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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.

Revenue Is Rising, But Collecting Is More Challenging

CBRE Hotels ·19 April 2019
Per the Uniform System of Accounts for the Lodging Industry, an account entitled "Provision for Doubtful Accounts" has been established in the Administrative and General Department of a hotel operating statement. Each month, hotel managers estimate the portion of their property's receivables that they do not believe will be collectible. The Provision for Doubtful Accounts records charges made to provide for the probable loss on accounts and notes receivable. An increase in the dollars expensed to this category indicates a rise in uncollectable accounts. Conversely, a decline in the Provision for Doubtful Accounts indicates that hotels overestimated the amount of amount of revenue they thought would be uncollectable.CBRE's annual Trends in the Hotel Industry survey of hotel operating statements tracks Provision for Doubtful Accounts, as well as Credit Card Commission payments. To analyze trends in hotel collections, we studied data for a sample of 1,456 properties that reported these two expense categories each year from 2010 to 2017 (most recent data available). The following paragraphs summarize our analysis.Doubt On The RiseFrom 2010 through 2017, the hotels in our research sample achieve a 4.7 percent compound annual increase (CAGR) in Total Operating Revenue. Concurrently, the amount set aside for doubtful accounts increased at a CAGR of 10.8 percent.Except for 2012, the annual change in Provision for Doubtful Accounts was greater than the change in Total Operating Revenue each year during the study period. This indicates that over the eight-year period, hotel operators have had to write-off greater amounts of uncollectable revenue than anticipated. Collections were most challenging during the years 2015 and 2016 when the annual change in the Provision for Doubtful Accounts approached 30 percent.The amount of funds expensed for bad collections is still a very small portion of total revenue. Over the eight-year period, the Provision for Doubtful Accounts averaged just 0.047 percent of Total Operating Revenue per year. However, it did peak at 0.063 percent in 2017.Due to the greater transient orientation of limited-service, all-suite, and extended-stay hotels, these properties had the highest ratios of Provision for Doubtful Accounts to Total Operating Revenue in 2017. Convention Hotels, with an extreme orientation to group business, had the lowest ratio.Collecting With Credit CardsWhile an increased acceptance of credit card payments provides greater assurance of collection, it does come at a cost. Like the Provision For Doubtful Accounts, Credit Card Commission payments have grown at a greater pace than revenue the past eight years. From 2010 to 2017, while Total Operating Revenue was rising at a CAGR of 4.7 percent, Credit Card Commissions were increasing at a CAGR of 5.5 percent. Over the past eight years, Credit Card Commissions as a percent of Total Operating Revenue has grown from a low of 2.20 percent in 2010 to 2.33 percent in 2017.Based on our analysis, the greater growth rate for Credit Card Commissions can be attributed to a combination of rising discount rates, and an increased incidence of the use of credit cards. To estimate the usage of credit cards within U.S. hotels, CBRE made assumptions using information from the following sources:Credit card discount rates were estimated from a survey of hotel financial executivesLodging and sales tax estimates were made based on information from public sourcesGratuity assumptions were derived from our general industry knowledge and revenue mix data taken from the CBRE Trends databaseFrom 2010 through 2017, CBRE estimates that 83.7 percent of Total Operating Revenue at the hotels in the survey sample was charged to credit cards. Credit card usage peaked in 2015 at 85.0 percent. Credit card use was lowest in 2017 (80.1%).In 2017, credit card usage was greatest at extended-stay hotels (93.5%) and all-suite properties (88.1%). Resorts (63.6%) and convention hotels (75.6%) had the lowest levels of credit card use.A DisconnectWhen comparing recent trends in the Provision for Doubtful Accounts and Credit Card Commission payments we find a disconnect. It is reasonable to assume that a higher of level of credit card use should result in a decline in ability to collect. Therefore, the increased use of credit cards over the past eight years should have resulted in a deduction in the Provision for Doubtful Accounts. Further, the property types with the highest levels of credit card use should have had the lowest levels of Provisions for Doubtful Accounts. In both circumstances, this was not the case.What this indicates is that hotels are subject to the recent rise in credit card defaults, delinquencies, and challenges that all industries have faced. In addition, the transient nature of travelers using credit cards at all-suite and extended-stay hotels helps explain the greater levels of doubtful collections at these property types.As the lodging industry begins to accept more and diverse forms of electronic payment methods, this will not absolve hotels from bad collections. Property level controllers, as well as corporate financial executives, need to adjust the methods they use to assess and estimate their Provision for Doubtful Accounts to match the benefits and shortfalls of the new technologies.This article was published in the March 2019 edition of Lodging.

Hospitality Financial Leadership - Nobody Gets to Be Wrong, Everyone is Wrong, No One Gets to Be Right, Everyone is Right

The Hotel Financial Coach ·15 April 2019
I use this quote to start many of my workshops. To me it's the way I want the participants to stand in their individual power during our time together. It's also how I see our industry. In the hotel business we all need to have an opinion and even more important we need to be able to share those thoughts. Reason being is, we all have something important to bring to the table.That's what I tell my workshop participants. To illustrate this, I often ask the following question. "What would you rather have to increase your GOP in your 300-room hotel that is currently operating at 75% occupancy with a $150 average rate, a $4 room rate increase or 2 more points of occupancy?" I get a lot of responses right off the bat. People are quick to jump on both options. But which one is right? The simple answer is they're both right and at the same time they're both wrong.That's the way I see it. Our business is not a science where there is a definitive answer. I have always said, "Put 10 hotel managers in a room and ask one question and you will get at least 12 answers." Hotel people love to pontificate about the answer to just about any question involving operations or the finances of hotels. You're never really short of opinions on what you should do. That's the way it is with most hotel executives. What I want is the same level of bravado in my session today with all my participants, so to stir things up a bit with the audience this is what I like to do.The participants all have an opinion, but often they are hesitant to produce it right away. Many of the workshop attendees are not used to being in the spotlight or on a stage. It takes them a little while to warm up. Just like the audience at a talk show or a quiz game, they need to be properly warmed up before we can get the most from them. I say something like this: Depending upon where you sit you will probably have a different opinion about what you would like better, the rate or the occupancy. Let's play this out a bit longer and do some math on each option to see if one selection is better than the other when it comes to GOP.$4 in rate seems like a no brainer. We all like rate because it's almost all pure profit. (300 room hotel * 365 days = 109,500 room available) currently operating at 75% = (109,500 * .75% = 82,125) and $4 more = ($4 * 82,125 = $328,500) in new room revenue. Less some additional travel agent commissions, corporate fees, credit card commissions and we're left with say.... 90% of that (328,500 *.90%) = $295,650 in GOP2 points of occupancy can also sound pretty attractive. (109,500 * .02 = 2,190) additional rooms. (2,190 * $150 = $328,500) in new room revenue. Less the additional costs for commissions, cleaning and amenities for the new occupied rooms and the additional fees and CC commissions @ 30% = ($328,500 *.70%) = $229,950 in GOPAt this point I say something like, "So I guess the room rate scenario wins; is there anything else we need to consider?" Then I wait and it usually takes about 2 seconds before it starts."What if the new occupied rooms are group rooms?""What if the additional rate comes from the OTA's?""What if the new occupancy is on Sundays?""What if the new occupancy were all stay overs"?"What if the additional rate comes from existing corporate clients?""What if the additional occupancy comes from transient family clients?""What about the additional wear and tear on our rooms with that extra occupancy?""What if we had some of both occupancy and rate, what would that look like?"We now have a full-on debate raging and everyone seems to have an opinion, and some are very strong. The foodies have one slant and the salespeople have another. Rooms division people are all about the right customers staying in our rooms. The administration folks can make the argument either way. The GM says she would take either scenario with a smile. I stop things about now and I make my point. In our business we all have the ability to see things our way. We can justify almost anything as it relates to what's good or not so good for our business. Knowing this about the people in the workshop is a good place to start. Showing them that their opinion counts and it's just as valid as another's is powerful. I want people to see that they make a difference no matter where in the hotel they earn their paycheck. We are all in this together and whether the subject is more business, right sizing the head count or what's for lunch in the cafeteria, everyone is entitled to their own thoughts. Nobody gets to be right today, and everyone is wrong and while we are at it everyone is right, and nobody is wrong.If we can truly model this philosophy, then we can get the entire team to lean into the challenge of figuring out this thing we call a hotel. What is the best way to move forward? There are so many aspects of the business we need to attend to. What can we do to truly engage the hearts and minds of the entire team?That is what it's all about. Getting everyone to play. If we sit on the sidelines waiting for the GM and corporate to fill our heads with what to do and how to think we just ordered the worst dish on the menu. Be a hotel full of the mindset that it's all about having everyone step up and truly contribute!

How To Drive The Right Results: An Interview with the CEO of HotStats·10 April 2019
The hotel industry saw mixed results from 2018, with hotels in the US enjoying a healthy annual increase in profit plus it was the third consecutive year of growth in gross operating profit per room (GOPPAR) for hotels in the country.

Cross Selling: The Innovative Face of Hotel Revenue Management

mycloud HOSPITALITY· 8 April 2019
Stakeholders and management alike in hotels dream about consistently upward soaring revenue graphs year after year. This is the reason the paranoia about YOY or Year on Year growth is widespread particularly in stakeholders. But revenue graphs do not move at the whim and fancy of owners. They follow demand and supply behavior and if you are in a demand saturated market (something every hotel will confront more than once in their existence), your prices and average daily rates are likely to be driven down thereby contributing to stalling revenues.
Article by Christopher Boinet & Anne Epinat & Christian Bardet

Five Essential Checkpoints For Successful Buy-Side Due Diligence

In Extenso Avocats, a subsidiary of the DELOITTE Group · 3 April 2019
A proverb states that prudence does not avoid all misfortune, but a lack of prudence never fails to attract it. This is why due diligence is a vital step in buying a hotel. In a hotel acquisition context, the term "due diligence" refers to the investigations carried out by the prospective buyer. These investigations focus both on the hotel assets (i.e. the operating building as a whole) and the company that owns these assets or operates the hotel. Due diligence must also enable the buyer to fully appreciate the hotel's business, understand its structure, environment and market, and analyse the long-term viability of their project.Due diligence is often carried out further to the drafting of a letter of intent and a non-disclosure and exclusivity agreement that define the key points of the transaction. Any letter of intent protecting the parties' interests should stipulate that the results of the limited investigations undertaken were satisfactory, and in particular, did not reveal any material misstatement or departure from the information provided by the seller.It should not be assumed that the seller's warranty [or legal guarantees] will protect the buyer as much as effective due diligence would. Buyers are advised to scrupulously perform due diligence (as if the seller had not issued a warranty). Since the contractual indemnities due by the seller under the seller's warranty are limited in time and amount, they will never replace successful independent due diligence conducted by the potential buyer.We have reviewed the five essential checkpoints to be examined by the potential buyer of a hotel (or group of hotels) below:1 Legal due diligenceThe potential buyer will ensure that the hotel operation complies with the regulations in force by examining current operating contracts (franchises, management contracts, service provision contracts, commercial leases, etc.), as well as contracts in place with suppliers, licences, potential brands or agreements concluded with financial institutions. In particular, due diligence must identify all contracts whose continuation is likely to be affected by the proposed transaction, taking into account an intuitu personae clause.The risk of immediate repayment of the company's financing (leasing contracts in particular) in the event of disposal of the shares and ownership interests of the hotel operating company or owner of the premises must also be carefully examined and dealt with before a promise to sell agreement is signed.A legal audit of the company that owns and operates the business is required, as is an investigation into the owner of the hotel premises, if applicable, in order to verify the seller's ownership rights and capacity to sell. Legal due diligence will also uncover any disputes initiated by or filed against the hotel, and the commercial and financial consequences thereof that may impact the final price or the seller's warranty.In addition to these habitual legal checks, a new subject has also recently arisen: protecting the personal data of guests and staff under the GDPR[1] which came into force on the 25th May 2018. Due diligence should cover all the procedures implemented within the hotel and actually used, hotel and staff management software, contracts involving confidential data processing such as those negotiated with OTAs, supplier contracts and hotel management agreements[2]. In addition, data processing management must also examine the compliance of those entities that process data on behalf of the hotel, in particular through SaaS software, i.e. software hosted by suppliers and accessed via the Internet.To be monitored: the current franchise contract or hotel management agreement.When a hotel operating company has entered into a management agreement with a hotel brand, the buyer should carefully review the history of the relationship with the brand and the investments made. There are often clauses requiring the prior agreement of the hotel group with regard to the transfer of control of the company/ business or premises. Lastly, if the potential buyer wishes to terminate the contract early, the cost of such and the contract terms will have to be assessed. A lawyer can advise the buyer on the most practical way to approach the hotel group in this respect - a direct approach is often best. The same considerations apply to hotel franchise contracts or hotel consortia membership agreements.To be foreseen: the commercial hotel lease and its renewal with a capped rent.Instructing a legal expert and a lawyer experienced in valuing rent can be judicious. Capex (if possible) and the lease should be carefully examined, taking into account the regulations in force[3] in order to avoid any unpleasant surprises with regard to the financial conditions of renewing the hotel lease that arise from the property's single use status and its capped rent. If the difference between the current indexed rent and the rent under the renewed lease is too significant, the hotel's profitability can be affected, as can the negotiations surrounding the sales price.2 The operational component of the hotelThe potential buyer will have to understand all the operational characteristics of the hotel and its positioning on the market. The buyer will focus investigations not only on the characteristics of the existing client base, but also on its resilience, the contribution of each segment (leisure, corporate, individual, group) and the weight/ cost of each distribution channel in the marketing of rooms and the revenue structure. A detailed understanding of the yield management strategy employed, the IT systems used (CRM, database, POS) and the professionalism of the management in place should make it possible to identify areas for improvement in order to boost the property's competitiveness vis-a-vis its competitors. It may be advisable to seek the advice of a consultant specialised in benchmarking in order to verify the hotel's positioning and performance (OR, ADR, RevPAR) with regard to its competitive set.Similarly, the analysis of each expense item and the comparison of expenditure levels with industry norms or averages is a source of valuable information. This will reveal the business model (subcontracting or in-house management of maintenance, cleaning, security, etc.), growth drivers (improvements in management), and even internal control procedures that call into question the proper functioning of the establishment.These operational investigations can be completed by an estimation of the property's "as-is" value. Taking into account potential improvements, the future value of the property can also be determined for the buyer, once the identified efforts (management, Capex, marketing, etc.) have been instigated.3 Technical inspection of the hotel building and its equipmentThis is one of the points that hotel neophytes often fear the most. The potential buyer's technical consultants and lawyers will carry out a detailed document and on-the-spot study of all the physical elements of the hotel building and associated reports. This includes installations and equipment such as electrics, plumbing, building structural aspects, IT systems, decorative elements and hotel material.A close examination will be carried out to ensure that the hotel, which falls under the category of public-access buildings, complies with fire safety and health standards. Particular care will be taken to ensure compliance with the recommendations indicated by the Health & Safety Commission and the various control authorities as part of their mandatory periodic checks. Lastly, due diligence can make it possible to verify, prior to the transaction, whether or not rooms can renovated or capacity increased in accordance with current urban planning rules.If the due diligence reveals that regulatory compliance work has to be carried out - in particular with regard to disabled access - the financial cost will in principle be borne by the seller [point to be negotiated]. Yet the question of which party is responsible and when the works should start does remain: if it is the seller, this may result in a further delay in signing the final sales act.4 Hotel tax, finance and accounting issuesDue diligence enables the buyer to check whether the hotel is up to date with its tax obligations and to assess the tax risks of the previous hotel operation by examining the various mandatory reporting that has been carried out. A tax and accounting audit of the hotel and/ or the operating company or the hotel operating group will help determine in particular the amount of the seller's warranty, the acquisition plan and the timing and structuring of the transaction (business or shares of the operating company).This part of the due diligence process requires a detailed study, notably an examination of the business' accounting documents and tax returns, as well as all legal documentation in order to assess financial coherence. In this respect, the verification of revenues and declared results makes it possible to check that there is no risk of a tax adjustment for VAT or corporate income tax purposes. Due diligence will also assure the buyer that the accounts are true and that the hotel is not in a precarious financial situation. In addition, it guarantees that the sale will not be called into question in the context of the fight against money laundering. Further, the potential buyer will examine operating expenses and their relevance in relation to the standard hotel industry ratios, which also provides a good indicator of how well the property is being managed.Lastly, accounting and financial due diligence is essential to evaluate the coherence of the proposed sales price in relation to the book value of the assets or shares acquired. In this respect, care must be taken with regard to the cut-off date, if set. Indeed, forgetting to rigorously account for accounts receivable or inventories can have consequences that are all the more significant since the hotel being sold is substantial. Provisions must also be verified. The proposed buyer must be able to identify all the risks related to the operation and then measure the repercussions on the accounts. They must also check that there are no fictitious assets recorded, such as non-existent inventories or receivables with a long history. 5 Hotel human resources and social aspectsDue diligence lists are generally exhaustive with regard to human resource issues. Legal due diligence will ensure compliance with labour law regulations and verify the hotel's HR management. It is therefore advisable to obtain information on employment contracts, the list of employees with an indication of seniority, the amount of salaries and the various benefits granted to staff collectively or individually.With regard to HR issues, it is the risk of litigation brought before the Industrial Tribunal by a former employee that is the most frequently observed. Human resources due diligence will make it possible both to assess the buyer's HR obligations and to evaluate any necessary reorganisation and restructuring with regard to the collective Hotels - Cafes - Restaurants labour agreement (in principle) and the company's agreements in place.In addition, it is crucial for the buyer to be able to anticipate future costs given the age pyramid of the staff and the existing skills versus the skills required in the future for the successful development of the hotel, after having identified key employees. The potential buyer is invited to examine the positioning of jobs in the classification of the labour agreement in place, gender equality, subcontracting contracts (housekeeping, for example), the frequency of use of fixed-term contracts (casual staff) and the risks of requalification. This is definitely not about conducting a Prevert-style inventory, but rather about identifying risks (financial and legal, not to mention the seller's reputation amongst staff).Perhaps a sixth condition for successful due diligence is related to the due diligence method itself. For example, properly coordinating the team of due diligence consultants, meeting deadlines and preparing the due diligence checklist in advance so it can be carried out within the specified timeframe.The potential buyer will have to conduct hotel due diligence in accordance with an often tight schedule, while rapidly identifying the key priority points to be covered. Effective due diligence is based on the proper coordination of the various parties involved and the exchanges between the various consultants and experienced lawyers (generally organised by the law firm, which already has its specialised lawyers and tax specialists).No checklist has been annexed to this article, since no standard list exists - the list must be adapted to each transaction. Indeed, we sometimes come across hotel due diligence checklists that are not necessarily appropriate for the hotel transaction in question. Some are too short or generic. Others result in the creation of voluminous data rooms which are time consuming to process on the buyer's side (and thus unnecessarily costly) - these create delays and are counterproductive since they fail to get to the heart of the matter. In short, let us not forget, "Hell is truth seen too late" (Thomas Hobbes).[1] General Data Protection Regulation on data privacy - European regulation ndeg2016/679 and law ndeg78-17 - French Data Protection Act, modified on the 20th June 2018[2] Reference: our article published in Deloitte - In Extenso's 2019 Tourism and Hospitality Trends publication : Personnal data processing and the hotel industry in France: hotel management agreements will need to be revised and currently found at[3] Reference: our article published in Deloitte - In Extenso's 2017 Tourism and hospitality trends publication: French hotel, tourist residence and apart-hotel leases are evolving and currently found at

Hospitality Financial Leadership - Hotel Finances For Dummies

The Hotel Financial Coach · 1 April 2019
My primary responsibility as the head of the finance and accounting departments in the hotel was to ensure the books were clean and balanced. What I really got paid for was serving as the "chief financial information officer." The reality was the financial information I had to work with stunk!In every business, communication is important, but especially around the financial piece of the business, communication is key. Great communication can make the business successful, help it grow, cause it to take on a life of its own. Poor communication can make the business die either a long, lingering death or a swift, unexpected death. But death is death. Death is painful, even in business. It means the death of that business owner's and/or the investors' hopes and dreams.Good communication in business is, therefore, a matter of survival.Hotels follow the same pattern, especially regarding communication about the money coming in and going out. No communication on the financial numbers translates into poor results without understanding why. For instance, incomplete financial statements with the telltale signs of missing invoices and bungled accruals, budgets, and forecasts that totally miss the mark feed financial failure. Put all that on top of monthly financial commentaries that didn't make any sense because supporting documents didn't exist. This was what I was producing.I knew what was needed in order to do my job properly, but I couldn't get the 75-plus other non-financial leaders in the hotel to help me.As the financial leader, I knew I couldn't just sit in my office and dream up what was going to happen next month in the kitchen, the laundry, the dining room or any other area of the hotel with any accuracy. The hotel business does not work that way. To be successful, the financial information must come from the department heads because they are the experts in their departments. But also, each of these experts must take ownership of the information and goals set. And in turn, each one takes ownership of the desired results.I tried everything I knew to get these managers to play ball with me. I wrote tons of memos, preached hundreds of sermons at department head meetings, and cornered countless managers for one-to-one discussions where I stopped short of dropping to my knees to beg. All of it was to no avail. What I wanted or needed didn't matter to them. They had their own worries, wants and needs.The reports I received in exchange for my heartache were either incomplete, not accurate, late or nothing at all. It felt awful to work so hard, with such passion and still fail, still produce lousy work. I was pretty sure this gig was not going to last too long because it was moving in this downward, unproductive direction. I ended every day feeling frustrated and alone.* * * * *The new general manager came to my office one day and asked what was going on in the financial area. I discussed the frustration I had with the other managers and their lack of follow-through in providing the financial information I needed to produce good results.I wanted him to say something like: "Leave it to me. I'll light a fire under them!" But he didn't.Instead, he said something unimaginable, "Why don't you create a workshop for the managers. Call it 'Hotel Finances for Dummies' or something like that."I paused for a split second, let my mouth and emotions overrun my brain, and blurted out, "I don't have time. Look at my desk. I'm already here 10 or more hours a day trying to do this job. And I'm not a teacher."His calm reply was, "You can do this! And, David, it's the right thing to do."As he stood to leave, the parting comment was, "As an incentive to inspire you, this little workshop is now part of your annual bonus criteria. No workshop, no bonus, Mr. Lund."Somewhat reluctantly, but with this new carrot being held out in front of me, I set about putting this monster training together.Where to start? What information to include? Where to get the information? How to ask for what I needed in a different way than what had already not worked?Days and weeks passed as I worked to address the questions in my own mind about the who, what, where, when and how of this presentation. Given my previous lack of success and having tried all methods of persuasion I could think of already, I didn't feel very confident about the workshop results. After all, it's accounting!The workshop day arrived. Human resources handpicked 35 of the hotel's leaders to attend my first-ever financial workshop from 9:30 a.m. until 4:30 p.m. Six hours of teaching time. I was scared. Not comfortable with the idea of standing up in front of 35 hotel managers who ran or hid when they saw me headed toward them. And then there was the part of me who dreaded standing up front of and talking to these managers the whole day about nothing but accounting."Yea! Everybody loves accounting! Not!" I told myself.Then a little voice whispered back, "That was the whole point of doing this workshop. Try to teach each of them the value in the numbers and the value they had in the process.""That was an impossible task," I thought, standing at the front of the room at 9:15 a.m. watching as everyone dragged themselves to a seat.As the day progressed, I gained more and more confidence. Ultimately, something magical resulted that day. From my perspective, some of my examples were hard for the attendees to follow. Some of the hands-on exercises were only semi-enthusiastically received. But overall the day went much better than expected. Turned out I was the harshest critic in the room.It was what happened at the end of the afternoon that blew my mind and redirected my thinking.I wrapped things up and got a small round of unexpected applause. I thanked everyone and gave them a short evaluation to fill out with 10 questions to rate the workshop from 1 to 5. Then I opened the workshop up for comments and feedback.A couple of the department leaders stopped and took their time to thank me. Before I knew it, I had a line of managers waiting to thank me.Me!After only six hours of teaching time, I got some amazing compliments that shook my core. I taught them to value their roles in the financial piece of the pie, to value each other and in that I felt valued, too.I knew right then and there how wrong I'd been. This training was something BIG. What an amazing feeling to motivate, inspire and train these leaders in a profound way.The words and surveys revealed some incredible comments. Here are a few:"Finally, someone explained the P&L." "We should all have had this training from day one." "I had no idea what you did with my forecast.""I didn't know my financial forecast input mattered.""The owners actually see my projections.""Owners actually care about my projections.""Sorry! I thought I was just doing your job for you. I didn't understand until today that what you asked for really made my job easier."During the coming weeks, I was asked to host a second workshop. It filled up quickly as word spread about its success. We even started a waiting list.Early the following year the hotel I worked for submitted the workshop concept and results to our headquarters for an annual contest. My accounting workshop won the international innovation award!All of this now, and it started with a problem and what appeared to be a dumb idea. Go figure.

Corporate Boards Are Pessimistic About Trade Between the U.S. and China

Hotel F&B·29 March 2019
The U.S. trade fights and UK’s Brexit are the most salient and recent symptoms of a decade of retreat from globalization that has international business apprehensive about the future. One of the most worrying developments today is the rising tension between the U.S. and China on everything from trade to military posturing.

Fresh Look: What We Did Not Know About the Pre-Opening Process

mycloud HOSPITALITY·27 March 2019
When researchers Agnes DeFranco, Ed.D., CHAE, Arlene Ramirez, MBA, CHAE, CHE, CHIA, and Tanya Venegas, MBA, MHM, CHIA started receiving inquiries from HFTP members looking for resources regarding pre-opening expenditures in hospitality, they realized how few there were, and set out to find some answers with the creative freedom that comes with researching an oft-overlooked topic. With the goal of demystifying the process and reinforcing industry standards, the research team worked extensively with a diverse body of financial executives who had opened hotels to share their experience.

Hospitality Financial Leadership - RevPAR vs. GOPPAR and Why We Need a New Champ

The Hotel Financial Coach ·25 March 2019
I have been around awhile and it's not like I'm ancient or anything, but I have seen some BIG changes in how we as an industry look at numbers and what numbers we focus on. What's important and what people are talking about for metrics is always changing--albeit slowly. Inside the current look is the driver for how we operate. For the longest time RevPAR has been the king. However, it was not always that way and I think it's time for the king to move on.I can remember when we didn't even use RevPAR; it was only occupancy and rate. Long gone are those days. I can also remember when we didn't have anything more complex than seasonal rates to play with. I can also remember the introduction of a weekend rate in one of my hotels. My, how things have changed.As soon as our industry discovered revenue management the quest for a higher revenue per available room has been the battle cry. Rightfully so, as we have enjoyed a prolonged period of top line room revenue growth at over 100 straight months according to STR.Some of the reasons that have contributed to this winning streak:Relentless use and growth of OTA'sEconomic recovery following the 2008/09 recessionIncreased use of sophisticated revenue management toolsOwnership's intense involvement and business focusNow things are changing yet again. Just this year in America we have hit an industry record occupancy of 66%. Never before have we accomplished this on an annual basis. Coupled with this record occupancy we are still inking out modest gains in room rates, producing the gold we seek which is an increased RevPAR. But hold the phone on this one because for the first time in almost a decade we're seeing operating profit falling at the same time. Reported this summer in several markets as well as a full nationwide month, we are seeing growing costs outstrip revenue growth.From my recollection, this is a different set of business circumstances than we have ever seen in the past. Prior hotel profit meltdowns have been consistently predicated by a loss of occupancy or rate and usual both at the same time, created by a broader economic set of negative circumstances. We have not seen data from the past (that I can find) that supports an erosion of operating profit with a continued growing top line. What this means to me is we are heading for what could be described as the perfect storm.Here is a recipe for that perfect storm: a 1, 2, 3 punch.One, we now have the need for continued profit growth like never before with more institutional owners focused on one thing, and one thing only, continued uninterrupted constantly increasing profits. Gone are the days for most of us where we were in it for great guest service and the long haul.Two, labor costs that are increasing in many markets by what we used to enjoy with RevPAR--double digits. Minimum wage increases that have taken place and are promised at the state and municipal levels. These have a profound effect on hotels where many jobs are at or close to minimum wage.Three, a lack of operational elasticity when it comes to managing costs. Hotels are largely unable to react due to a high proportion of fixed costs and the inability to react positively to a downward, flat or even modest improvement in top line.Back to the new champ we need. GOPPAR is a very different number than RevPAR. As we know, you can't take increased RevPAR to the bank. You can take GOPPAR most of the way to the bank and as hotel managers this is what we ultimately get paid to produce. Gone are the days of high single and even double digit RevPAR growth. Now we need to figure out how to drive increased operational profits on small, flat or even declining revenue streams with increased per hour labor costs.First the definition of GOPPAR - From Wikipedia"GOPPAR is the abbreviation for gross operating profit per available room, a key performance indicator for the hotel industry. It gives greater insight in the actual performance of a hotel than the most commonly used RevPAR as it not only considers revenues generated, but also factors in operational costs related with such revenues. GOPPAR is the total revenue of the hotel less expenses incurred earning that revenue, divided by the available rooms. GOPPAR does not take into consideration the revenue mix of the hotel, so while it does not allow an accurate evaluation of the room revenue generated it demonstrates the profitability and value of the property as a whole."To better and more consistently deliver profit at different revenue points, hotels need to deploy and support tools to assist their leaders in delivering superior financial results. They need to educate their managers to not only be able to look after their guests and colleagues, but also to teach them to be on top of their numbers.Here is the short list of four must-haves at your disposal going forward inside your hotel's financially engaged leadership team if you want to be out in front of that storm that's coming.Each department needs their own plan.Each department manager must be the master of their expenses and payroll. To accomplish this, they must be producing their own monthly financial forecasts with detailed line by line data for all expenses and payroll.Payroll pans need to be supported by staffing guides based on approved formulas for variable payroll and a sharp eye to fixed positions. Gone are the days of staffing heavy to ensure we can handle the customer volume. It's about right sizing and making sure we don't waste resources. For some managers this is next to impossible due to their past bad habits. Creating and sticking to productivity targets vis-a-vis the schedule on a daily and weekly basis is the key to controlling the payroll cost. I also know what you're going to say here and that's you telling me about your wiz bang payroll planning software. News flash - they don't work unless they are productivity based! See my article on creating your own productivity tools and request my rooms and F&B productivity sheets. Expenses need to be zero based.Operating on a cost per room occupied target is completely ineffective when it comes to controlling or trying to reduce expenses. If we don't have the nauseating detail of each line item for our expenses we're sunk. This in the modus operandi for almost every hotel. Don't believe me, ask your hotel manager or the director of finance for the "detailed list of the rooms guest supplies account." I guarantee that 19 times out of 20 you will get "we use a cost per room occupied target" which is the code for we don't know what's in the middle of our statement.An effective example I teach in my workshops goes like this. I give you $200 for groceries and I send you to the store. Sure enough, you come back with lots of stuff worth $200 but what did we actually need? And how many? What I want and what you need is to send you to the store armed with a complete list of items, quantities and prices to ensure you spend your money wisely. Now comes the pivot and this is what we train for. This month things are tight and I don't have $200 anymore. I have $170 to spend. Now the rubber hits the road and with your list you have a good shot at getting what is essential and curtailing where necessary to manage the flow. Without your list in the first place you're up a creek. You cannot manage your expenses properly without a zero-based budget and monthly detailed forecast.The last tip is to make the numbers as important to your leaders as the guests and the colleagues. What I mean by this is treat them with the proper respect and do not make the numbers or their messenger the villain that will blow up in your face every time. Make the numbers fair and equitable and train your leaders on a system to manage their departmental picture. Teach them that the numbers are just the way we keep score and the numbers are just another part of our business.These strategies will help you manage the GOPPAR because absolutely everything counts and without a system and a plan to manage the profits, you're lost and at that point just about any road will take you where you want to go.

Hotel Spas: Not Just For Resorts Anymore

CBRE Hotels ·22 March 2019
According to the December 2018 edition of CBRE's Hotel Horizons, the annual growth in RevPAR for U.S. hotels is forecast to decelerate from 2.8 percent in 2018 to 0.1 percent in 2021. As the main source of hotel revenue is plateauing, hoteliers are looking up and down their operating statements to find alternative sources of income. For hotels that operate a spa, this department has stood out as a bright spot not only for growth in revenue, but gains in profits as well.The slowdown in revenue growth will be particularly acute in the nation's major markets. Since 2010, the majority of new hotel rooms entered into the larger urban cities making market conditions very competitive. Therefore, urban hotels are increasingly relying on their spa operations not only to boost revenue, but to help define the identity and character of the property within the greater marketplace. At first, spas were added to urban corporate and convention hotels to remain competitive with resorts for group demand. Now, operating a hotel spa on premise promotes an environment of wellness throughout the hotel that is desired by all types of travelers looking to maintain their healthy routines while away from home.Since 2007, CBRE has published the annual Trends in the Hotel Spa Industry report. For the 2018 edition, 192 hotels across the U.S. provided detailed revenue and expense data for their spa operation. Of the total sample, 60 spas were in transient hotels located within the nation's major markets. For this analysis, we refer to these properties as "urban hotels", versus the remainder of the sample which consists of traditional resorts located in rural or remote destinations.The following paragraphs highlight the performance of urban hotel spas during 2017.RevenuesIn 2017, urban hotel spas enjoyed a 6.5 percent increase in revenue. This is greater than the 3.1 percent increase observed at resort spas. During the year, spa revenues represented 3.5 percent of total hotel revenue at resort hotels. As expected, this is greater than the same ratio at urban hotels, but not by much. In 2017, spa revenue accounted for 3.1 percent of total revenue at urban hotels.One reason urban hotel spas can generate significant levels of revenue is their ability to capture customers from the local market, not just hotel guests. In 2017, local residents and members accounted for 59 percent of spa department revenue at urban hotels. This compares to 41 percent at resort hotels. In addition to paying for spa services, local patrons are a source for other ancillary revenue, such as the spa's retail shop and the hotel's restaurants. Local membership programs, while providing a steady income stream, serve as an important marketing tool and help increase awareness of a hotel within the local community.Urban hotel spas are also more efficient at capturing revenue than their resort counterparts. In 2017, urban hotel spas captured $226.57 in revenue per-square-foot compared to $180.23 at resort spas. This efficient use of space is particularly important for urban hotels where land is scarce and development costs are much higher. Urban hotel spa customers also spend slightly more per treatment ($164.71) compared to resort spa customers ($162.03).Expenses and ProfitsBecause of their location, urban hotel spas experience increased costs of operations. Accordingly, urban hotel spa department profit margins (21.4%) are less than those at resort spas (25.9%). Not only are operating costs greater at urban spas, they are increasing at a faster pace. From 2016 to 2017, total spa department expenses at urban hotels increased by 4.0 percent compared to 0.9 percent at resort spas.Labor costs are the largest expense category for all hotel spas. At urban hotels spas, labor costs average 57.6 percent, compared to 55.3 percent at resort spas. Like overall department expense trends, labor costs at urban hotel spas grew at a greater pace (3.9%) than labor costs at resort spas (2.9%) from 2016 to 2017.Fortunately for urban hotel spa owners, the relatively strong increases in revenues offset the burden of rising operating costs. For the seventh consecutive year, urban hotels (16.8%) achieved greater growth in spa department profits compared to resort properties (9.8%).Discretionary incomes are increasing, as is the desire for self-care and wellness. This is true not just for hotel guests, but for local residents as well. As access to wellness services becomes more commonplace in residential communities and in the workplace, guests will increasingly expect hotels to offer these same services. Hotel guests will even make travel-based decisions based on such offerings. Therefore, hotels that capitalize on their spa and wellness services have the opportunity to increase revenues and profits. In turn, this will increase the value of the hotel for owners and operators.Mark VanStekelenburg, Managing Director, and Jenna Finkelstein, Senior Consultant, work in the Hotels Advisory department of the CBRE office in New York City. To purchase a copy of the Trends in the Hotel Spa Industry report please visit, or call (855) 223-1200. This article was published in the February 2019 edition of Lodging.

Profiting From Prearrival

Hotel F&B·20 March 2019
Every hotelier knows that tech-enabled personalization is crucial to the future success of one’s brand. In reality, though, these customized experiences are very difficult to put in place, often requiring complex software integrations, significant CapEx and a fully trained team – both at the supervisor and frontline levels – to properly act upon any insights or recommendations gleaned from a unified CRM.

SunTrust Provides $1.5 Million to Clean the World for Global Expansion

green lodging news | By Glenn Hasek·19 March 2019
SunTrust announced that it has provided more than $1.5 million in term loan and working capital financing to support Clean the World, a global social enterprise, and a leader in global health dedicated to WASH (water, sanitization, and hygiene).

Hospitality Financial Leadership - Understanding the Concept of Owner Spend

The Hotel Financial Coach ·19 March 2019
The hotel business is unique with owners, brands and assets all vying for their individual needs and attention. All the while this delicate balance has some interesting business characteristics that are essential for hospitality financial leaders to understand. It's not terribly complicated, quite the opposite. It hides out in plain sight, so it can be easy to miss if you're not looking for it. I can remember an old boss telling me his thoughts on what I call "owner spend." I thought at the time he was full of whatever, yet the concept was bold and incredibly clear. It also struck me in that moment that no one else had ever spoken of this, in exactly this way in my many years working inside a large brand. Owner spend is the key to understanding the relationship between the owner and the brands and it plays out inside each individual asset on a daily and annual basis in a managed hotel.When I talk about owner spend, I'm referring to hotels that have a full-blown management contract with a brand. Not franchised properties, as the concept does not literally work the same way due to the smaller size of the teeth inside the franchise agreement. With hotels that have full-scale management agreements in place, that agreement and how it is executed is the key to the brand's success or failure and it all revolves around the concept of owner spend. I wrote a similar article titled "The Secret To Great Financial Expertise - What the Brands Don't Know" - In that article I point to the owner spend concept when it comes to training and establishing brand expertise, but it stops short of exposing the full concept.Here it is and, like I said, it's not a secret; it's as plain as the nose on your face, but I believe most people can't see it for what it really is. That's a business concept that if properly executed gives the brand a large upper hand in its dealings with the asset's owner. Brand spend means the owner spends 100% of what's required to run the hotel. That's right the owner, never the brand.The owner writes all the checks for absolutely everything that the hotel needs. Every dollar of: operating payroll, expense, executive compensation, capital spend, advertising cost, promotion cost, severance cost, employee benefits and even service length of tenure gifts. I could fill this page and the next one with what the hotel spends its money on and the owner pays every penny, never the brand.The brand by way of the HMA gets to tell the owner exactly what needs to be spent in operating costs on an annual basis. Yes, there can be owner push back on some items, but overall the brand has license visa vie the HMA to get the owner to spend money on anything and everything and it is usually in support of maintaining the standard. The standard, the nebulous what's new this year in the way of training, service, technology, administration, you name it and the brand creates it, charges the owner for it and the owner pays.All of this points to the obvious fact that the brand decides what's necessary to maintain the brand standards and they deliver the news via the annual budget. Once the budget is approved the invoices start flying to the property and the owner pays. This means quite simply the brand creates the concept of the brand's standards, something that is constantly and forever evolving, and the owner pays. The owner pays 100% of these "brand standard" costs and the reason they do is that's what they signed up for in the first place with their HMA. Simple, pervasive and if properly executed it's a powerful way to build a brand.Having high brand standards is an excellent way to grow the brand, but it also comes with some hurdles. It can be a stumbling block for owners when the assets are not performing. Brands face incredible pressure from owners in times of economic turmoil. Owners want brands to trim the sails and throw as much off the sinking ship as possible, so to speak. Most brands help in these circumstances by way of CCP's, "cost containment plans." These are the plans that the brands develop to stem the bleeding when the occupancy and rates plummet as they do on an infrequent basis.We have been off the need for these cost containment plans for almost 10 years but when they are needed the brands will get into action. That is most of them will. It's important to point out that even when the hotel faces an economic disaster that always ensures it's the owner that still pays 100% of the freight.

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.

Can Hotels Sue Their Governments Over Home Sharing?

Hotel Mogel Consulting Limited ·15 March 2019
Taxi drivers working in the City of Toronto launched a $1.7 billion CDN (about $1.4 USD) class action lawsuit against the city itself, claiming damages that reflect how much licensed taxis have lost - what is sometimes coined as 'plate value' - since these ride-sharing services came into the municipality. Given that drivers are licensed by the city itself, they say that the Toronto government has failed to protect the taxi industry and is thus negligent. Spokespersons for Toronto have responded saying the city bears no responsibility for any financial loss, the devaluation of taxi permits/plates or the state of drivers' retirement pensions.Not being an attorney or a party to any of the statements of claim, I merely wish to draw parallels to the situation we in the hotel industry are facing. To open a hotel in most jurisdictions, you require an occupancy permit. Issued by a local licensing board, this permit requires any lodging operation to demonstrate compliance with a series of safety standards and other critical elements designed to protect guests, workers and the surrounding community. Some jurisdictions also mandate regular inspections for health, safety and fire regulation. As hotel operators, we look at these requirements as part of the normal operating process.To echo hoteliers' perennial battle cry of leveling the playing field, I have yet to see a sharing-economy operator subject to all of these licensing procedures and to the same rigors as traditional hotels. How is this fair to the hotel operator? We do not argue the expense of the regulation. But in doing so, we expect that everyone else doing business in the lodging industry follow suit.For the most part, electing to put a residence into the accommodations pool through, say, Airbnb or the like does not necessitate the acquisition of an occupancy permit, nor does it require any strict safety inspections. The playing field is simply not level, and from this I can see why cabbies in Toronto have banded together to throttle their discontent at the city itself. The very concept of regulation is under question, and governments haven't acted hastily enough to preserve the inherent value of the licenses or permits they issue.As an example, if an extreme one at that, what happens in the case of a pop-up, 30-room condominium hotel comprising 30 different owners? Each is acting separately, but they may all contract for common services such as management, maintenance and housekeeping. Would they need an occupancy permit or perhaps 30 permits? How is this situation different from one where there is just one entity that happens to have multiple shareholder-owners?Moving to the issue of legalities, what legitimacy is there to a city's mandatory occupancy permit requirements if these are not universally upheld? Does the bylaw under which this permit process was granted specifically state that the permit is required for a property with a minimum number of rooms? If not, why aren't all properties licensed regardless of their approach to marketing, channel distribution or positioning differences?Unlike the financial hardship that has befallen the traditional car service industry, most hoteliers have had a pretty good year-to-date 2018. As such, it will be hard to rally the troops and justify a full-fledged legal battle against any government agencies like what the taxi drivers are starting to do. Nevertheless, I see nothing wrong with the ironclad stipulation that every operator, from one suite to one thousand rooms, should require a license to operate.Does this sound fair? Is there any room for a middle ground in asking for the same regulations as traditional hotels? What happens when the next economic downturn hits and our 2018 numbers start to wither due in part to the gross oversupply stemming from the glut of alternate lodging providers?

The Simple Secret Behind Why Acquisitions Fail

mycloud HOSPITALITY·14 March 2019
Corporate acquisitions often fail for a simple reason: the buyer pays too much. An old Wall Street adage comes to mind: “Price is what you pay; value is what you get.” When our investment firm purchases shares of a stock, we pay a price that is within pennies of the last trade. But when a company is acquired, the purchase price is negotiated during long dinners at fine restaurants and usually goes higher than the latest stock quotation.
Article by Fred Novella

3 Important Reasons Why Hotel Asset Managers Have Become Such Hot Property

Global Asset Solutions ·14 March 2019
Indeed, given the volatility in the travel market many hotel owners would no longer take the risk of entering a relationship with a hotel operator without the ongoing support of a hotel asset manager.Employed by the asset owner, the role of a hotel asset manager is to ensure a property reaches its full potential so that it can create increased returns in the long term or be sold at the peak of its real estate value.Fred Novella, Managing Director at hotel asset management company Global Asset Solutions, outlines the three main reasons why hotel asset managers have come to play such an invaluable role.Reason #1: They bridge the knowledge gap between owners and operators When owners and operators enter a hotel management agreement, they often do so with different objectives in mind.The operator may naturally be more focused on protecting their brand and on growing their footprint, while the owner may be looking at maximising their profits or the value of the asset.Although the management agreement usually goes some way towards aligning these objectives, it often leans slightly more towards the operator.This misalignment wouldn't necessarily be an issue if there was a greater symmetry between the hospitality expertise of the owner and that of the operator.But large hotel owners aren't always professional hoteliers. They're more likely to be financial institutions, funds, real estate companies, high-net-worth-individuals, etc. - often with little operational experience in hospitality.This lack of experience means they may sometimes struggle to identify the right operator in the first place. And even when they do, they may not always know what to look out for when negotiating the best terms and conditions.This is where we as hotel asset management professionals step in.Our experience in hotel operations, contract negotiations, development and performance management, along with our track record of working with high-profile international management companies in different world regions, gives us the level of expertise some owners may be lacking.And while operators can also offer a great deal of local and tactical expertise during agreement negotiations - often hand in hand with the advice received from their legal representatives - it may not be enough.Hotel asset managers bring a much broader understanding across geographical markets, segments, property types, best practices, brands and operators.This big-picture thinking can be helpful while owners are choosing an operator that's right for their property. Our early involvement often prevents future conflicts down the line.Once a hotel property is operational, we then provide the owner with regular detailed reviews of the financials, Profit & Loss, balance sheets, budgets, cash flow, as well as any advice on capital expenditure.We provide support to the hotel management team with regards to sales strategies, food and beverage marketing plans and any other issues relating to the future of the hotel.We also regularly make sure the voice of operators and the local management team is heard by the owner on security issues, industrial action, delays in opening or any other urgent matters.Reason #2: They are the owner's eyes and ears on the ground Hotel asset managers make sure communications between the owner, the hotel management company and their local team are coordinated in the most efficient way.Our role is to ensure all information - positive and negative - reaches the ownership as quickly as possible. This creates a win-win for the owner and the operator.By being proactive and truthful in all reporting, we make sure there are no surprises for the ownership later on.Each asset manager takes a slightly different approach, but most will produce a monthly market review and a monthly profit and loss review which highlights any major issues.These reports are based on information provided by the operator which is then standardised to make it more easily digestible for the owner.The reforecast and the PACE are also closely monitored to ensure the hotel finishes the year on target or above.We also verify balance sheets, cash flow, summaries of monthly capital expenditure projects, etc.In doing so, we make sure all provided data has been calculated correctly and follows the latest USALI guidelines.We also highlight key points relating to operational departments, operating expenses, human resources, cash flow, balance sheets, statistical data, etc.When it comes to capital expenditure, the asset manager will regularly provide owners with a detailed analysis of where the asset is at, along with the best strategy for going forward.We always seek to immerse ourselves at a property level so that we can provide this type of high-level service.We study how the asset is run, review its capital expenditure, booking pace, the types of groups coming into the hotel - indeed, anything that may impact the profitability of the property.During the construction and pre-opening phase, we will also provide boots on the ground with ongoing site visits and meetings with the regional operational team, future general manager and steering committee.As hotel asset managers, we rely on our detailed knowledge of the hospitality industry across a number of regions, but our experience of working with a variety of different operators is also very helpful.It allows us to support general managers and their teams in using the latest techniques and international best practices relating to hotel sales and marketing, revenue management, commission levels and flow-through.Beyond the level of the individual property, we have an in-depth knowledge of the tourism industry as hotel asset managers.It gives us great insights into potential disruptors affecting the market (think Airbnb, HotelTonight or other OTAs) and any developments in digital marketing, online booking tools and social media - not to mention their impact on commission fees.Reason #3: They act as an arbiter in resolving potential tensions between operators and ownersAlthough as hotel asset managers we are accountable only to the asset owner, our role is to build bridges across different teams.Those who buy into the cliche of the aggressive asset manager telling operators how to run their businesses, will no doubt be disappointed by the courteousness, professionalism and ease with which our interactions take place.Instead of micro-managing general managers and their executive teams, our success depends on our ability to work collaboratively.To achieve the best result on behalf of the owner, we need to be able to work harmoniously with the operator's corporate office as well as local teams on the ground.We're often well aware of the tightrope many general managers are expected to walk between demonstrating accountability towards the hotel owner (as they should), their regional manager and the corporate office (as is often the case).Hotel asset managers regularly provide additional backup to general managers when it comes to pushing for more support from the wider brand, particularly when the local team doesn't feel able to speak up - for example on issues relating to better engineering supervision or increased sales and marketing support.This is why we spend so much time trying to get a full picture of the specific dynamics and limitations each general manager works under.Given the need we talked about earlier to align interests, the role of a hotel asset manager can of course be adversary too.After all, we need to ensure owners only get billed for justifiable expenses and cross-check that revenue and cost items are booked in the right departments.It is also our job to help ensure the best executive team is in place and see to it that operators comply with the most recent accounting standards.Mistakes can and do happen of course. When we pick up a particular issue, we'll first approach the general manager with a request to rectify it.If disagreement with the local team persists, we may then escalate it to the corporate office.If no solution can be found at that point, we'll seek to mediate and identify a way forward which is acceptable to all parties.If it involves an accounting issue, we may also be required to contact USALI.The owner is always informed of any mistakes we pick up on, although minor ones will mostly be dealt with without their direct intervention.Of course, the management team may occasionally consider us a 'fly in the ointment'.But they also know well enough that by us challenging the status quo, they're more than likely to benefit from improvements in practice and performance themselves.ConclusionAlthough still more common in upscale, full-service hotels operated by regional and international hotel companies - hotel asset management is a thriving profession.Given the complexities of the hospitality market, many asset owners highly value the stability and clarity we bring within the relationship between the owner and the operator.And while our ultimate responsibility is to maximise the profit and value of a specific asset, our role has evolved beyond a solely 'checking the books' function.Indeed, our impartial expertise in areas as diverse as real estate, operations, sales, capital expenditure, strategic positioning and marketing, has made us an essential partner in some of the most successful owner/operator relationships.

3 Important Reasons Why Hotel Asset Managers Have Become Such Hot Property

Hotel Online·13 March 2019
Hotel asset management is a booming profession. Thanks to the increasing complexities of today’s hospitality market where disruptors seemingly turn up out of nowhere and operators consolidate at a fast rate – it is easy to understand why. Indeed, given the volatility in the travel market many hotel owners would no longer take the risk of entering a relationship with a hotel operator without the ongoing support of a hotel asset manager.

Hospitality Financial Leadership The Next Big Thing

The Hotel Financial Coach ·12 March 2019
For almost 10 years our industry has been a rocket ship of top-line growth driven almost exclusively by big gains in RevPAR driven by solid increases in occupancy and rate. You also can't go too far inside the online world without finding articles that speak to when and if this growth will stop. We all know it will and it's never been a question of if it will stop, the question is when it will stop. Knowing this growth inevitably will stop and being cognizant that when it does stop it will go backwards, what can you do? History always repeats itself.When the growth stops and revenues year over year shrink what will hotels do to minimize losses and maximize profit retention? For most of us we remember the major negative historical economic events of the past 25+ years and the results to the hotel business that followed. For me my memory going backwards is this: the 2007- 2009 debt crisis, SARS (I'm Canadian), 9-11 and the Gulf War. All of these had a major impact on the hotels I worked in and we scrambled to throw anything and everything off the sinking ship.I painfully remember: hiring and wage freezes, layoffs, mandatory vacations, amenity reductions, outlet closures, corporate training program suspensions, mandatory productivity targets and FF&E contribution freezes.I also remember preemptive contingency plans that targeted a 10-15% decrease in revenues that dictated reductions in: fixed staffing, linen pars, china glass and silver pars, fresh flowers, service audits, uniform purchases, suspension of conferences, relocation freezes, VIP gift eliminations, departmental restructurings, management incentive plan cuts, live music expenses curtailment, aggressive food and beverage cost targets, elimination of administrative assistants, employee opinion survey cancellations, health and safety program reductions, moratoriums on seasonal parties and sports teams, a halt to the company newsletter and travel bans.I took part in planning and communicating: in house meal and entertainment stoppage, the temporary addition of energy surcharges, elimination of hotel executive auto leases, combining like positions, grandfathering personal device purchases, curtailing of cell phone reimbursement, direct in dial telephone line termination, fax number consolidations, pool attendant layoffs, security department day/time/hour reductions, crisis and communications training moratoriums, sales incentive plan restructuring, FAM trip reductions, guest floor shutdowns, and the elimination of supervisors on the front desk and in housekeeping.I vividly recall how painful it was when we: eliminated turn down service; mandated business center staffing cutbacks; eliminated one-time seasonal decoration expenses; trimmed dry cleaning privileges; downsized duty meals; we combined stores and receiving positions; we outsourced payroll services; we made cutbacks to in-house IT staff; we completed sales coordinator right sizing; we exercised reservation department closures; attempted Sunday lounge service moderation; delivered on banquet captain consolidations; completed valet parking outsourcing; started charging for parking; then the up-sell program pruning; and worst of all for me was the requirement to show all of these changes and adjustments in the subsequent detailed forecast for the balance of the year.This is where the rubber hit the road. I recall how impossible it was to execute the reductions, in many cases, because the departmental managers did not know what was really in their budget/forecasts to begin with. Sure, they had dollars for their expenses and hours and dollars for their payroll, but it was not defined in detail. There were no zero-based expenses where we could really look at the current shopping list and eliminate or adjust real things. The same with payroll, there was no fixed staffing guide and no formula for variable payroll. We just took our expenses from last year and added 5% when doing the budget and the same with payroll; wages were forecast to increase 3% so we added 3%. We did cost per cover and cost per room occupied so we would simply extrapolate that and create the budget. Things would come together because they always do until they didn't any longer.We didn't know what was in the middle of our statement so when someone said reduce something it's like, OK we will make that change but it's not a defined result because we were starting without a list, without a real starting point. Here is a domestic example of what I mean. If I send you to the grocery store with $200 and tell you to go buy some groceries you will come back with $200 worth of stuff. On the other hand, if I send you to the store with a list and the corresponding costs for each item you will come back with exactly what was on the list. Now this is where it gets good. I now send you to the store with the same list, but I only give you $175 to spend. I inform you that we must make some reductions this month. I now tell you to eliminate, reduce or forgo what you can to equal the new cash I gave you. This way you know what you're starting with and what your changes result in.The same applies to payroll. You need a concrete fixed staffing list that's approved annually with your budget and meticulously maintained through the year and a detailed staffing formula for every variable payroll category in your entire hotel - not a guide of payroll cost percentage by department or an hour per room or covers formula. These are useless when it comes time to trim, reduce and curtail. They do not work when reductions are necessary. They just confuse the executives and frustrate the department managers.The next big thing as I see it is we learn form our past mistakes. We take the appropriate actions to ensure our operating department managers all know what's in the middle of their statements, down to how many of each item and at what cost that makes up every line of their expenses. We also need to go down to a monthly payroll forecast that is detailed by position and contains the exact number of hours wage rate. This way when it's time once again to cut costs we will have a real starting point. Or, we can just hold our breath like I did and hope that it will all get better soon.Once upon a time...

From Beds to Ballrooms: Total Revenue Performance for Your Total Property

mycloud HOSPITALITY·10 March 2019
Get as much heads in beds as possible while optimizing your hotel's profit potential. This straightforward definition of a revenue manager's job-albeit oversimplified-probably rings true for many of us in the industry. However, if a revenue manager is solely focused on guest-room pricing, then who's in charge of enhancing revenue for the rest of your property?
Article by Elie Milky

Synchronised for Success - Radisson Hotel Group

MEED · 5 March 2019
In the lead up to the 2019 Arabian Hotel Investment Conference (AHIC), we asked a number of industry partners how they synchronise for success.In the hotel industry you often hear the owner-operator relationship being compared to a marriage, where both parties enter into the arrangement with the best of intentions and a view towards a lifetime partnership. While this may seem a slightly idyllic perspective the fundamental principles are nonetheless very similar and as with all relationships, the most important factors in building strong, long-lasting relationships are trust, communication and a shared vision for the future. The ultimate goal of course, is to develop a sustainable and profitable real estate investment, create job opportunities, contribute to the economy, and to continue to maintain and optimize the value of the asset for owners.Hotel agreements now come in many guises but the owner-operator relationship is the cornerstone of any long term hotel agreement. It is based on trust and continuous dialogue between the parties to tackle obstacles and to minimize conflict and misunderstanding. Any operational or financial issues can be resolved, and the hotel management agreement saved, if the relationship is strong and transparent. Indeed, most agreements fall apart because the relationship was not properly handled or where expectations were not managed as they should have been. As much as possible both owner and operator should have a common vision from the outset but also understand that there will be bumps along the way where you may temporarily fall out of love, but always retain the outlook that you are in for the long term.As the hospitality market continues to evolve so do owner-operator relationships nurtured with careful consideration given to an owner's specific needs and an understanding of their investment requirements. Today, hotel management agreements need to incorporate some flexibility to reflect the changing landscape and ensure owners' concerns are being addressed by putting together more reflective and more balanced agreements. For instance, as owners with multiple hotels start insisting on franchising, it is important that operators start incorporating franchising into their strategies for the region and partnering with specific owners who have the infrastructure and expertise to support such an operation, at least with certain brands. Such adaptation to market trends is just one example out of many that we should do in order to optimize the chance of success. But like in any business transaction it is important to highlight to some owners why franchising may not be the right choice for them as it would involve extensive infrastructure and may well be costlier than expected, involving industry expertise and extensive resources. Franchising is just one example of many where hotel agreements need to be tailored to address owners' concerns and strategies, while still preserving the rights of the hotel operator and brand.Equally so, new or first-time owners need to seek advice and be realistic when it comes to expectations, investment returns, and over-leveraging. The hotel asset class cannot be compared to residential real estate, for instance. As much as it is the operator that needs to manage such expectations and keep the dialogue, it is important that investors commission third party advisory firms to get an independent opinion throughout the process if necessary. The hotel type and its positioning need to be established given the market, the location and the city. Whether it is to develop a hotel or serviced apartments, whether it is to be positioned in the midscale or upper tier categories, are all factors that should be agreed on from the start given the market dynamics.As mentioned earlier both owners and operators should have a clear and common vision for the hotel from the onset of the relationship. And it is vital that both parties recognize the market variables and that market demand will continue to evolve. When a traditional source market shuts down due to sanctions or economic conditions, another market needs to be tapped. Such diversity is crucial to reduce any long term risk. For instance, when Dubai had experienced a reduction in the Russian market in recent years, the government's strategy was to eventually waive visas for Russian nationals which brought back the demand, while at the same time opening up to more visitation from India, China and some African markets. Hotels in turn have to adapt to changing trends and to remain proactive in their strategies by creating and stimulating demand rather than waiting for the business to come from established sources.So, in summary the key elements to foster harmonious relationships between all stakeholders may be simply categorized into the following: a shared vision, managing expectations, constant dialogue, transparency and fostering solutions. As an ever-changing industry synchronizing for success is simply partnering with the right owners, developing the right product, understanding the importance of the owner-operator relationship, adapting to changing owner and consumer trends, and living by these pillars proactively and transparently.This year will see our continued focus on adding value to our owners and maximizing the value of their real estate assets. The core philosophy will remain to manage a profitable, sustainable hotel operations by maximizing returns for our investors with the right type of agreement, the most appropriate brand and optimal real estate offering.

Hospitality Financial Leadership: Contra or Barter Exchanges - How to Record Them and Some Tips

Hotel Online· 4 March 2019
Contra, barter, trade outs, exchanges – they are all the same thing. Exchanging goods and or services is older than currency and it's still used today, especially in hospitality. How you can use this tool effectively and how to properly record these transactions on your books is the meat on the stick in this article.

Contra or Barter Exchanges - How to Record Them and Some Tips

The Hotel Financial Coach · 4 March 2019
Contra, barter, trade outs, exchanges - they are all the same thing. Exchanging goods and or services is older than currency and it's still used today, especially in hospitality. How you can use this tool effectively and how to properly record these transactions on your books is the meat on the stick in this article.First thing you need to know that typically stops most people from pursuing trade out agreements is they do not have a direct positive impact on your profit and loss statement. The trade out itself if it's recorded properly will not reduce expenses. It only saves you cash. So, if cash flow is a concern and let's face it, it is for many hospitality operations especially seasonal ones, then contra agreements might be something to consider. Lastly before we get into the body of this piece is to do your local homework and get the tax facts straight. Each jurisdiction is different. What I will describe here is a generic version but don't rely on the process as it's laid out here. Get the local facts on exactly how it is treated in your location.Typically, in the hospitality business we trade rooms and food and beverage for advertising; this is by far the most common. The second most popular trade I have seen is our services for transportation - air, rail and car rentals. The third is health club memberships. In all three instances the advertising aspect is the main driver on the hotel side.It goes like this.How can I get advertising on my regional radio station to drive room nights? Or, how can I get an ad in the airlines magazine or how can we participate in a promotion that features our hotel as a prize? How can I get the local popular health club members to use my bars and restaurants? The answer many times is let's try and set up a trade out with one of these organizations so we can get some increased visibility without having to use cash.We can use our "unused" room inventory and our capacity in food and beverage operation to help drive more sales of rooms and F&B. Remember, if we don't occupy a room tonight or one night next week, we can resell that inventory. This is a main driver for hotels to use trade outs to help boost business. In my experience it's also a tool that General Managers and Directors of Sales love to use because they get to "make a deal" and for most of them this is an exciting prospect.But beware of the rules and the proper treatment of the transactions before you jump in with both feet. First off, your state or national income tax rules probably preclude your business from treating the trade out any differently than any other sale. Same with your municipal sales tax rules. You will have to come good on all taxes due just like complimentary rooms in most locations. I strongly recommend checking with your accounting leader before any deals are made. I can't tell you how many times I have had to "counsel" my fellow executives on the proper treatment of these exchange agreements that caught them completely by surprise. Don't think you can simply trade your stuff for theirs without paying the piper. Do this and you're both liable for some trouble.First off, when we trade it's important to know that rooms and F&B are very different from a cost point of view and, as such, the rooms typically should trade on a 1-1 basis at rack pricing with your trading partner's rack prices. Or we both agree on a price that's going to stand up to scrutiny, certainly an exchange price on our side that is equal to or above our average room rate. If it's below that level, then local taxing authorities will ding you for the difference, plus a penalty and interest. Don't be tempted. Second, where we are trading F&B you are going to want to get a 2-3 times exchange. F&B costs plus labor are extremely high and therefore we want to ensure we get additional advertising or travel as a result.In the F&B trade example let's say you are trading a banquet for 100 clients of the radio station and the bill is estimated at $10,000. You are going to want to bargain for at least $20,000 to $30,000 worth of advertising because you have a considerable cost associated with producing the food and staffing the event. Their costs to produce and run the adds are much less. Be a savvy negotiator and get more.Back to the room scenario and, in this case, we have agreed to exchange two suites for two nights and 30 superior rooms for two nights. The radio station will run a series of ads over a two-week period as promotion to give away two 2-night suite stays to the lucky listener. That is what the hotel gets: The radio station is going to use your hotel and the 30 superior rooms for an event for their staff and owners.The question is how we treat all of these transactions.

Effective Measurement of ABM Depends on These Four Steps

MarketingProfs·Requires Registration · 4 March 2019
At least twice a week, marketers ask me how to best measure the performance of their company's account-based marketing (ABM) program.

Data protection rules, one year on: Anticipating a second wave - HITEC Europe Preview

Hospitality Net · 4 March 2019
Over the past year, many of us have been bombarded with emails from companies virtually begging us to allow them to keep our personal details on file.That was due to the introduction of new regulations in Europe which imposed -- in theory at least -- substantial penalties on any firm breaching the rules. And the penalties were harsh -- up to four percent of annual global revenues or 20 million euros, whichever figure is greater.According to Timo Kettern, director of information technology at Event Hotels and a member of the HITEC Europe Advisory Council, although the constant bombardment proved somewhat annoying to consumers - Kettern uses a more forthright term - companies were running scared as they realized they did not have the consent needed to handle our personal data.Kettern was part of a HFTP working group preparing for the introduction of the EU's General Data Protection Regulation and co-produced a couple of papers to help hoteliers come to terms with the GDPR rules, outlining the steps they would need to take in order to comply. The papers were presented at HITEC Amsterdam a year ago, and this year the conference on the Spanish island of Mallorca will review the progress made.Speaking specifically about the German market, Kettern says that since May last year, authorities have focused on educating businesses and the consumer about data protection rather than enforcement. Consequently, the impact so far has not been as severe as had been anticipated."I've not seen any fines for larger organizations," he says, adding that several smaller firms had been fined around 20-25,000 euros. Nevertheless, he is now expecting the data protection authorities in Germany to begin looking into complaints.Kettern says that in his own organization, he had previously struggled to convince the leadership team of the importance of data protection or of the need to increase training budgets. "GDPR has changed that. Data protection now has visibility at the C-level and GDPR has helped people like myself to get budgets approved and get working parties started, together with HR for training and for the practical changes we had to make in our operations. So that, for me, was the biggest impact."Had companies overreacted to the introduction of the new digital privacy rules? Although there may be certain parallels with the way in which companies had handled the Y2K 'non-event' nearly two decades ago, Kettern does not believe companies had overreacted, saying that the GDPR had raised awareness in the industry and given professionals like him "the budgets, the freedom and the support needed to deal with the issue because at the end of the day, it's kind of a risk exercise. How much are you prepared to spend to minimize the risk?"As to the action hoteliers should be taking now, Kettern advises they should make staff training a priority, in addition to making sure they update passwords and have firewalls in place. "It's one thing to have the procedures documented and your systems in place, but it's people who need to make those processes work.""It's very simple for someone at the reception desk to leave a guest registration card lying around or spin the (computer) monitor around so that someone else can see the data."'So, what we're doing, we're attacking this on several levels. First of all, data protection is part of the employment contract. It's also about the consent that we, as an employer, can hold the data." Staff also need to acknowledge formally, as part of the employment contract, that they aware of the guidelines.One complication though is posed by the franchise model in the hospitality industry. This means franchisees have to conduct training and self-audits, in conjunction with a data protection officer who should be part of the HR team.Kettern (pictured right) says one of the major challenges faced in running franchises in Europe for major hotel chains in the US and Canada is that "by default we are exporting guest data to North America." In terms of the GDPR, he says, this is critical.As a hotel operator working with US-based hotel chains such as Marriott and Hilton, "it's our obligation to make sure we get confirmation from the brands that they're dealing with the data in North America in the same way we deal with it in Europe. They're all giving us that (assurance) but we can't control that."As the tension rises again, a second wave will come"We've changed some - not all - of the processes because we always took data protection seriously.""We're in an acceptable position but I think we can still improve." For companies to know whether they are on the right path, they may, however, have to wait for the first court rulings with judges giving their interpretation of the regulations. These rulings will, Kettern says, "influence our future and how we're going to change things in the future for sure."The first wave of activity (and anxiety) has 'calmed down', Kettern says, but with the possibility of the authorities pursuing potential breaches, "the tension will increase again and there will come a second wave."'Networking, education and finding new things'On HITEC Europe, April 9-11 in Mallorca, Spain, Kettern says: "The networking aspect is very important as I'll be catching up with colleagues. So too are the educational sessions, to see what the trends are. There are lots of subjects around digitalization, robotics, artificial intelligence, as well as to overcome one of the challenges we face in hotel operations which is finding appropriate staff."Kettern says he'll be taking a look at the new technologies on offer and will be meeting suppliers on the exhibition floor, and not just the central aisles as those on the edges can be interesting."So, it's networking, education and finding new things ... It's going to be fun."

A Quick and Easy Approach to Financial Fraud Detection

CHR ·27 February 2019
Pamela Moulton and Fang Liu recently published a CHR report showing financial fraud is a significant cost in the hospitality industry. According to the Report to the Nations on Occupational Fraud and Abuse, the typical organization loses 5 percent of its annual revenues to fraud. Hotels in particular are estimated to lose 5 to 6 percent of revenues to fraud on average, while the National Restaurant Association estimates that restaurants on average lose 4 percent of revenues to fraud. These are losses as a percentage of top-line revenues, not profits, meaning that their magnitudes represent a significant risk to hospitality methodology for detecting financial irregularities that may signal fraud based on a mathematical principle known as Benford's Law. The analysis presented here can firms, given the industry's relatively thin net margins. This study presents a simple be applied by hospitality industry managers at all levels, from individual units or departments to entire regions or companies. The Cornell Hospitality Tool accompanying this report provides an easy-to-use spreadsheet-based application that can be used to quickly analyze any set of financial values (for example, guest checks, receivables, payables, or reimbursements) to quickly detect suspicious activities...Click here to read full report


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