Hotel & Motel Management - May 19, 2008 - (Page 46)

46 News H&MM May 19, 2008 | HotelMotel.com www.HotelMotel.com/digital_edition Transactions market Continued from page 4 in previous years. It’s a trend that Niehaus said was “contradictory” to what he expected to occur. Larger deals yield less optimistic results for 2008. In preparing his quarterly report, to be released on GlobeSt.com, Daniel Lesser, senior managing director-industry leader, hospitality & gaming group and valuation & advisory services at CB Richard Ellis, found that the ability to get deals less than $15 million done is much easier than larger transactions, leading to an increase in the number of smaller transactions. “The numbers aren’t down—the total volume is down, and that’s Hennis because the deal size has HOSPITIUM shrunk dramatically,” Lesser said. “Larger deals need more institutional-type capital; that’s just a little bit scarce today.” The luxury and upscale segments have been hit by the scarcity of funding, according to Hospitium’s numbers. The ﬁrst quarter of 2008 saw just 28 hotels in these segments change hands, compared to 73, 88 and 76 in the same time period in 2007, 2006 and 2005, respectively. These segments were the most active in recent years because large amounts of capital were poured in, according to Stephen Hennis, managing director of Hospitium. Also in the past three years, RevPAR grew, supply was limited and debt FHG’s annual incentive trips for its top-performing employees are planned to do more than offer rewards; they strengthen business bonds, too, Habeeb said. “We travel together, we stay together, we meet each other’s families. It’s a remarkable retention tool,” he said. “Not only does the general manager buy into FHG, but the spouse does, too.” How does that familial interaction boost business? It’s all about balance, which Habeeb described was available. Fast-forward to 2008 and RevPAR has slowed (PKF Hospitality Research revised its forecast to a 3-percent gain); supply is on the rise (the pipeline in January had nearly 100,000 more rooms than last year); and credit is harder to come by. The drop-off came faster than anticipated, Hennis said. “We expected deal ﬂow to slow moderately over the course of the year.” The first quarter of 2008 brought in $1.6 billion in luxury and upscale transactions; Q1 of 2006 saw $6.8 billion, and Q1 of 2007 experienced $4.8 billion, according to the Hospitium report. “However, while the level of activity has dropped signiﬁcantly from the last year or two, the environment still remains near the level of an ‘average’ year,” Hennis said. Luxury and upscale transactions will total between $5 billion as “a two-way street.” Employees happy with their jobs go home to better personal lives, he said, and families who know and like an employer better understand the hectic demands of the hospitality business. Labor issues always have been a big concern for Habeeb. “We all agree, three years from now the biggest issue facing our industry will be labor,” he said. “You have a little bit of a perfect storm brewing. We’ll face a clampdown on immi- and $6 billion for 2008; year-end numbers totaled about $18 billion for 2007 and more than $21 billion in 2006, he said. Niehaus said he expects there might be a slowdown, but it will af- Eaton fect sales negligibly for PKF CAPITAL HBI brokers. “Our expectation is that 2008 will probably be equal to 2007— no real increase or no real drop,” he said. “For us, the properties that are going to change hands are going to be those that are less than $10 million because there still is ﬁnancing available.” Financing for such projects generally comes from local and regional lending institutions that either have relationships with the buyer or are familiar with the property’s location, Niehaus said. Conduit ﬁnancing, on the othgration. And the Millennial workforce has a lot of positive qualities, but they’re not really keen to get into the service sector.” In addition to the company’s incentive trips, FHG offers its biggest rewards on the line level, Habeeb said. All property employees with perfect attendance by quarter are entered in a yearly drawing for big prizes, like a Harley-Davidson motorcycle, the use of a Cadillac Escalade for a year or all living expenses paid for a year. er hand, might require more equity than in previous years. Difﬁculty obtaining ﬁnancing is driving transaction rates down. “Slowing transaction pace [is] a result of diminished liquidity in the debt market, questions about the future of hotels and probably some ‘deal hangover’ from the last three years,” said Bob Eaton, executive managing director of PKF Capital. Uncertainty in the hotel realestate market stems from an uncertainty about the economy. “As good as the economy is, that relates to more or less business travelers or tourism,” Eaton said. “Obviously, with the price of gas and the recession in the general economy, it has and will affect demand.” ehanna@questex.com “This year’s winner was a Homewood Suites employee who works in downtown Chicago, and he hadn’t called in sick in eight years,” Habeeb said. “He took the living expenses option because he works two jobs, both seven days a week. “The cost of these programs is bubkes, in the scheme of things,” Habeeb said with a laugh, using the popular sports term that translates to “nothing.” “One person calling off sick for one shift costs more than the incentives,” he said. On the business side, Habeeb said he looks forward to continued growth for FHG, within the limits the company has set for itself. “Focusing on the Midwest allows us to get deeply rooted in the markets where we do business,” he said. “It allows us to manage hands-on, then ﬁnd opportunities ﬁve miles down the road, not ﬁve states away.” The company plans to add ﬁve properties in 2008 and another ﬁve in 2009. As for Habeeb, he’s content to keep the culture and business strong, to continue teaching graduate-level courses and to serve as a guest lecturer at nearby hospitality schools, a side project he enjoys. “I want to do what I can to give back to the team,” he said. “I want to continue to grow our company and make it better. I owe them.” sricca@questex.com Hotelier Continued from page 4 turnover, is rooted in action. “When the rubber meets the road, the companies that walk the walk are the ones that get it done,” he said. “Everybody talks the talk, and they talk about an ethereal mission statement and post it on the wall. We stay engaged with our hotels on a person-to-person basis.” CIRCLE NO. 110 http://HotelMotel.com http://www.HotelMotel.com/digital_edition http://GlobeSt.com http://www.dialprofessional.com http://www.dialprofessional.com

Table of Contents Feed for the Digital Edition of Hotel & Motel Management - May 19, 2008

Hotel & Motel Management - May 12, 2008 Contents Hotelier of the Year Leads Team to Victory Sheraton Builds on International Success Slower, Smaller Transactions in First Quarter Perspective Legal FAQ What Women Want Sales Clinic AAHOA Update Franchise Law Family Business Travel Trends Guest Column HotelWorld Update Trends & Stats Cleaning and Maintenance H&MM's 2008 Franchising Fees Guide FACs Evolve to Meet Brand, Owner Needs The Importance of Branding When Buying Ad/Editorial Index Marketplace Classifieds Checking Out

Hotel & Motel Management - May 19, 2008

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