HOSPITALITY CONSULTING - What does it involve? What value can it add?
2 KINDS OF CONSULTANT:
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•Dedicated hospitality consulting firms like HVS, TRI and Viability compete with specialist divisions of accounting firms like Ernst & Young, Deloitte, KPMG
•Services include hotel market & financial feasibility studies, market studies, valuations, operator selection and specialist strategic/operational advice
•Single owners generally have owner’s representatives
•Development companies and groups of companies generally have development teams including experienced development and asset managers
Owner’s rep or development team will:
•Identify and assess suitable hotel acquisitions, sites for development or buildings for conversion to hospitality use
•Undertake due diligence
•Supervise construction team to ensure compliance with hotel operator technical services (design/fit-out) standards and operational requirements
•Oversee and monitor investment and feasibility processes
•Initiate asset management systems for investment life cycle.
•Hotel asset management is the service of assisting hotel owners in realizing their investment goals. Asset managers act as an owner’s agent or representative to ensure that a hotel is acquired for a reasonable price; is then operated properly during the period of ownership; and ultimately disposed of at an appropriate time and price.”
(Stephen Rushmore, Who Needs an Asset Manager?, Lodging Hospitality magazine, Vol 50, No 1, 1994).
ASSET MANAGEMENT PROCESS
SUPERVISION OF OPERATIONS & THE PHYSICAL ASSET (1)
Monitor ongoing financial performance:
•Review actual performance compared to budget and prior years
•Compare performance to comparable properties
Monitor the competitive market:
•Track occupancy and average rate trends
•Track new properties being considered for development
•Monitor demand generators for significant increases/decreases
SUPERVISION OF OPERATIONS & THE PHYSICAL ASSET (2)
Monitor the asset:
•Evaluate physical condition and anticipated capital requirements
•Evaluate major systems (HVAC, phone, PMS, etc) for appropriateness and competitiveness
•Ensure legal compliance (health codes, life safety, access for disabled)
SUPERVISION OF OPERATIONS & THE PHYSICAL ASSET (3)
Support and review the budgeting process:
•Benchmark operations against comparable properties
•Communicate ownership expectations to property management
•Review proposed budgets, marketing plans and operating plans for compliance with ownership’s expectations
•Facilitate approval of budgets, marketing plans, and operating plans by ownership.
SUPERVISION OF OPERATIONS & THE PHYSICAL ASSET (4)
Advise ownership as to management issues
•Evaluate operator strengths and weaknesses
•Review industry trends that may affect the property
MANAGING THE INVESTMENT (1)
Advise ownership as to optimum investment strategies
•Perform annual strategic review, comparing properties’ expected performance to ownership’s investment objectives
•Determine market value of properties and project future increments in market value from holding, renovating, expansion, or other strategic alternatives.
MANAGING THE INVESTMENT (2)
Monitor the investment community
•Track sales prices for comparable properties
•Track capitalization rates for hotel purchases
•Remain apprised of financing terms available
Select and oversee operators, franchise affiliations, and consultants
•Determine appropriate branding for properties
•Determine appropriate management
•Retain appraisers, environmental consultants, engineering and other consultants as appropriate.
MANAGING THE INVESTMENT (3)
Negotiate and administer contracts
•Ensure management/franchise services are provided and billed properly
•Ensure management contract compliance
•Negotiate outside contracts (vendors, retail leases, service contracts) for optimal returns to ownership.
MANAGING THE INVESTMENT (4)
Approve/monitor capital expenditure
•Create long-term capital expenditure plan
•Review annual budget proposals for consistency with capital plan
•Evaluate impact on profitability/value from discretionary expenditures
•Approve capital budgets for presentation to ownership.
•Review spending requests for compliance with capital budget .