The recent severe economic contraction we experienced as a result of the global financial crisis has left in its wake some particular conditions in the hospitality industry:
- Severely limited financing has reduced the pipeline of new construction although projects under construction continued to add to supply through 2010 (albeit at half the rate of 2008 & ’09)
- Banks extended various forms of concessions to hoteliers which allowed them to weather the worst of the downturn
- Brands extended grace periods for property improvement and brand upgrades in light of depressed earnings and lack of capital
- After deferring property upgrade plans for 2-3 years, many brands are now re-launching/have already re-launched their refresh programs to capture a larger share of the now-growing demand cycle.
- Revenue declines and operating income shortfalls have resulted in situations of financial distress.
- Lenders were willing to negotiate repayment plans during the depth of the downturn, typically for one year extension periods; after one or two extensions, they are now less willing to extend these concessions further.
- Brand standards, relaxed to some extent during the declining market, are now more demanding of product improvement as a part of their brand upgrade and relicensing strategies. Lender requirements may make it very challenging to finance these improvements.
RevMax Hospitality can help:
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