Hotel & Motel Management - December 10, 2007 - (Page 22)

22 Special Report H&MM December 10, 2007 | HotelMotel.com www.HotelMotel.com/digital_edition of 5.8 percent in 2007, while ADR will be more than $103—the ﬁrst time it has surpassed the C-note mark. With occupancy checking in at about 62 percent, it’s no wonder hotel owners are enjoying a proﬁtable year—and they should expect another one in 2008. Capital and ﬁnancing 3 By H&MM STAFF O ne year ago, as 2006 came to a close, we characterized it as “a year gone wild” for the lodging industry. This year, some of the same issues that topped our trends list then, such as labor, brand growth and transactions, made the list again. Mergers and acquisitions have made headlines consistently in 2007. Industry forecasters have said all year that the good times are still rolling, but an expected downturn is on the horizon. In a climate like that, it makes sense that 2007 has been peppered with big deals, ﬁnancing issues and concern over how to staff the hotels going in the ground. As new brands were born and others resurrected, hotel company leadership changed, too. This year, we give a nod for the ﬁrst time to the green trend—one we predict is here to stay. Capital was ﬂowing into the industry in the early part of 2007, and company leaders debated the merits of public versus private ownership. A seller’s market characterized this time period, with lots of M&A activity, particularly involving real-estate investment trusts. Capital availability, rising construction costs and supply outpacing demand became concerns midyear, and when The Blackstone Group announced it would acquire Hilton Hotels Corp., talk again turned to the availability of private equity. Late 2007 focused on speculation about the effects of the credit crunch. PricewaterhouseCoopers reported credit market conditions most likely will delay lending activity into 2008 and 2009, so industry insiders continue to take a wait-and-see approach. days after The Blackstone Group’s completed acquisition of Hilton Hotels Corp., Host Hotels & Resorts President and c.e.o. Chris Nassetta was named to the same position at Hilton. Starwood Hotels & Resorts Worldwide was the only company to appoint an outsider in c.e.o. Frits van Paasschen, former president and c.e.o. of Coors Brewing Co. Other leadership changes included Ken Greene as president, Days Inn; Mark Hoplamazian as president and c.e.o., Global Hyatt Corp.; Olivier Poirot to c.e.o., Motel 6/Studio 6 and Accor North America; and Jim Amorosia to president and c.o.o., Motel 6/Studio 6. Brand boom 6 Labor pains Deal or no deal 4 1 There was plenty of activity on the acquisition front in 2007, including the largest lodging-speciﬁc transaction in history. When privately held Blackstone Group closed on its $26-billion-plus acquisition of publicly traded Hilton Hotels Corp. in October, it became the poster child for a year that will be remembered as one in which private equity emerged as a dominant force. Other high-proﬁle acquisitions included: The Lightstone Group’s $8billion acquisition of Extended Stay Hotels; Morgan Stanley Real Estate’s $6.6-billion buy of CNL Hotels & Resorts and subsequent sale of 51 of the assets for $2.4 billion to Ashford Hospitality Trust; the $3.8billion acquisition of Four Seasons Hotels & Resorts by afﬁliates of Cascade Investment LLC, Kingdom Hotels International and Isadore Sharp, Four Seasons’ founder, chairman and c.e.o; JER Partners’ $2-billion deal for Highland Hospitality Corp.; and Apollo Investment’s $800-million buyout of Innkeepers USA Trust. There were a number of other deals, and companies such as Eagle Hospitality Trust and Winston Hotels changed ownership. More of the same is expected as 2008 unfolds, but for the time being, 2007 is one of the most active transaction years on record. By the numbers 2 Average daily rates, revenue per available room, occupancy rates and the supply pipeline each continued their strong upward movement in 2007. With the industry’s pretax proﬁts hovering around $27 billion—was it really only 15 years ago that the lodging industry as a whole lost nearly $6 billion?—the performance numbers speak for themselves. Lodging Econometrics estimates that 1,042 hotels will have opened in 2007, and 1,200 more will debut in ’08. Smith Travel Research estimates RevPAR growth The International Society of Hospitality Consultants ranked the labor and skills shortage as the No. 1 issue facing the hotel industry in 2007 at the group’s annual conference. The problem of attracting and retaining qualiﬁed workers, once an issue in only a few markets, is becoming a global challenge, according to the group. Demographics, wage levels, failure to adequately address worker satisfaction and a reputation for long hours and low pay were cited as contributing factors. To combat this reality, some companies implemented training programs to increase employees’ happiness and their likelihood of staying with the company. Other companies offer incentives, such as free trips, the use of a car for a year and monetary bonuses to help attract and retain quality workers. Mentoring programs are another strategy that some companies have adopted. This year was all about brand growth, and hotel companies sought to diversify by acquiring brands or launching new ones. The GuestHouse, Budgetel and Adam’s Mark brands all went to new owners, while Settle Inn reintroduced the dormant Shoney’s Inn brand. Companies took advantage of the lodging cycle success by refreshing tired brands and boosting global expansion plans. Meanwhile, launches such as Starwood Hotels & Resorts Worldwide’s aloft broke ground and Choice Hotels International’s Cambria Suites opened doors. New offerings from Global Hyatt, The RitzCarlton Hotel Co. and others went after the luxury segment, and partnerships with Nickelodeon and Ian Schrager supported two new brand launches from Marriott International. Brand proliferation continues to be a hot-button topic going into 2008. Green: Here to stay? 7 Changing places 5 In a year ripe with wheeling and dealing, new leaders, mostly industry insiders, took the reins. Just There isn’t an executive at any level in the hospitality industry who doesn’t have the word “green” written at the top of his or her priority list. Becoming more eco-conscious—at the guest level, the operations level and even companywide—was a major topic of discussion at nearly all conferences during 2007. “We’ve got to ﬁgure this out and ﬁnd ways of living on this planet differently,” said Chris Smith, c.o.o, U.S. Green Building Council, during November’s International Hotel/Motel & Restaurant Show in New York. Although there isn’t a clear deﬁnition of what a “green” hotel is and exactly how much it will cost an owner, many organizations and property case studies can offer tips on how to save water and energy and reduce carbon emissions. http://www.hotelmotel.com http://www.hotelmotel.com/digital_edition

Table of Contents Feed for the Digital Edition of Hotel & Motel Management - December 10, 2007

Table of Contents News Wildfires test hotels' emergency plans LIIC roundtable: Capital available for hotel projects Departments Perspective Letters to the Editor At Your Risk Family Business Matters Sales Clinic On Finance Satisfaction Trends HotelWorld Update Events Trends & Stats Special Report H&MM's "year in review" tackles the top seven in 2007 Transactions Consumer Insight Travelers rank free breakfast high on must-have items Hot Products IH/M&RS Editors' Choice Award winners Construction Spending up, costs steady in construction Design Window treatments Ad/Editorial Index Marketplace Classifieds Checking Out

Hotel & Motel Management - December 10, 2007

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.