Forces Shaping the Hotel Business

1
Forces Shaping the Hotel Business

• Chapter Eleven

2
Sections in a Typical Feasibility Study

• Market area characteristics
• Site/area evaluation
• Competition analysis
• Demand analysis
• Proposed facilities / services
• Financial estimates

3
Hotel Financing

• Hard costs
• Soft costs
• Permanent financing loans (take-out)
• Construction financing loans

4
Debt Financing

• Debt Financing from Banks, Insurance Companies,
  and Conduit Lenders
• Mortgages
• Bonds
• Debentures
• Commercial mortgage-backed securities
• Mezzanine/gap financing

5
Equity Financing

• Real estate investment trusts (REITs)
• Initial public offerings (IPOs)
• Secondary stock offerings

6
Financial Factors Influencing Hotel Investment

• Interest rates
• Inflation
• Leverage
• Taxes
• Exchange rates

7
Six Forms of Hotel Ownership / Operation

• Independently owned and operated
• Independently owned, leased to an operator
• Owned by an entity or group, operated by a hotel
  management company
• Owned and operated by a chain
• Owned by an independent investor or group,
  operated by a chain
• Owned by an individual or group, operated as a
  franchise of a chain

8
Two Kinds of Management Companies

• Chain organizations
• Serve as management companies for hotels under
  their franchises
• Independent management companies
• Able to offer more control over daily operations
  to owners of smaller properties and more
  flexibility in contract terms

9
Measuring Rooms Division Performance

• Average Daily Rate (ADR)
• ADR Rooms Revenue Rooms Occupied
• Occupancy Percentage (OP)
• OP Rooms OccupiedRooms Available x100
• Revenue Per Available Room (REVPAR)
• REVPAR OP x ADR