Early 2011 was an interesting time for hotel real estate, as public funding was flowing freely, and hotel REITs had pressure to place money in the market. As a result, we saw astronomical prices paid for great assets in the top few markets. This glut of high-profile transactions gave the overall investment climate a robust façade, yet private money – read: a majority of hotel investors – remained on the sidelines. After the debt ceiling crisis and growing uncertainty in the European markets became a reality in late summer 2011, stocks fell and sent the REITs back to the bench.

With that backdrop, what does the market look like in the upcoming months? In January, Jones Lang LaSalle Hotels released its Hotel Investment Outlook, which pointed out that despite the volatility in velocity, the pace of hotel real estate investment in the Americas reached a four-year high in 2011, as transaction volume swelled to $15.2 billion, a 24 percent increase over 2010.

Despite the concerning market conditions in the final months of 2011, hotel fundamentals continued to show resilience, and as a result, early 2012 remains as good a time as any to transact because distressed properties are finally coming to market, and there is virtually no new supply coming online. 

“The big story since the crash has been lenders holding onto their troubled assets, when in past down cycles they had to write down their underwater loans and push their REO properties through,” says Irv Sandman of Sandman Savrann, a national law firm devoted to the hospitality industry. “The result had been a slow deal velocity that has not been particularly good for buyers, sellers or the economy as a whole. But the market is now improving for traditional buyers – the REIT-driven bubble of last summer appears over; lenders are increasingly pushing assets to market; and momentum is building to ‘come clean by ’13.’”

“Those that get in and sell early will do better than holding, and we don’t see values getting much better specifically because of the volume of assets we expect to hit,” adds Lou Plasencia, chairman & CEO of The Plasencia Group, Inc. “With no financing for construction, the market is ripe for assets to trade in first and second quarters. We’re seeing REITs on the other side now, moving properties. These are great owners of real estate, and they sell into an up market when the pricing is right.”

Reflecting these factors, Jones Lang LaSalle Hotels forecasted the Americas hotel transaction volume in 2012 would at least match 2011 levels at an estimated $15 billion. Operating fundamentals are expected to remain strong in 2012, and the transactions market will be bolstered by acquisitive private equity funds.

“It seems like virtually all of our clients are buyers, and any hotel company that has survived and was not overleveraged has wanted to expand,” says Sandman. “Because there has been essentially zero development for the last 3 to 4 years, companies have to make their own opportunities, and that means they have to focus more on acquisitions and assets with hidden potential.”

Because of this environment, however, typical auction bids and marketed properties are extremely competitive, which was what drove much of the private equity away from the market in 2011. Therefore, buyers are looking for behind the scenes, off-market opportunities where they can make a strong bid.

“The REITs were so aggressive and so active, it really shut out a lot of the private groups, and they did pursue a lot of off-market deals,” says Plasencia. “We’re still seeing that now, and probably 40 percent of the deals we’re working on are like that.”

Because hotels are very often complex assets, buyers don’t like to bid against dozens of competitors in an auction because it’s high risk for potentially low reward.

“It costs a lot in time and money to figure out an asset,” says Sandman. “Is it worth the time to go through that, only to then face the prospect of having to outbid all the other competitors?”
 
On the seller side, marketing a property quietly has its advantages as well. Business can be disrupted when you indicate it’s for sale – competing hotels might take advantage of that and employees get rattled, so it’s in the best interest of ongoing operations to close quickly and quietly.

Plasencia says the transactions he’s seeing are happening in secondary markets and resort venues, primarily from high net worth owners, or what he calls “forced owners,” who didn’t really want to be in the driver’s seat but got pushed into a more active role when an operating partner got into trouble.

“A lot of passive owners don’t like that position and looking to quickly exit,” he says.

Another typical seller in this environment is a legacy owner who’s looking to exit or retain passive interest when the next generation isn’t interested in carrying on the family business.

As with any investment, getting a good deal is all about due diligence and understanding the market, eyeing an asset that’s not like a lot of others out there. Both buyers and sellers have to develop relationships and target specific deals that will work for them to get the best pricing, which will create a win-win on both ends. If a seller can identify a dozen buyers in the market who they know would take care of and improve the asset, why blast out the listing to the world?

“If sellers look for buyers quietly, the buyers feel special, and that creates urgency for them to get ahead of the curve,” says Sandman. “That changes the equation for the buyers; the risk-reward is better. The seller always has to try and get a good price, but to do that they have to be strategic about attracting the handful of buyers who are serious, capable and best suited to unlock the asset’s value.”

“Flexibility will be a key theme for 2012, and the ability to react to change quickly will be a success indicator,” adds Arthur Adler, Managing Director and CEO-Americas for Jones Lang LaSalle Hotels.

Credit

Dan Marcec Managing Editor Hotel Interactive, Inc.

Homewood Suites Slims Down

Feb 24, 2012 7:23 AM, By Ed Watkins

New Prototype Is Smaller, Cheaper to Build

The new Gen 9 Homewood Suites prototype features an L-shaped studio suite.

Upscale extended-stay chain Homewood Suites recently introduced a next-generation prototype that’s smaller and less expensive to build than previous incarnations of the product. The Gen 9 prototype, which is currently being rolled out for new projects, gives developers an opportunity to build Homewoods on slightly smaller or oddly shaped land parcels.

While the differences between the seven-year-old Gen 8 and the new Gen 9 prototypes will help developers’ bottom lines, brand executives say the changes will be barely visible to guests. That was one of the key goals of the project.

“We wanted to update the product, but we had to make sure the guest-facing experience remains intact,” says Bill Duncan, global head of brand management for Homewood and its Home2 Suites sister brand. “We’ve received a lot of validation from our guests on the experience they receive and the space our product offers to them. That had to stay intact.”

One significant change with the new prototype is replacing the separate, single-story lodge structure with one that’s integrated into the main building and tucked under a bank of guest units. The overall size of the lodge facility doesn’t change, however.

“We couldn’t skimp on this space because it’s the center of activity for many of our guests,” says Dawn Koenig, vice president of brand performance support, who adds that 87% of guests eat continental breakfast in the lodge, and 65% have evening dinner and drinks there on Monday through Friday. While the size of the lodge stays the same, the new prototype has a fitness center that at 650 square feet is about double the size of the facility in Gen 8 hotels. “Our research has shown fitness to be very important to our guests and the new center allows them to maintain the kind of lifestyle they enjoy at home.”

Changes in the new prototype shave about 11,000 square feet off the building, reduce land requirements by about 20% and the overall building area by 20%. Construction costs are reduced by 10%-15% and overall per-key development cost is between 4% and 6% lower, say Homewood executives.

The prototype has fewer units (109 keys versus 123 in previous editions) and 12 fewer parking spaces. One of the big changes involves the mix of guest units. Gen 9 hotels will have 60% king studios and 40% king suites, whereas the previous product featured a 50/50 split in suite types. The change reflects customer feedback on the Homewood product.

“Many guests love the open-floor concept of the studios,” says Duncan. “Through research we heard from guests that when they’re on the road and away from family, they feel confined. The studio suites give them a sense of open space.”

The studio suite was redesigned from a rectangle into an L-shape, with the long part of the L a little wider than in the previous designs. And while the unit is smaller by 27 square feet, Koenig says its nearly square shape makes it hard to tell that it’s smaller. Another change in the unit is the elimination of the desk, which brand management realized guests weren’t using. In its place is a single table that can be used as a desk, activity surface or for dining.

One ff&e change in the new prototype is the elimination of a desk. A single table will now be used for work, dining and other activities.

Other changes are in store for the Homewood brand, some of which are fueled by trends in residential design the brand wants to adopt where feasible in its lodging product. For example, the standard for new Homewoods or those undergoing changes in ownership or product improvement plans will be stainless steel kitchen appliances. (The change creates one minor operational challenge as management will need to relocate the nightly dinner and drinks menu that it previous attached to the refrigerator by magnet. Stainless steel doesn’t have the same magnetic properties as other metal refrigerators.)

The chain is also experimenting with all-white bedding and a coverlet instead of duvet. One Alabama hotel is testing the new bedding and several more will follow. “We’ll test these concepts for 120 to 180 days because it’s very important to understand what impact such a change will have on the laundry and the time it takes to clean the suites,” says Koenig. Another possible change is integrating reading lights into each bed’s upholstered headboards.

While most new Homewoods will feature the Gen 9 specs, Duncan says the changing development environment means owners want opportunities for more flexibility. As a result, the new prototype and its concepts are scalable and can be optimized to fit individual needs and challenges of specific projects.

“We’re no longer just offering six ff&e packages. We intend to inspire, not require,” says Duncan. “We have standards and guidelines on the look for the product, but we’re able to work with our owners and their designers to create a concept that looks appropriate and works in whatever market they’re developing in. We found that sometimes our owners can be more nimble and cutting edge than can the brand.”

The first Gen 9 property opens later this year in Joplin, MO. Overall, the brand hopes to open between 12 and 15 hotels in 2012. While many will be in standard suburban locations, Duncan says the chain is reviewing several proposals for adaptive reuse or new-build projects in urban centers. Canada is another growth area with 10 properties open and three new signed deals.

Related Stories
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Homewood Suites Chief Duncan Pens Mascot Books
Dual-Branded Hotel Groundbreaking in Atlanta

(The views and opinions expressed in this blog are strictly those of the author.)

How much money you take to the bank is in direct proportion to how your guests think and speak of you. The more they recognize your distinction and the more they feel connected to you, the mo' money they bring you. Like it or not, people are Yelping you, TripAdvisoring you and blogging about you before they buy you. Simple: It's “media” — not “medi-huh.” 

Guest satisfaction goes beyond what we have to give those “pesky guests.” My acid test is this: If a guest is at a cocktail party after they have checked out and someone asks, “Gwyneth, how was your trip to Boston?” the only response I, as a manager or owner, is interested in hearing Gwyneth say is, “OMG, fabulous. Let me tell you about the hotel I stayed at. They … ”

My work is about getting hotels to be number one in their comp set and putting distance between hotels and their competitors. Too often at P&L reviews I have heard owners say, “I am not interested in your TripAdvisor rating. Why aren't you number one in your comp set?" While seemingly a reasonable question, comp sets are contrived. By a wave of a pen, the comp set could be changed along with the results. These days, you can dispose of an undesirable comment card, but media sticks to you like a tattoo. What your guests say turns into real money real fast, or loss you can’t even begin to measure. If Pythagoras were alive today, there would surely be an algorithm to prove this.   

Here’s a positive news flash! The paradigm that really happy guest experiences cost more is not a useful theory. There is a bigger picture to happiness than 800-thread-count sheets — it begins with embracing a more holistic view of things. Just as you don't get the taste of apple pie in your mouth by lining up oil, apples and flour on a plate, you don't get amazing experiences by addressing cost, training and talent as separate components. If blended appropriately, what you get is a great culture. Culture is not about expense. Nor should it be a human resources “to do” project — great culture springs from great leadership, as do results.

The greatest guest experiences in the world come from business cultures that align themselves with the highest potential of financial and human outcomes. It makes good profit along with good sense. 

Yum. Pass the good fortune cookies.

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Front Desk Upsell Training Can Increase RevPAR – By Doug Kennedy

Date: 2011-10-05

Although 2011 has provided a quicker rebound in terms of hotel occupancy and overall RevPAR, most hotels are still looking for ways to further increase their ADR. One great place to start looking is your hotel’s front desk.

Depending on your hotel’s inventory of accommodation types, the potential impact of a comprehensive, focused upselling program will vary greatly.  However when you sit down to do the math on the potential additional revenue to be generated even for hotels with minimal upsell opportunities, it becomes instantly clear that the effort can easily generate a significant ROI.  Potential upsell opportunities include:

- Special room types, such as junior or one bedroom suites,

- Rooms or suites with special features such as whirlpool baths and kitchens. 

- Preferred views or hotel locations.

- Special “exclusive” floors such concierge or executive level floors. 

- Packages that include additional amenities, services, or activities.

- Adding on a second room at registration for a significantly reduced rate. (Such as offering the family of four a second room at 30% off.)

Of course one opportunity to upsell is when callers contact the reservations department or call center.  Yet with so many guests booking online these days, the front desk registration experience might present the best opportunity of all.   

• Guests may not be aware of upgraded options, especially when the reservation was made by third party such as a travel agent, administrative assistant, or function planner. 
• Voice reservations agents may have failed to convey the value of the upgraded options, or worse yet, failed to mention them at all. 

• The guest’s needs might change while en route.  Business travelers, for example, might have pop-up meetings or projects to work on, requiring additional workspace in their rom.   

• The impulse of the moment might cause guests to be more receptive to upgraded options, especially after a stressful day of travel.  For example, when mom and dad were planning the trip it seemed like a good idea to share a room with the two kids, since “all we’re going to do is sleep there anyway.”  Yet after 8 hours in the minivan the adjoining room or suite starts looking like a great option.  

Another great advantage of upselling at registration is that it’s possible to be very specific about what is offered by particular rooms or suites, since the front desk knows exact inventory.   

Front Desk Upselling Training Techniques

• Reconfirm the pre-reserved accommodation; reassure the guest that they already have a nice room.  Avoid making the options they’ve already selected sound undesirable with statements like “Right now we’ve just got you in a standard room.”  Instead say “Mr. Johnson, we have you confirmed in one of our traditional rooms, which I’m sure you will find quite comfortable…” 
• Probe to find out if the guest is aware of available upgrades with statements such as: “Did your (travel agent or assistant) have a chance to tell you about our ____ rooms?” or

            “When you booked online did you happen to notice our suite options?” 

• Present the availability of upgrades as a unique opportunity by saying: “We’ve had some of our ____ rooms open up this evening…” or “We’re offering a special rate to help familiarize our (repeat or first time) guests with our business suites. Does that sound like something you’d be interested in?” 

• Utilize incremental sales techniques, especially since in their minds the original room rate has already been paid.  “For only $25 more, I can offer you one of our _____ rooms.” 

Demonstrate the value received. Be as specific as possible. Rather than saying “Deluxe rooms have a view,” say “In this room you can look out your window and see…”  Rather than saying “The concierge floor has a lounge,” say  “As a guest on this floor you’ll have 24-hour access to our executive lounge, which includes…”  Rather than saying “This is a 600 square foot suite with a fully equipped kitchen,” say “Since you’re traveling with your family, you’ll love having all the extra space this suite provides.  And the kitchen will be nice if you want to make breakfast or bring back take-out one evening.” 

 Mention higher rates as a reference point to position lower rates as being a good value: 

            “These rooms usually run _____, but because of (special circumstance) I can offer you   a special rate of _____.” 

• When quoting rates to walk-ins, always offer a menu of options.  Without training, front desk associates tend to offer only one room type to walk-ins, which is typically the least expensive.  Instead, offer walk-in guests a range of accommodation types and rates.  Offer to show the rooms where possible.  

Provide Front Desk Associates With Visual Aids.  Many hotels are finding it helpful to display digital picture frames showing photos (from the website) of actual rooms and suites.  You can also drop-in a slide with copy reading “Ask us about suite upgrades” or similar. 

Structuring Rates So That An Upgrade Is A Reasonable Value

Most properties market a range of rates to various market segments.  However, groups, high-volume accounts, or guests participating in special discount programs, are only offered their special rate for the least expensive room type.  Upgraded accommodations, if offered at all, are at rack rates.  The end result is that the additional cost to upgrade does not justify the value received.  

For example, if the rack rates are $100 for a regular room and $135 for deluxe, a $35 difference seems reasonable.  However, when a special corporate rate of $79 is offered for the regular room only, the upgrade fee, which is now $56, is effectively out of reach.  

To work around this, many properties are implementing a “flat rate” for upgrading.  In this scenario, the guest always has the option of upgrading for the same fee, regardless of what rate they qualify for.  So whether it’s a corporate, group, government, or promotional rate, the investment for the upgrade is reasonable.  Best of all, additional revenue is created from rooms which might have been given away at lower rates anyway! 

Recognition And Incentive Programs.

A key ingredient in any upsell program is to measure the results and to implement a recognition and/or incentive program.  Front desk upsell incentives are especially easy to justify, as the upsell can be documented.  (Associates simply do a print-out to document the change.) 

Most incentives reward the individual associate for each upsell, with either a predetermined cash amount, with points that can be redeemed for prizes, or perhaps with days off with pay.  (Cash incentives should be paid separately to help differentiate rewards from base salary.)   Alternatives are team incentives where everyone who works during a given time period (i.e. shift, day, or week) is rewarded equally for upsells which occurred during that period. 

Regardless of which incentive program is selected, it is important to post the results in a prominent area on a regular basis.  This helps spark the competitive spirit, and reminds all associates of the potential to achieve the same rewards being earned by the top performers. 

By focusing your front desk team’s attention on upselling, by providing training tips for doing so, and by measuring and rewarding the results, your property can turn-on the faucet to this extra revenue stream.  Along the way, your guests will enjoy utilizing the extra space, upgraded room features, and special services they might not have otherwise considered.

- Doug Kennedy

- October 2011

Doug Kennedy is President of the Kennedy Training Network, Inc. a leading provider of customized training programs and telephone mystery shopping services for the lodging and hospitality industry.  Doug continues to be a fixture on the industry’s conference circuit for hotel companies, brands and associations, as he been for over two decades.  

Visit KTN at: www.kennedytrainingnetwork.com   

Read his travel blog at http://ontheroad.kennedytrainingnetwork.com/ 

or email him directly:  doug@kennedytrainingnetwork.com  

This article comes from Hotel News Resource

http://www.hotelnewsresource.com

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15 February 2012
By David Becher
RRC Associates

• Nearly half of school districts have scheduled their 2012 spring break to overlap with Easter weekend.
• The two weeks of highest spring break incidence will be 10 March to 18 March and 31 March to 8 April 2012.
• Most schools will begin summer vacation between 21 May and 9 June.

School breaks have traditionally been a good source of leisure demand for many classes of hotels -

• highway properties on route to destination locations (beaches, for one),
• those close to attractions (theme parks),
• those close to major urban centers and with some resort features (attractive pools, etc.)

According to a recent article by David Becher, RRC Associates and published on HotelNewsNow.com, an interesting phenomenon will occur this year with Easter Sunday falling on April 8th, earlier than last year: (quotes from article)

• 44% of school districts in the research sample have scheduled their 2012 spring break to overlap with Easter weekend. More school districts will be on vacation that weekend than any other weekend in March or April 2012.
• Only 15% of school districts were on spring break the same weekend last year (Easter occurred on April 24th last year)
  
• School spring breaks will occur during a more compressed period this year than last. Specifically, a higher share of school district breaks will occur between Saturday, 24 March and Friday, 13 April this year than last, as an increased share of schools move their spring breaks close to Easter

Full article is available by clicking here – also includes information on university vacation breaks.

This compressed break period will allow for potential marketing opportunities for all hotels who cater to this segment:

• Consider packages tailored to the transient leisure market carrying kids
• Landing pages with key words vacationers will be searching for – attractions close to you, things to do, value added amenities
• Guests are looking for an experience – sell your suites by selling the experience of space and luxury
• If you have a database of guests, invite them with added value – late check outs, gas cards or discounts for multi-night stays, welcome amenities, hotel restaurant coupons and so on.

Some earlier newsletters with ideas that may interest you:

1. Summer travel
   
2. Upselling
   

20 February 2012 7:21 AM
By Stephanie Wharton
Reporter
swharton@hotelnewsnow.com

• While hotel performance metrics are expected to be solid for the next five years, the financial structure is pending catastrophe, said Steve Van, president and CEO of Prism Hotels & Resorts.
• Despite the financial hardships distressed properties experience, they operate normally as long as there is significant cash flow from the property.
• Much of the management process for a distressed property involves working on guest service issues and developing a comprehensive sales and marketing plan, said Michael Marshall of Marshall Hotels & Resorts.

REPORT FROM THE U.S.—Business is booming for hotel receivership companies as the number of distressed properties in the United States continues to rise.

 

Steve Van, president and CEO of Prism Hotels & Resorts

Steve Van, president and CEO of Prism Hotels & Resorts, said he’s waited a couple years, but his phone is ringing off the hook with requests for help.

While hotel performance metrics are expected to be solid for the next five years, the financial structure is pending catastrophe, Van said.

Loans for hotels that were financed and bought between 2005 and 2007 are coming due, and Van expects there will be major defaults during the next few years.

“Everyone borrowed too much money, and they’re having trouble paying it back,” he said.

Borrower issues
Lou Plasencia, chairman and CEO of The Plasencia Group, a hospitality transaction and consulting service, said the volume of business his company is seeing is significantly greater this year than it was a year ago.

“We are getting a lot of requests from lenders, servicers, what I would term ‘forced owners,’ or passive investors that ended up being the owner of the property when their partners backed out or went bankrupt,” he said.

 

Jeff Kolessar, senior VP of development for GF Hotels Management

Borrowers also are experiencing difficulties paying fees to their franchisors, said Jeffrey Kolessar, senior VP of development for GF Hotels Management. Many have not been able to put required property improvement plans or standard brand changes into the property.

“(The property) then goes into default with the franchisor with the possibility of losing a franchise,” he said.

Michael Marshall, president and CEO of Marshall Hotels & Resorts, said brands will more than likely kick franchisees out of the system rather than allowing them to  reflag within the company.

“That will bring about liquidated damages for getting out of your contract too soon,” Marshall said. “That’s the way these franchise systems are set up. It’s not always fair, but at the same time, you’ve got to protect the brand.”

If the foreclosure is coming from the bank, the brand might decide to invest money in the property if it makes economic sense to oversee a renovation, he said.

Despite the financial hardships distressed properties experience, Kolessar said the property continues to operate normally as long as there is significant cash flow.

Managing distressed properties
Often times, those involved in distressed situations want to get rid of the property, Marshall said. “It’s easier to sell a hotel when it’s running than when it’s shut down.”

“You’ve got to spend money to make money, but we try our best to spend as little as we can. A lot of it is changing the mindset,” Marshall said of operating a distressed property.

Motivating the staff is key, he said. It is important to let employees know it is not their fault if the owner made a lousy deal.

Much of the management process for a distressed property involves working on guest service issues and developing a comprehensive sales and marketing plan, Marshall said. However, some properties are beyond repair.

 “A lot of times, it’s as simple as going in and spraying the place down. We’ve been involved in situations where we’ve gone in and told the bank, ‘You’ve got to shut this place down. It’s a safety hazard,’” he said.

Another big part of Marshall’s business is working to keep hotels that are not yet distressed from getting to that point. “There are a lot of hotels that are in trouble,” he said.

Prism’s Van said although the U.S. hotel industry is  paying for its mistakes, there’s still great news for hoteliers to revel in: “Worldwide we’re starting a recovery, and hotels are recovering faster than the economy.”

ATLANTA—Extended-stay hotels recorded a 7.3 percent increase in RevPar in 2011 compared to 2010, bettering the 7.1 percent gain during the previous year, according to recent research from The Highland Group Hotel Investment Advisors, Inc., which tracks the segment.

Extended-stay hotels reported a record low 1.6 percent annual increase in room supply in 2011. Another record low is a possibility in 2012 and very slow supply growth is "a certainty," according to Highland.

Extended-stay demand is still rising and average rate increases accelerated throughout 2011, the research showed. Average occupancy in 2012 is forecast to be one of the highest on record and new peaks in nominal RevPar are expected in the second half of the year, according to the Highland data.

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