Happy Holidays from Integrity Hospitality Advisors

The holidays are upon us and the New Year is quickly approaching.   We look for further clarity and greater rewards in the coming year in our wonderful industry as we move from crawling out of recovery to momentum and building into the new year.

I’d like to take a moment to wish all of our family, friends, colleagues, and clients a warm and healthy holiday season. We hope that you are able to spend time with loved ones and share many happy moments over the coming weeks.

This is a season to reflect on the many blessings in life, to put aside the challenges of a year past and to look forward to the good things that lay ahead.  Here is to a happy, healthy and prosperous 2011!

Warm wishes, Happy Holidays and Merry Christmas!
Integrity Hospitality Advisors

Where do owners, funds & hotel companies go from here and where you can use help?

2010 is going to be another rough year for hotel owners, managers and brands. While there is little in the way of new construction deals materializing, hotel companies continue to nurse along existing stalled developments, public/private deals and the few brand conversions that come their way – all are welcomed with open arms.  The brands are taking this time to introduce more new brands and catching up with those “lifestyle” brands that led the way with design innovation, fresh ideas and product offering that appeals to the newer generation.  They face uncertainty regarding exactly when that new traveler they are targeting and designing to will have the opportunity to experience and become brand loyal to “their product.” They also wonder when the resulting success of those new brands via new development will come their way and start the development ball rolling again.  The answers to both questions rely heavily on the capital markets, a rebound in demand and how rapidly both begin to show their new colors.

Brands are also taking this time try to clean up and reinvent old brands that have lost their swagger or look for new brands to buy and expand their reach.  Some brands are taking this opportunity to expand their presence by fishing at the trough of hotels that have dropped or been forced to drop their more upscale brand affiliations. In many cases these hotels suffered from bad timing of capital expenditures and lacked cash to update the hotel to meet brand standards.  A few of the expanding brands are cashing in by providing money, great terms and most importantly, “time” to get everything done to meet their new brand standards.

With the incredible tangle of institutions and servicers burdened with bad assets while at the same time new and existing funds flush with capital are searching for bargain-priced deals that may or may not materialize, it helps to have someone in your corner to sort it all out.  Hotels in markets that have good bones, are in excellent locations in quality markets will not be trading at pennies on the dollar.  Yes there will be bargains, but those with capital on the sidelines hungry for deals do not want to stretch on deals, make bets and lose long term on assets they purchase that are not fully vetted by those who have been here before – return sensitivities demand excellent execution.  Qualified, experienced consultants will be kept busy over the coming 12 months, inundated with projects that I suggest will include:

  • Working with receivers, attorneys, and lenders to figure out what to do with their distressed assets. Particularly, stopping the bleeding, recovering value and working proactively with the in-place or newly hired management company.
  • Assisting funds to quickly discover the true value, vet the assets and the market and thus help insure the return associated with an asset they are considering buying;
  • ·Providing due diligence expertise and offering hands-on assistance in making critical decisions and sorting the wheat from the chaff.
  • Strategizing with groups on what assets to save, which to invest in today and which to send back to the lenders or discount and trade.  A consultant’s past experience in a down cycle is essential in this process.
  • Assisting in repositioning strategies and brand negotiation of PIPs. In certain cases tying up the brand before others obtain it or working a deal to your best advantage.
  • Continuing to review, recommend and execute sales, marketing, revenue management and top line plans – advice that is critical to recapturing value, average rate and performance in a competitive environment.
  • Asset managing hotels on behalf of investors keeping a watchful eye that the investors returns are maximized and capital investment managed properly/protected.

Value and greater certainty will be created in hiring smart consultants who can help you make good decisions. Veterans of previous downturns will help you understand the risks, upside, downside, and pitfalls in each market.  They will help you avoid critical mistakes that could kill fund performance with a few bad or ill thought through asset acquisitions that in the coming competitive environment may damage returns – they will end up proving their worth in saving some of you in support of the old adage, “That was the best deal we never did!”.

This year it’s still all about the transient customer. Get back to sales basics, get assistance from your brand regional sales and staying ‘on’ relationships

What a change in the hotel business as we know it, eh? If you are lucky enough remember this iconic group from the 60′s, one can almost hear Peter, Paul and Mary singing the updated hotel version of Where have all the flowers gone?, … “Where have all the the conventions and groups gone?….Long time passing”. Those of us who have been in the industry for a while have not seen a drop off in group business like this for this extended period of time….ever?

I completed a few sales audits at hotels in a major markets and while pleasantly surprised at the continuity of systems and energy of the DOS’s, sales managers, etc., I was struck by the lack of detailed examination and analysis that had occurred relative to focusing and targeting the competition and their natural transient customer for the hotels. As far as background goes, these are newly opened hotel which couldn’t have been built and opened from a timing stand point at a worse time in our industry. The brand I have been auditing is still in it’s infancy thus not as recognized as old standbys but promises to be a “hot” star on this brand’s horizon.  The locations are “A” locations when there is convention and group business a plenty but a “B” location when relying on drive in or pure corporate transient customers.

Sales Directors and corporate sales departments need to continually shift and refocus their strategies when confronted with the dramatic shifts in business that have occured in the past year.  Group business in secondary or tertiary location convention centers are only attracting the flower shows, occational concerts, flea markets and the like.  The rotational convention business is now able to book in much larger, and from their standpoint, prestigious venues in more primary locations as rates have dropped and availability of space is abundant.   An amazing opportunity for some of the groups that in the past have not had the opportunity to hold their events in downtown and otherwise untouchable locations when times are good.  Thus hotels in proximity to those secondary venues and convention centers that were built under the auspices of “if we build it they will come”, are suffering.
Having a brand is certainly a plus as frequency program users and loyal brand travelers will seek out brands they are comfortable with and provide the benefit of loyalty program points.  The individual hotels who pay for these brands must find ways to further tap into and market/sell to those loyal customers whether they be individuals or companies that have local or national negotiated agreements with those brands.

  •  Think about using some of your marketing dollars  buying and providing frequency point bonus offers to those in companies who book the business – remember the old “secretary clubs”….is it time to revisit that program if you don’t have it in order to get back in the offices of those who book business travel in local businesses?
  • Offerings of double points to frequent program users who stay at your hotel for specific need periods of time is always a winner but you need to make sure all your web channel notifications are updated and posted.

Are you taking a close look and analyzing carefully weekend and weekday trends that are playing out in your comp set and how others are playing the rate game for business?  Getting back to basics and making sure that all in your hotel have their eyes, ears and sales hats on is critical as we move toward rosier booking times.

Another dilemma has often been how to tap into that database or customer base from the brands.  This is where your sales & marketing teams needs to work closely with the brand regional sales management and sales teams in mining the opportunities with them for your hotel.  Don’t take no for an answer as the natural tendancy from the brand marketing and sales system leaders is to deny access to national negotiated accounts for fear of unwanted pestering, sales abuse and other fears.  In today’s environment, savvy sales departments are finding ways to tap into and market their product directly to the national accounts especially when those accounts sit with demand at their back door.
Take the time to begin to sew the seeds of this years short term booking windows with all leads you can source, all the programs you can put in place and stay on top of them all year long.  Measure them, make sure your GM is in lock step and making the sales close if you need it.  Your persistence, time and energy will win you room nights and success as this turn around year begins.  Good luck to all!