Today’s continuing difficult operating and capital constrained environment continues to beg the question, “What have you done recently to address and enhance your hotel’s value equation?”  The economy, price wars, diminished demand and escalating costs have done their part to erode the value of your real estate.  Your loan(s) may be coming due with limited options in today’s tight credit market and little ability to recapitalize on depressed values.  While occupancy is on the rise in most markets, ADR continues to be the challenge facing everones budgets and is keeping all values in marginalized positions.  Many operators and owners are looking at the budgets that were put together in the depths of the depression last year where visibility was only clear to those who had access to a “time machine” (i.e. no one) and saying, “Wow, we’re beating our budgets by ‘X’ and value is on it’s way back!”   However, budget is not the only consideration that a prudent owner and their operator should focus on.  Frankly you may be leaving significant value on the table by not going deeper into the bag of tricks that is necessary to create value when you need it most.

Examples of items you may be overlooking that a prudent and partnership oriented management company or asset managers should have you looking at are:

• Have you reviewed your property taxes recently and how they equate to the value of your hotel in today’s market? If you haven’t and haven’t gone to your local municipality to file an appeal given the precipitous value erosion of the past 2 years, you are leaving money on the table.
• Have you reviewed any outside contracts with companies that provide services or labor to your hotel? No doubt they have gone through a retrenching and cutbacks in taking advantage of softness in labor prices, availability of labor “capital” and other steps to increase margins on their “fixed” contract business…shouldn’t you share in some of these efforts or re-bid the opportunity?
• Taking advantage of government tax credit programs when hiring certain class and types of workers – there are significantly profitable programs in place that with the help of one of a number of organizations and coordination with your H/R department. These programs assist you in setting up profit sharing program with the company (no cost to you) to document employees who you are already hiring, running them through a system that properly documents, submits and then provides you tax credits for you from the turn over and hiring that you already undertake can be substantial benefits to you and your organization. This is especially true if you have multiple properties.
• Energy audits and credit programs – have you looked into programs that provide rebates and credits to you through proven energy programs?
• Have you evaluated and done a cost savings analysis of your Insurance and Healthcare Costs?
• Have you reviewed your management costs from both the expenses that your management company is charging to you and the level of benefit costs they are passing along through your P&L?
• Is the brand you are affiliated with asking for more in the way of upgraded amenity or other standards, PIPs, product upgrades and what are you doing to work through or avoid costly items and defer or exempt your hotel?  Have you approached them for a break in fees if they have added new product to the market that may be eroding your limited demand?
• How good a job is your manager doing at controlling and working current employment levels, combining jobs, evaluating schedules to maximize efficiency?
• When was the last time you took a close look at your administrative expenses at the hotel level and tested those assumptions?

Looking at all corners of the value equation is important in addressing how your management company, asset manager and you as an owner plan and structure value in today’s difficult operating and lending environment.  An experienced and proactive approach is essential to creating potentially millions of locked up value in your hotel real estate.

We suggest and encourage you to work with a qualified and experience consultant and/or asset manager to assist you in assessing, evaluating and delivering on your hotel asset.  Our preference and desire would be for you to give us a call to discuss how we can work together in a collaborative, cooperative and proactive manner to unlock the value equation for your hotel.  We look forward to speaking with you!