, education, and technology sectors. The first phase of Discovery Square is currently under construction, inclusive of an 81,000-square-foot, mixed-use facility; this project is scheduled for completion in May 2019. Once part of the Downtown Waterfront District, the proposed $230M mixed-use Bloom Riverfront Project was terminated in February of 2019, which was expected to include condominiums, senior living, retail, and a 180-room four-star hotel.While a handful of projects relating to the DMC initiative have already been completed, several are currently under construction or in the development phases. A new, 264-room Hilton Hotel is nearing completion along Broadway Avenue, just blocks from the Mayo Clinic, and is expected to open in the second quarter of 2019. The Rochester lodging market is healthy and should continue to remain so, bolstered by significant medical-related demand. Below is a sample representation of the current hotel brand mix in Downtown Rochester, accompanied by the future brand mix based on proposed new hotel supply.Although a significant portion of the existing hotel supply consists of independent hotels, future supply is anticipated to change the dynamic of the downtown lodging market, allowing travelers access to more branded options to accrue or redeem rewards. As new supply is expected, so are improvements to existing properties in Rochester. It was recently announced that the 660-room Kahler Grand plans to undergo a $30-million renovation, including the conversion of economy rooms into fewer, larger, contemporary-style rooms; an increase in the number ADA-compliant guestrooms; and the refurbishment of the tower guestrooms.One of the oldest hotels in Rochester, the Holiday Inn, is currently closed for a major renovation. The hotel, which was built in 1971, benefits from a strong location near the Mayo Clinic and is connected via skyway to the recently renovated and expanded Mayo Civic Center. The hotel was sold for $18.16 million in March 2018 and closed for renovations in the fall of 2018. Anticipated to reopen in the summer of 2019, the hotel is expected to be converted to the upscale Hotel Indigo brand, featuring an updated layout, modern decor, and refreshed exterior facade.The entrance of nationally branded new supply and major hotel renovations should put upward pressure on average rates in the market going forward. Thus, yield-management will become a greater issue, as hoteliers will need to determine how to position new and existing assets appropriately. While medical-related and group demand are expected to continue to grow, the outlook is best described as cautiously optimistic given the additions to supply anticipated in the next few years. Continued growth attributed to the DMC initiative is expected to further anchor Downtown Rochester as a world leader for medical advancement and opportunity.HVS continues to regularly consult in this city from our nearby Minneapolis office. Justin Westad is ready to assist you on any consulting needs you may have. Drew Noecker with HVS Brokerage can also discuss any Rochester asset that you may be considering selling in 2019.

HVS Market Pulse: Portland, Maine

HVS · 7 March 2019
Hidden Gem of the NortheastWhile much of the tourism in the area takes place in the city's historic Waterfront and Old Port neighborhoods, hotel development in these areas has largely slowed in recent years due to the lack of vacant land available. Downtown hotel development has shifted primarily to the northeastern and southwestern ends of these neighborhoods. Additionally, recent hotel developments have been part of larger mixed-use developments.A notable hotel opening in 2018 was the 178-room AC Hotel by Marriott in the northeast edge of the Old Port neighborhood. The opening of this hotel led to a nearly 12% increase in room supply among upscale, upper-upscale, and luxury properties in the market. Despite this increase in supply, these product classes still finished the year at record occupancy, average daily rate, and RevPAR levels.Despite the limited impact of the AC Hotel by Marriott on market key performance indicators, new supply will become a growing threat in this market. Over the next three years, Downtown Portland's hotel room supply will increase over 30%. Upcoming supply in this market will include both branded and boutique hotels, such as Cambria, Aloft, West Elm, and Marriott Tribute Portfolio. To maintain this staggering amount of growth and development, the City of Portland recently introduced impact fees on January 1, 2019, to fund infrastructure improvements and other municipal services. While these impact fees apply to any new development or expansion from residential to industrial developments, the new fees will add a cost of over $3,000 per key to development and permitting costs for hotels. While this may taper some future new supply development in the Downtown Portland market, the revenue from these impact fees will allow the City to fund necessary upgrades to handle the over eight million visitors annually.ConclusionPortland will likely experience another record-breaking year in 2019, especially after being named Bon Appetit Magazine's Restaurant City of the Year; however, new supply will remain a threat to this market after 2019. Aside from Portland's tourism industry, driven by the market's numerous hotels, local breweries, restaurants, and cruise-ship port, entities such as Maine Medical Center, Unum, and Mercy Hospital, among other smaller medical centers, will continue to support Portland's vital healthcare sector.

HVS Market Pulse: Gainesville, FL

HVS · 6 March 2019
New SupplyFrom 30,000 feet up, the Gainesville lodging industry would appear to be in trouble with 750 rooms added to the market in 2018, in addition to over 500 rooms in various stages of planning and development. However, given further investigation, each respective proposed hotel benefits from a distinct commercial demand generator that is expected to help ramp up each property. Significant expansions related to UF Health, the revitalization of the downtown area, new retail development at Butler Plaza and Celebration Pointe, and the stability of the University of Florida have sparked local hotel developers' interests in various locations throughout Gainesville.The following is a brief overview of the commercial development throughout Gainesville that have prompted the influx of new supply.UF Health ExpansionA 174-room UF Health Guest House is currently under construction and anticipated to open in April 2020. This property will benefit from its location near UF Health Hospitals. UF Health, encompassing the University of Florida Health Science Center and UF Health Shands, is one of the Southeast's premier health systems. Construction of a $415-million, 540,000-square-foot expansion of the UF Health Shands Cardiovascular and Neuroscience Hospital was completed in 2017. The nine-story expansion included 21 new operating rooms, 216 inpatient beds, laboratories, and a 212,000-square-foot parking garage.University of FloridaA 146-room Aloft Hotel opened in September 2018 at 3743 Hull Road. The hotel is expected to ramp up quickly given its proximate location to the University of Florida (UF). The institution, which was founded in 1853, enrolls over 50,000 students annually. UF, which sits on 2,000 acres and comprises over 900 buildings, offers 16 colleges and 150 research centers and institutes. The University has an annual economic impact exceeding $8 billion. Special events such as football games, graduation ceremonies, Parents' Weekend, and Reunion Weekend routinely sell out lodging facilities in the city.Innovation District & DowntownIn 2018, a 144-room AC Hotel by Marriott opened at 530 West University Avenue. Furthermore, a 135-room Hyatt Place is proposed development on a site to the northeast of the intersection formed by Southwest 2nd Street and Southwest 2nd Avenue. Both hotels are anticipated to benefit from the University of Florida and Santa Fe College Blount Center, coupled with development near Downtown Gainesville, most notably Innovation Square. Innovation Square is a 40-acre urban master plan, located between Downtown Gainesville and UF, that will eventually host over 100 private companies, UF-based start-up businesses, classrooms, and research facilities, as well as restaurants, retail space, and residential units. Its concept is to fuse research and education with the private sector, spurring growth of the technology sector and creating a live, work, and play community that fosters innovation. Since 2011, the University has focused on creating and growing the Innovation Hub, a 40,000-square-foot facility that serves as an incubator for over two dozen startups; in 2017, a new wing, with nearly new 100 office areas, was added. The Innovation Hub employs approximately 260 and is anticipated to experience rapid growth in the near term. Furthermore, in 2018, Santa Fe College announced an expansion of its Blount Center in Downtown Gainesville with a $36.4 million building that will feature classrooms, incubation spaces, and lab suites; the new building is scheduled for completion in the spring of 2021.Retail Development - Celebration Point & Butler PlazaThe Drury Inn & Suites opened in 2017, followed by the Fairfield Inn & Suites by Marriott, Hotel Indigo, and the dual-branded Staybridge Suites/Holiday Inn Express & Suites that opened in 2018 near Celebration Pointe and Butler Plaza. Furthermore, new supply is in the early development phases on a site located near Interstate 75 and State Highway 24. These hotels are expected to benefit from Celebration Pointe, a mixed-use, 225-acre development at the intersection of Interstate 75 and Archer Road, which opened in 2017. Celebration Pointe will include 300,000 square feet of retail space, restaurant, and entertainment space; approximately 1,000 multi-family residential units; and Class-A office space. To the southeast of Celebration Pointe is Butler Plaza North, an outdoor shopping plaza that opened in 2016; it is 95% occupied by retail and restaurant tenants. Adjacent to Butler Plaza North is the Butler Town Center development, which opened in 2018. The new complex comprises 350,000 square feet of retail space, ten restaurants, a movie theater, and over 200 residences.OutlookThe near-term outlook is best described as cautionary, despite the anticipated healthy increase in demand levels as a result of commercial activity related to the education, retail, IT, and healthcare sectors. Occupancy is anticipated to decline as the influx of new supply is expected to outpace demand levels. Meanwhile, local hoteliers are anticipated to continue to discount average daily rate (ADR) as they focus on maintaining base occupancy levels, creating a temporary ADR ceiling. However, the long-term outlook for the market is positive. Once the new supply is absorbed and occupancy levels stabilize, the previous ADR ceiling will no longer hinder the market.


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