Today the Wall Street Journal broke a story that real estate investment trust Sunstone Hotel Investors will turn over the 258-room W San Diego to its lenders after a compromise with special servicers failed (See "Sunstone REIT forfeits W Hotel," June 9, 2009, by Kris Hudson).
You'll get the details from the story, but here's a quick recap: Sunstone bought the property for $96 million in 2006 from a group led by Gatehouse Capital Corp. Sunstone's mortgage has been in special servicing with Centerline Serving, and Sunstone president and CEO Arthur Buser says in the article that Centerline will not accept Sunstone's modification proposals to the loan, and Sunstone will turn the property over to its lenders.
It's not news that hotel owners are going into forfeiture and foreclosure, but it is interesting to see case studies of specific properties working with special servicers.
In the last month I have attended presentations at both Meet the Money and the NYU investment conference where speakers talked about how important it is for owners who are in danger of defaulting on their loans to communicate with their lenders and special servicers to reach a compromise. (See "Meet the Money: We're not out of the woods yet," May 7, 2009; and "LIIC: New indicators for a new economy," June 1, 2009)
Just last week in New York, I had a couple conversations with lenders and brokers, and many said that turning the property over is the last-ditch solution. The goal is to keep a property operating, because the asset itself (minus operations) is worth so little, and nobody is buying yet.
I learn more every day about how situations like these play out. I know each case is unique, and I will follow the outcome of this one closely, because it's one thing to hear financiers talk about the ideal way to re-negotiate or re-finance, and it's another thing entirely to watch it happen in real time.
Peter Yesawich, chairman and CEO of Ypartnership, spoke and led a panel today at Wyndham’s 2009 Owners’ and General Managers’ Conference. He always provides new insights or a different perspective on the industry, and I often agree with him, but one of the points he hit on today seems a bit counterintuitive.
Wyndham’s overall message at the conference is one of brand clarity. It is defining its brands and working to make them more consistent and powerful. During his speech, Yesawich mentioned the importance of brand clarity in this market and thinks there is a real opportunity to get branding messages out there and grow a customer loyalty. But the stat he showed that prompted him to say this was that 44 percent of people consider themselves brand loyal—a stat that has been on a steady decline during this decade, with this 44 percent being its low point.
Now, I often consider myself brand loyal. I would rather lick dirt than drink a Pepsi if no Coke is available. I also believe that people are like me and gravitate to certain brands over and over again.
But then I see the graphic illustrating a decline in people saying they care about brands, and then I see the other slides during Yesawich’s presentation that further show how customers are basically latching onto the best deals and looking for value. And if one brand continually offers the customer the best deal, I’m sure the customers will start looking there first and become more loyal. But I don’t really make a connection with those facts about customers and how that creates a good opportunity for brands.
I just wonder if this new technology has changed the branding game in hospitality more than we think. In the latest Wired Magazine, the cover story was about what it calls “The New New Economy,” and the gist of it is the big corporation in on the way out and smaller companies are on the way in. The magazine believes the new communication technology available is going to give more people business and decision-making power. And there are a variety of reasons they give to support this thesis, but the point I took away is business might be changing more than we think. It may be going in a direction no one really planned for or anticipated, much like the downturn, and maybe we should start paying attention.
And I think of that idea, and I see that decline in brand preference, and I just wonder if this is really an opportunity for brands to clarify what they are and capture those brand-ambivalent people, or if maybe the big brand name peaked and isn’t going to be as meaningful as before—with the biggest importance being the needs of the customer in that moment. What do you think? Am I reading too much into that 44 percent graphic?
While you ponder how right or wrong I am… I'm going to grab a Coke.
Peter Greenberg, travel correspondent for ABC’s Good Morning America and travel editor for NBC’s Today show, was a speaker at the Choice Hotels International 55th Annual Convention, and I thought he had an interesting perspective that many in the industry could benefit from.
First, he made light of the "bunker mentality" and paranoia that can all too quickly run through the national consciousness.
"Anyone out there have the swine flu?... Are you sure?" he asked. He then went on to warn against the dangers of discounts. "Discounting doesn't work in the long term, anyone who thinks the recovery will be driven by price is kidding themselves. Recovery will be driven by value."
And this is where Greenberg's main point centered. Hoteliers, in both bad times and good, need to be thinking more about the hospitality experience from the guest's perspective.
"Suicidal pricing sets a precedent that's negative," he continued. "What are you adding to the deal? You can't institutionalize value. You can't put it in a coupon. I don't care how good your reservation systems are... what counts are the people who work for you."
He's talking about the personal interactions all of your employees have with your guests, but he's also talking about the step beyond that. The term he used to describe how most people perceive value is experiential one-upmanship.
"We want bragging rights. We all want an experience out neighbor couldn't do," he said. "Say any of you were sitting next to someone on a plane today and, god forbid, you actually talked to each other on the plane. The conversation would inevitably get to 'how much did you pay for your ticket?' ... But then the next question is 'where did you stay last night?' ... The next question is never asked because it doesn't matter—Nobody ever says 'How big was your room?' Because it doesn't matter. It's just a place to sleep and shower. The next question is 'What did you do last night?'"
This is where your hotel can stand out, provide a value that's "not in the brochure" and play into the guest's need for experiential one-upmanship. Greenberg's example of this was a hotel he visited on the island of Kauai, Hawaii. He asked the GM what the hotel could offer that wasn't in the brochure. The GM pointed to one of his bellboys and said, if you ask him, he'll take you wild pig hunting at 4 a.m., and then you can bring it back and the chef will cook it. Greenberg thought that sounded fun, did it, filmed it and aired the piece on the Today show.
Weeks after it aired, Greenberg said he got a call from the GM.
"You sonuvabitch," the GM said. "We've got people coming to this hotel that don't even eat meat who are demanding to go out and kill a pig."
Greenberg said three weeks later the island of Kauai ran out of pig.
It was a funny, entertaining story, and I can't vouch for the total validity of every detail, but it offers valuable insight nonetheless. In times like these, your hotel, at little-to-no cost, needs to provide an experience for guests that others can't. And I agree with Greenberg—this is what guests are looking for. Occupancy may be down, but the people who are traveling and are paying to stay at your hotel should walk away with the feeling they received incredible value for their money. That feeling will turn into loyalty and word-of-mouth will spread, and it's possible that your island, town or city could run out of it's version of wild pig too. Just something to think about.
I tend to think much in life is subjective, especially when dealing with aesthetics. So that's why I find it interesting to hear something artistic, like hotel design, can being measured objectively. Isn't design like art, music and literature where the beauty is in the eye of the beholder and all of that? Well, that still holds true, but if enough people all feel the same way, that brings you closer to an objective analysis, at least as far as designers and hoteliers need to be concerned.
Anyway, Howard Wolff, SVP of design firm WATG, stopped by our office and talked about some of the analysis his company does. They've started to compare data (occupancy, ADR, RevPAR) from hotels they've designed to other hotels in the same market that are operated by the same management companies over a 15-year period. Fortunately for WATG, according to Wolff, this analysis shows their hotels outperform the others in the comparison. So, if different hotels performed differently with one of the only changed variables being the hotel's design company, one could say, objectively, that shows one design was better than another. At the very least, it's an interesting theory.
Wolff went on to discuss another method, Design Quality Indicator, managed by the Construction Industry Council, that further evaluates design quality. According to Wolff, when DQI consults on a project—whether it's a renovation or a new build—it gathers everyone involved in the project and figures out what the design needs. So the designers, architects, owners, developers, stakeholders—everyone—get together and answer a questionnaire with specific questions about the building's design. This may happen several times throughout the design/building process. But with the end of each question session, DQI can determine, objectively, what's deemed most important by the people involved with the project. This can help focus attention and dollars into the areas of the design that need help. It's kind of like a psychoanalysis of the design.
So, maybe I'm wrong. Maybe nothing is subjective. Either way, you may want to try and analyze what your design says about your property. With a few tweaks, you may significantly grow your market share.
A few thoughts from the Asian American Hotel Owners Association 2009 annual convention in Washington, DC:
— The theme of this year’s convention is “Power of AAHOA,” and that theme couldn’t be more accurate. Simply by numbers alone, the presence of Indian-American hotel owners is astounding. Exact conference attendance numbers haven’t been released, but based on perception, the general session ballrooms seem filled with twice as many people than ALIS in January. Check-in lines on Day 1 and Day 2 at the new Gaylord National resort and convention center were 200 feet long.
The presence of Indian-American owners in the hospitality industry is often underestimated. The facts stand alone: 40 percent of hotels in the United States are owned by Indian-Americans, more than 22,000 hotels. The group employs more than 1 million people and is responsible for $60 billion in assets. AAHOA has more than 9,300 members.
— The owner’s association is now 20 years old and has progressed tremendously. Its goals have grown from bringing together a group of minorities who share common interests, to fighting for fair franchising, to using its large footprint to make an impact on the industry and America’s economy. Today, AAHOA is in the nation’s capitol fighting for minority business owners, attempting to protect their community for generations to come. Because of its size and financial success, the group is poised to have a major impact on legislation and policy decisions moving forward.
— Although fair franchising is of utmost importance to AAHOA, it seems the fight it once took to franchisors has taken a back seat. More focus is being put on lobbying and growing the membership to have more clout in Washington. Continuous discussions throughout the year still remain between AAHOA and franchisors in attempts to better the owner/brand relationship, but AAHOA board directors said the economy has forced both sides to be more flexible than ever. Overall, the directors said, the franchisee-franchisor relationship has improved dramatically, albeit with some brands more than others.
— The new Gaylord National resort and conference center, home to several hotel industry conferences in 2009, is astounding in size as well. Location is its best asset. It sits at the west end of an enormous and modern mixed-use development called National Harbor, about 25 minutes from downtown DC, perched right on the Potomac River. An oversized, 18-story atrium at the Gaylord faces the water and provides a center point to the maze of conference space, guestrooms and restaurants. National Harbor is trendy, hip and of course expensive; the retail and dining options provide a great alternative to stuffy downtown DC. National Harbor is also home to a Westin, Residence Inn, Hampton Inn and an aloft. Of course each hotel targets a different traveler, but the aloft stands out as providing the best overall experience.
I'm always impressed with multiple uses. Like a Swiss Army Knife—it's a knife and scissors and a magnifying glass. Or Kramer's coffee table book about coffee tables that could turn into a coffee table on "Seinfeld." I think that's why I like this solar-powered WiFi system from Meraki. It has several traits that are important for today's hotel.
As we've said before, wireless networks are becoming more and more important at hotels whether it's for better cell phone reception, or in this case, laptop connectivity. Eighty-two percent of lodging executives surveyed last year by the American Hotel & Lodging Association said guests demand WiFi more than any other hi-tech amenity. Connectivity isn't so much a new, cool, trend your hotel should look into as it is a must for quality customer service—which is maybe the most important part of the hotel stay from a guest perspective.
And on a totally unrelated note, green initiatives are important in hospitality too. Often they show your hotel cares about the environment, and they also help reduce your hotel's operating expenses.
That's why Meraki's solar-powered WiFi system caught my eye: It offers WiFi access outside, which is huge for guests looking to do work or check ESPN.com with an umbrella'd drink by the pool, and it does so in a way that's friendly to the environment and your expense bills. The price tag ranges between $1,300 to $1,500, which may be a lavish investment during these times, but the value it may provide to separate your hotel from the pack—technologically and environmentally speaking—might be worth it.
Now if only it could fold out into a coffee table...
Ever watch the show Mad Men on A&E? If you haven't, the show revolves around a New York-based advertising firm in 1960. Having not been around for the '50s and '60s, it's fascinating to watch the different lifestyle that existed then, which is both appalling (the rampant racism and sexism) and intriguing (being able to drink alcohol at work).
Well, in one episode in the first season, a company came into town for a meeting with the advertising guys. The travelers were staying at a nearby hotel, and when the guys wanted to meet for a drink, they met at the hotel's bar. And the atmosphere at this bar was very lively and social. Some aspects of the Mad Men lifestyle just seem kind of cool, and the setting in this scene gave that vibe. The hotel bar was kind of cool. Travelers need not venture out to the city's surrounding pubs, bars and grills for the local scene because the hotel's bar was where to be.
And I bring this up because the hotel bar seems to be trending back to those days and becoming a local staple again—only instead of racist and sexist advertisers that smoke 50 packs a day, the new social-networking generation is coming in the doors.
Jane Humphrey, senior designer and project manager for the Puccini Group, a hotel restaurant design firm, has seen more emphasis on social atmosphere creation from hotels, in that W kind of way, with the bar combining with the lobby. "There's a new style," she says. "There's not as many barriers between the bar and lobby. The eating goes out into the lobby and becomes more of a revenue driver." Guests can sit in a lobby and be served small plates of appetizers or the cocktail of their choice. And design-wise, it's achieved with very flexible casual seating.
And we're not just talking one bar. Ideally, there is a bar within the hotel's restaurant and one more in a more relaxed, less food-oriented area. The key to this though is not creating the vibe just for the business traveler or hotel guest, but making it stand out enough to draw in the locals.
"I do think the hotel bar, particularly when activated by food, does have that capacity," says Patrick O'Hare, senior associate with EDG Interior Architecture. "It's a great social spot. Also, we're applying a different sensitivity to the bar in each meal period. It's a social spot at night with wine and food and cocktails. The trend has not come back to everybody drinking highballs after work, but it's a more casual food platform." Instead of going out for a full expensive sit down meal, locals can come in and order some quality appetizers and a drink or two. A less stressful, more social experience that is rejuvenating the hotel bar.
So in summation, racism and sexism=bad; a comeback of social drinking hotspots in the hotel (that create a local buzz and drive some extra revenue)=good.
I'm not a big fan of many TV news and news talk shows. One of the only shows on TV that I choose to go to for news/talk is Bill Moyers Journal on PBS, which airs on Fridays. I DVR it, and I watch it as soon as I wake up on Saturday morning. This week's show immediately caught my attention as the words "Employee Free Choice Act" came out.
As I've gotten deep into writing about the hotel industry for a living, sometimes I forget to place issues in the broader context. I forgot that EFCA isn't just some bill that affects the hotel industry, but one that could significantly change workplaces across America. The feature on the show (which I linked to above) gives the perspective of James Thindwa, an activist in Chicago who has campaigned for worker's rights a majority of his life.
The video isn't all about his group's campaign for EFCA; it's more of a feature on their journey as working class advocates. But it's weird to me to hear talk about the issue and not have one mention of the hotel industry, which is what I now immediately associate with the topic. Anyhow, you might find it interesting. I also recommend checking out some videos from the last few weeks as well because he's had some economic experts on recently that have had interesting (but often depressing) views on the state of the financial system.
Guest satisfaction has always depended on service, from a pleasant greeting upon check-in to timely room service delivery. Now, according to a new study, hotels also must provide superior cell phone service.
In a recent study of 1,000 American adults, researchers found that 54 percent of guests who received poor cell phone reception would not return to a hotel.
When I first read the results, I was astounded. Really? You would turn your back on an otherwise-stellar stay just because you missed a call?
But the more I thought about it, the more it makes sense. Many people on the road are traveling for business, and when that's the case, there is much work to be done: conference calls, phone meetings with clients, checking in on the family. And with the rates hotels charge to make calls from landline phones in the guestroom, it's usually not economically feasible to sit on the phone for an hour to listen to what you're missing out on in the office. Plus, today people are using their mobile devices to check e-mail, surf the Web and get real-time updates on what's happening back home. If they're not able to do this, their visit—and impression of your hotel—could be tarnished.
So what are you to do? For starters, find out where. You must get moving to determine hotspots—and freezing cold spots—for reception. Then, the why. Have a service provider visit your property to distinguish why some locations get stellar reception while others get none at all. Is it the weather in your area, dense walls or an obstructing building (things you may not be able to do anything about)? Is it the lack of a cell phone tower in your area? Are there too many users overloading your area? Find out! Then, see what you can do. Can you and other businesses in the area lobby a cell phone carrier to get another tower built? Are there changes you can make to the hotel's walls during your next upgrade? Are there other options for amplifying the waves from the towers?
No matter what, you can't let this remain untouched—especially in today's market. When a guest gets frustrated after losing service throughout your hotel, the next time they return to your city, they can—and apparently 54 percent of them will—seek out a better option. Is that a risk you're willing to take?
Despite both personal income and disposable personal income seeing dips in February, the Department of Commerce reported today that actual spending increased.
A study on personal income and outlays by the Bureau of Economic Analysis shows the following:
- Personal income decreased $29.1 billion, or 0.2 percent.
- Disposable personal income decreased $10.5 billion, or 0.1 percent.
- Personal consumption expenditures rose $17.2 billion, or 0.2 percent.
And revised estimates show January being an even better month with increases in personal income of $20.5 billion, or 0.2 percent; disposable income of $164.6 billion, or 1.6 percent; and spending of $94.8 billion, or 1 percent.
So, even the slight dips we did see in February aren’t so bad after all with the growth seen in January. Call me an optimist, but I’m looking for silver linings. And I think you may find them here. With summer quickly approaching and spring fever starting to hit us all, I wouldn’t be surprised if these numbers start rising even more. Keep those fingers crossed.
In the meantime, for the full report, go to www.bea.gov/newsreleases/national/pi/pinewsrelease.htm.
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