The Hotel Times - December 2008 - (Page 18)

IN CLOSING » BY RUSSELL SAVRANN Three-point plan to thrive in 2009 Having your cards in order now will help later s we enter the ﬁrst quarter of 2009, everyone is anxiously anticipating the recovery of the credit markets. I suggest a three-step, common sense approach to surviving and prospering this year. First, review your business plan; second, protect your assets; and third, look for opportunities in the new distressed asset market. Review your business plan. Take a fresh look at your short- and long-term objectives. Evaluate what you want your company to look like when the credit crisis is over. Ask whether your current business model is viable in this market. Are you holding the best assets to achieve your business assumptions? Do you have sufﬁcient cash? What obligations are at risk? Will your lenders renew without recourse or additional equity? Once you know what you want, identify your strengths and weaknesses. Identify the methods and strategies that will permit you to take special advantage of the opportunities that will appear throughout the year. Protect your assets. If you have a mini-perm or term loan coming due, see if the lender will extend its terms or reﬁnance. Be sure you have a relationship with an alternative lender that will reﬁnance you. If you have a line of credit, make sure you can cover your expenses if the lender places a credit hold. Go on the offensive. If you are positioned to protect your assets, then go on the offensive. Seek ﬁnancing now and research unconventional facilities. We can expect some prize assets to go into receivership in 2009. Consider managing to own. Leverage your balance sheet (if you are fortunate enough to have assets) to acquire projects that have stalled in markets that have high barriers to entry, A or buy debt (even your own) at a discount. Opportunities will come from owners who have mini-perm or term loans coming due this year. If the recession continues to depress values and revenue, highly leveraged loans may go into default. Conventional underwriting for reﬁnancing will be expensive, new loan-tovalue ratios may require additional capital and there likely will be recourse. These conditions will force many owners who do not have access to capital, or cannot provide recourse, to divest at a discount. When good values start to appear, those who are prepared will have a competitive advantage with their ability to rapidly deploy capital and access debt. Look at creative means for raising capital and debt. For capital, look for private Opportunities will come from owners who have mini-perm or term loans coming due this year. wealth, foundations and pension funds that have not traditionally invested in hotels or divest non-core assets. For debt, consider unconventional products such as life settlements, which are popular in Europe and gaining ground in the U.S. With a life settlement, the loan is fully secured by life insurance proceeds and not by the asset itself. As we face the uncertainty of 2009, we expect that for some, the recession will be a supreme test; for others, there will be great opportunities. We should all be cautiously optimistic, prepare as best as circumstances allow and hope money starts to ﬂow again. hmm@questex.com www.TheHotelTimes.com Russell Savrann is a member of the Hospitality Industry Group of Graham and Dunn PC. He works with hotel, restaurant and national association clients on strategic planning, transactions, franchising and operational matters, including mergers and acquisitions, joint ventures, corporate organization, management agreements, franchise and sales. He can be reached at rsavrann@grahamdunn.com. 18 The Hotel Times December 2008 http://www.TheHotelTimes.com

Table of Contents Feed for the Digital Edition of The Hotel Times - December 2008

The Hotel Times - December 2008 Business Outlook Contents In the News Where is the Bottom? Capital Outlook Timeshare Report In Closing

The Hotel Times - December 2008

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.