Being opportunistic without being a shark
Today's climate may present a new opportunity for the hospitality industry for those sitting with cash, or some form of available cash.
By Frances Kiradjian, Founder/CEO, BLLA
Opinion Articles
Further Insights on What Hoteliers Can Do to Prepare for COVID-19 Recovery
In the previous article, I mentioned some thoughts on the position of hoteliers and restaurateurs in regards to this unprecedented crisis that the industry is facing. Now is the time to prepare and start some of the activities and conversations that might help for when things are picking up again.
By Pierre Verbeke, Director Hospitality Advisory Services
Hotel Real Estate in a Turbulent Macro-Economic Environment
Would you invest your money and time in a hotel project? Once more, the world is hit by a crisis, a pandemic this time, which affects all world economies. Many industries are suffering in particular the hotel industry.
By Jochen de Peuter-Rutten, Consultant, EHL
Hotel Industry Crisis: 8 Do’s and Don’ts for Distressed Hotels
As the COVID-19 crisis grows in the US and elsewhere outside China, hotels and restaurants are among the businesses hardest hit. In select markets like Seattle and San Francisco, hotels are reporting single digit occupancies and crushed ADRs. Many hotels do not have the cash flow to keep their doors open. The major hotel companies are talking of furloughs for tens of thousands of hotel employees and many properties are looking at closure or skeleton team maintenance operations.
By Guy Maisnik and Jim Butler
COVID-19 Financing Strategic Options For Hotel Owners
Along with all the other industries around the world the U.S. hotel industry has been blindsided by the COVID-19 Global Pandemic Black Swan Event. Instantly, hotel owners have found themselves with empty hotels, depleted cash reserves, and wondering how they will be able to make their monthly mortgage payments and payroll which were hardly ever considered to be a problem in the expansionary period leading up to COVID-19.
By Harry George Spirides, President, Spirides Hotel Finance Company
Asset Management – Why Bother?
In the course of each year my colleagues and I see a huge number of hotel P&Ls and, within them, there are often wide variances in performance, even in like-for-like situations - whether it is better or worse revenue generation, cost control or effectiveness. Some hotel management companies don't produce an adequate return on their owners' investment by doing as much as they possibly can to increase revenues, reduce operating costs and improve bottom-line profits and cash flow. Only when given a 'kick' from the owner or from a third-party asset manager acting on behalf of the owner does the optimisation of a hotel's performance - and therefore its value - often become a reality.
By Russell Kett, Chairman at HVS - London Office, HVS
Transform Tomorrow – Shaza Hotels
In the lead up to the 2020 Arabian Hotel Investment Conference (AHIC), we asked a number of industry partners how they are transforming their business for tomorrow.
By Noelle Homsy, An Associate Director, leading the hospitality industry, Grant Thornton LLP
A Comprehensive Record of the Lodging Market’s Q4 Transactions
At several points during 2019 many market participants believed the grind higher was going to come to a halt. However, this did not occur, even after a tumultuous 4Q18 where many experts were calling for a downturn. Although America's nancial system has been bueted by a slowing global economy and the U.S. instigated trade war with China, it has been buoyed by the lowest unemployment levels during the past 50 years, and rising incomes which have fueled consumer spending and a generally optimistic sentiment.
By Daniel Lesser, President & CEO, LW Hospitality Advisors LLC (LWHA)
Let us restore our focus on the fundamentals
The Arabian Hotel Investment Conference 2020 is being held at a time when significant changes are sweeping the hospitality landscape of the world - and the region. The state of flux that hotel operators face is driven by several variables and there are no easy solutions to address them.
By Abdullah Al-Abdooli (B.Arch.), Chief Executive Officer - Marjan, MEED
New Hotels and Startups Have Many Things in Common, But Losing Money Shouldn’t Be One of Them
The stories were everywhere: WeWork, the unicorn darling of the co-working space, valued at $47 billion, was a bleeder. And not just a small puncture, but a gaping gut wound from which some $219,000 came spewing out on an hourly basis, reports said.
By David Eisen, Content Director, Media, Questex
Revealed: what’s fuelling the rapid hotel growth in West Africa
Today, Africa is seen as one of the most promising regions for hotel developers. Aside from small chains and independents, four global hotel groups dominate signings and openings on the continent. Over the last four rolling quarters, as of September 2019, Accor, Hilton, Marriott International and Radisson Hotel Group have opened 2,800 rooms and signed deals for 6,600 rooms. Across Africa, hotel development remains important in most advanced economies, such as Morocco and South Africa; and projects are multiplying in East Africa, especially in Ethiopia, Kenya, Tanzania and Uganda. In West Africa, Nigeria is back on the development scene thanks to emerging regional destinations beyond Abuja and Lagos. Francophone Africa is also moving fast. The Ministry of Tourism of Ivory Coast has launched an ambitious national plan for tourism development, Sublime Cote d'Ivoire, and already announced over US$1bn investment in the sector. Senegal is the other regional star, with local programmes such as Diamnadio, Lac Rose near Dakar and Pointe Sarene. Other countries showing active hotel development include Benin, Cameroon, Guinea, Niger, and Togo.
By Philippe Doizelet, Partner Horwath HTL (France), Horwath
HVS 2020 Hotel Transaction Outlook
As expected, hotel transaction volume fell to a historic low during the peak of the Great Recession in late 2009, a drop that began roughly 24 months earlier at the end of 2007. Similar to the rebound in performance, transaction activity among economy hotels recovered rapidly, but soon declined as investors shifted their focus to midscale and upscale hotels, which recovered more slowly from the recession.
By Benjamin Levin, Chief Investment Officer, Cliffrose Group
LVMH / Tiffany - Diamonds Are Forever!
LVMH is to acquire Tiffany & Co. for $135 per share, in a transaction which will value the entire equity at $16.2 billion. Including net financial liabilities of $0.7 billion, this leads to an implied enterprise value of $16.9 billion for Tiffany, making this the largest acquisition ever made by LVMH.
By Stéphane Haddad, Academic Director Graduate School & Senior Lecturer, EHL
Equity Yield Rates on the Decline
HVS continually tracks the rates of return on the assets on which we consult. In our most recent review, we found that equity yield rates, on average, have shown a continued trend of decline in the full-service and luxury hotels sector, as well as the lower-tier limited-service sector, with the select-service and upscale limited-service sector showing stability.Equity yield rates were notably lower for full-service and luxury hotels, averaging 16.4% for the year-to-date 2019 period, which is 140 basis points (bps) below the 17.8% most recent peak level recorded in 2017.
By Rodney Clough and Katy Black
The Current Impact of Brand PIP Requirements on Hotel Sales
The most consistent issue HVS Brokerage & Advisory has encountered during transactions is whether a group is budgeting sufficient capital for prospective asset acquisitions that require PIP renovations. An incorrect estimate means buyer groups must increase their capitalizations or request a price reduction on a dollar-for-dollar basis relative to their cost increases. This ultimately changes many metrics late in acquisition processes and lowers IRRs because any extra capital is drawn entirely from equity and not a blend of equity and debt. Recent observations are detailed below. The lesson is that accurate PIP estimating is vital in successfully acquiring hotels today.
By Eric Guerrero, Senior Managing Director and a Partner, HVS
Promoting student success in the STR Student Market Study Competition
I was in New York City (NYC) over the Veterans Day weekend for the HX: The Hotel Experience 2019, one of the most important trade shows in the lodging industry. Similar to last year's trade show, the HX 2019 also entailed four components, including HX: The Marketplace, HX: The Conference, Boutique Design New York, and the STR (Smith Travel Research) Student Market Study Competition.
By Linchi Kwok, Professor and Department Chair, CAL Poly Pomona
Q3 2019 US Lodging Market Update
While the U.S. continues to be in the midst of its longest uninterrupted economic expansion in modern history, slowing growth metrics along with abundant geopolitical uncertainties are heightening perceived risk of impending recession.
By Daniel Lesser, President & CEO, LW Hospitality Advisors LLC (LWHA)
Are investment decisions really independent? The role of decision making biases in hotel development projects
Think back to an important decision you have had to make. You may have weighed out the costs and benefits, studied the context, and evaluated the potential outcomes. While one hopes that careful analysis will lead to rational choices, the truth is that our human minds are complex. Our rational decisions are doctored by - amongst many others - feelings of potential regret, conscious or subconscious references, emotional attachment, and herd mentality. These biases prevail in business as much as they do in our personal lives, and we are all prone to them. We take a first look into the role of herd mentality in hotel investment decisions.
By Achim Schmitt and Samrah AlShawi
Formulating “Asset Light” Strategies In The Hospitality Industry Through The Spin-Off Of Real Estate Assets
The objective of this article is to analyze the strategic approach that lodging corporations with owned properties in their portfolio are conducting, which advocates for a bifurcation between operational and asset management orchestration. Such approach is originated inside big hotel chains and is opposite to another industry widespread practice in which a third-party owns several hotel properties and rents those to hotel chains (i.e. Blackstone, Starwood Capital Group, Bain Capital, etc.).
By Francisco Garcia Auyanet, A Proactive, Curious and Constantly Adapting Consultant, Francisco Garcia Auyanet
Hotel Real Estate: How Brands are Re-Imagining Hotel Lobbies
Several reports show the astonishing growth in self workers, contract freelancers and consultants, according to Statista, 10.3% of the working age population is involved in entrepreneurial activities. Alongside this, project task forces are becoming more and more common, and companies are starting to become more agile in their operations, ING's agile transformation started with the 3,500 staff members at group headquarters, Bart Schlatmann: former chief operating officer of ING Netherlands said, "we invested in tearing down walls in buildings to create more open spaces and to allow more informal interaction between employees. We have a very small number of formal meetings; most are informal. The whole atmosphere of the organization is much more that of a tech campus than an old-style traditional bank where people were locked away behind closed doors."