1/7 I spend a lot of time talking numbers, metrics, and cost savings, so it’s time for a thread on what this is all about – hospitality.
2/7 As hoteliers, we are in the business of hospitality… of warm, sincere welcomes; of kind, helpful interactions; of thoughtful, creative problem solving; of surprise, of delight.
3/7 We should let technology aid our mission – mitigating the transactional to focus on the emotional, easing communication and interaction, or smoothing out wrinkles in a guest’s stay – but not be our mission.
4/7 Technology truly can help us in that mission: CRM data that highlights Room 405 is traveling for their anniversary, text messages to the valet to pull around the car for Room 607, market data collection that suggests we adjust prices to reflect a late surge in demand, or…
5/7 …sensors that tell us when a minibar needs to be restocked. Note, though, that each of these requires one more critical input: a person to execute.
The risk we run is when we try to replace that human-to-human interaction with technology.
6/7 When guests are arriving and departing, never having interacted with a hotel’s employees, your building is no longer a hotel – with the sense of community imbued in that word. You’ve become merely a room, and no matter how nicely designed, you’re now a commodity.
7/7 As a hotelier, your differentiation, your moat against the AirBnB’s, VRBO’s, etc. of the world is your people. Don’t ever forget it.
tl;dr - don't ever forget this is a "people" business
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1/24 De-Risking Hotel Acquisitions: Thread 5 – Expenses (our denouement)
We’ve talked along the way about expenses obliquely – shifting business mix to bring down reservations costs, slimming down or eliminating room service, considering meal periods, outsourcing parking, etc.
2/24 , but now it’s time to focus fully on the expense side of the ledger. Again, each project is different and there is only so much one can do to identify, understand, and “box in” the risks, but here are some of the areas I focus on and what I look for.
3/24 Staffing. Staffing expenses are massive at hotels – upwards of 70% of your OpEx is staffing.
2/27 We’re going to start with Banquets + Catering (B+C) revenues, then hit on the small F+B sources – minibar and in-room dining (IRD) – and then move on to other revenues.
3/27 Since we’re trying to hit a bunch of things and I’ve been exceptionally long winded (2021 goal – learn how to edit writing for Twitter) I’ll try to be a bit more concise on each.
1/25 De-Risking Hotel Acquisitions Thread 3: Business Plan, F+B Outlets
Now that we’ve talked Occ + ADR, let’s talk about some of the more fun areas of a hotel – the F+B outlets. Full Disclosure – I’m not a “restaurant and bar guy” professionally.
2/25 I work closely with them on hotel acquisitions and developments, and have learned quite a bit about how they think about outlets, but I’m not an expert here (other than at the eating and drinking part – I’m seriously, seriously good at that).
3/25 Hopefully some actual experts step in to correct me where I’m wrong, and to fill in the inevitable gaps! Tomorrow, we’ll hit on banquets + catering, then the smaller departments (in-room dining / mini-bar) and other revenue opportunities.
1/20 De-Risking Hotel Acquisitions Thread 2: Business Plan, Top-Line
We’ve already talked a bit about underwriting, both top-line and expenses, but here’s where we’ll try and connect the numbers to actual business planning.
2/20 Each potential acquisition presents a different turnaround story, and those stories are myriad and varied. For our purposes, we’ll try to hit on a wide variety of items that will help us find and confirm our turnaround story. This one will focus on Occ + Rate.
3/20 Once I’ve established where my post-renovation hotel should sit within its competitive set, I need to start finding the business to get there. What types of customers are in the market, and what drives them, are the first two questions I need to answer.
First focus is on the value-add, and narrowing my risk profile there. The renovation is likely driven mostly by the new brand’s PIP and any material requirements of the new operator, along with any value add items my team identifies.
2/17 Before getting to anything specific process-wise, this is absolutely critical: TOUR THE HOTEL WITH AN ENGINEER. Take as much time as you want. See as much as you can. Take good notes. Take photos.
3/17 Do not rely on seller reps as to conditions, mechanicals, etc. Initially post-tour, I’ll generally price out the PIP as-is with a couple trusted purchasing agents, adding consultant fees, installation, contingency, and warehousing / tax / freight markups based on prior…
When pursuing a new hotel acquisition with a capital partner, I do my best to identify and box in risks as part of a rigorous due diligence process.
2/8 I don’t believe I can ever truly de-risk, but by identifying the unknowns and having a plan to address, I can ensure a higher likelihood of success.
3/8 It also affords me the opportunity to present a capital partner a thoughtful plan and to be open and forthright about the risks. I find it helps me answer the partner’s questions, even the ones I hadn’t anticipated.