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Realizing An ROI

Owners Share Strategies For Long-Term Success During BITAC® Panel

Tuesday, November 12, 2019
Dennis Nessler
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A number of owners and operators convened during the BITAC® Owner’s event last week and discussed a range of topics relating to their bottom line from the ongoing economic cycle to the importance of selecting the right brands for their respective assets.

The event, which took place at Grand Hyatt Baha Mar in The Bahamas, featured a panel discussion entitled “Realizing An ROI: Owners Share Strategies for Long-Term Success.”

Greg Winey, president and CEO, Northpointe Hospitality Management, expressed some concern about current conditions. “When you think about the next 12 to 18 months I think most of us in the room would agree that in most cases we’re flattening out. There might be some slight declines...How leveraged are you is really the question? If we lose 3 or 5 points in occupancy or if your revenues go down 3 or 5 points that’s a haircut. That can be significant to a mid-level operator,” he said.

Elliott Estes, principal, Woodmont Lodging, noted that the “young company” has taken a cautious approach to growth since its inception in 2015.
“We’ve been told that the cycle was ending for a spell now so we’ve had to be somewhat agnostic to the cycle. We have to be smart when we buy; we primarily focus on price per key. Is it the right number and are we using the right financial structure in that acquisition?” he stated.

Cameron Lamming, president and COO, RAR Hospitality, also recommended a cautious approach for properties while providing some advice on assessing STR reports. “I highly encourage everyone to go back before 2008 and do a 20-year [review]. Take what your comp set did in the recession and plug that into your model and [see] if you can still cover debt. If you can’t cover debt then you need to relook at the financial engineering,” he commented.

Larry Birnbaum, vp, global hospitality, Ruckus Networks, offered the perspective of an IT supplier and emphasized there are a “number of changes” taking place on the technology landscape while encouraging owners to get ahead of them.

“I’m going to suggest that you invest in infrastructure for all four corners of the property. The network that we’ve been putting in was for the guest, the network of the future is for all associates and all devices communicating with other devices. It just needs to be done now,” he noted.

The panelists acknowledged how critical it is to pick the right brand for their respective assets to ensure long-term profitability.

Winey, for one, showed a strong bias toward what are commonly referred to as the “premium brands.”

He flatly stated, “two words: is it a Hilton or is it a Marriott? Then we kind of go down the pecking order. Those are institutional-grade investments and when a lender looks at those they look at that as strong long-term stability as it relates to that asset.”

Winey also emphasized the importance of a rapid ramp-up for a property. “My experience has been with a Hilton or Marriott brand you’re going to get to fair market share in about 6 or 8 months. Other brands that I’ve worked with that can be a 24-month climb so that’s a lot more painful. In the long haul our preference obviously is to go with the brand that has a quicker ramp-up and great staying power,” he said.

Estes agreed pointing out that the company often recommends the premium brands in its advisory work as well. He offered a recent example where the company got an owner to reconsider another branding option.

“We showed them the difference between what we would project a Hilton or Marriott product to do against the other brand and there was a significant enough difference for them to slow down. We actually got them to take a process they thought they would finish in two days and turned it into two months and I’m certain we created a lot of value for them,” he said.

While Lamming noted the company “leans toward Hilton and Marriott” in general, he stressed that it depends on the market pointing out that roughly a third of the company’s portfolio is independent boutiques.

“We love the freedom that comes with it [boutiques] because you really want to focus on what is the guest you want not necessarily the guest who’s going there. There’s a time and place for boutiques,” he noted.

However, Lamming did acknowledge that unbranded boutique properties still have their challenges. “Getting the market to understand independents even in this day and age is still shockingly difficult and getting lenders to be okay with it,” he said.

Finally, owners acknowledged the importance of reinvesting in their assets, particularly when it comes to renovations.

Birnbaum, for one, sees it as an opportunity as the need for bandwidth continues to increase. “I think when hotels are renovating it’s really time to refresh the entire guest experience. I would encourage everybody if you’re at a point where you’re going to open up the walls, or you’re going to do any kind of major renovation, even if it’s years off go ahead and put in the network infrastructure while the walls are open. Just put it in even if it sits dark for a while, he said, later adding, “however much bandwidth you think you need, you’ll need more.”

Winey, meanwhile, pointed out that allocating funds for renovations is no longer an issue for many owners. “The lenders have gotten smart and they’re going to require 2, 3, or 4 percent of your revenues reserved. They snag that every month as part of your debt payment so it’s become less of an event for us. It’s just an ongoing thing,” he concluded.
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Dennis Nessler    Dennis Nessler
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Hotel Interactive®, Inc.
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