Second City Smash
The good news, at least according to Geller, is the brand companies are up to the task. While for many years Geller was a stern critic of the way brand companies managed his properties, he sung their praises during his remarks, saying, “They finally get it. They've done a tremendous job in recent years.”
FRANCHISEES VS. FRANCHISORS
Sometimes, it's hard to tell franchisors and franchisees are actually business partners. Two separate general sessions revealed how different the groups are in their outlooks on the hotel industry and its key issues. At an opening session on the first day of the three-day event, a group of five brand company CEOs focused on global issues affecting the business. Topics ranged from immigration policy and green hotelkeeping to development and marketing in a downturn.
The next day, a discussion among four chiefs of franchisee firms centered on their bread-and-butter issues: franchise fees, impact, amenity creep, data ownership and more. There was very little overlap in topics between the two sessions.
While the franchisees took the opportunity to complain about some franchising practices, they ended the session in general agreement that a brand is a great “insurance policy” for a hotel owner. As Fred Cerrone, president and CEO of Hotel Equities, said, “Some owners expect too much from a brand. You've got to constantly market your property, but it's a great way to start your day knowing that the brand has already filled up 50 percent of your hotel.”
Mike Marshall of Marshall Management was particularly tough on his franchisor partners, saying, “Some things they do are difficult to swallow and they're not always accountable. Some brands will sell you something and then not follow through.”
Much of the focus of the brand president panel was the current state of hotel development and financing. “There has been a definite slowdown in the planning stages of the development cycle,” noted NYLO Hotels CEO John Russell, “and we don't know how long it will last. I'm hoping it's only 12 to 18 months.”
The consensus among the brand CEOs — and most MLIS speakers — was that financing for development and acquisitions is still available but at more stringent terms: loan-to-value ratios not exceeding 65 percent and lenders demanding personal recourse by borrowers. As Wyndham Hotels' Peter Strebel pointed out, “Mixed-use development is one solution to financing as pre-sales of a residential component can be used to finance the hotel portion of the project. Obviously, mixed-use doesn't make sense in every situation, however.”
A BRIGHT SPOT
While some of the news at MLIS was grim, one bright spot was a panel discussion on timesharing, a segment of the hospitality industry that's enjoyed nearly non-stop growth for the past three decades. As several speakers pointed out, while the vacation ownership business may not be recession-proof, it has proven to be very resilient, even during difficult economic times.
And, as session moderator Howard Nusbaum pointed out, timesharing is still a business with room for small and medium-sized independent developers. Nusbaum, who is president of the American Resort Development Association, noted that while the big national lodging chains account for about a third of the industry's $11 billion in revenues, many independents continue to develop product. However, it's a tougher process than it once was.
“The ability of an undercapitalized developer to do a project today is virtually nil,” said Nusbaum. “The business is very capital intensive, and you need deep pockets to compete.”
The second annual Midwest Lodging Investors Summit is scheduled for July 19-21 at the Chicago Marriott. Visit www.midwestlodginginvestors.com often for conference updates.
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