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New Ways to Measure Hotel Success

By Jeff Higley, Editorial Director, hotelnewsnow.com

How about trying NetPAR and YTR as the hotel industry measurements du jour?
If you’re not familiar with those terms, don’t be alarmed—they are not in the everyday repertoire of hoteliers just yet. But if industry veterans Steve Van and Tom Corcoran had their way, they most certainly would be.

Van and Corcoran made their pitches for using “net rate per available room” and “years to recovery” to measure the health of the industry while speaking during the 10th annual Fishing for Solutions conference at the Gaylord Texan Hotel & Convention Center.

Industry overview
Neither Corcoran nor Van are eager to call the current climate in the industry a recovery.

“There probably has not been a reset, but the consumer today is much more value-conscious in all parts of their life,” Corcoran said. “Luxury will come back, people will spend money, but the hotels are going to have to give a better perceived value to our guests.”

Tom Corcoran of FelCor Lodging Trust said hotels must give a better perceived value to guests. (Credit:Chris Bryan/Prism Hotels & Resorts) Van said there is a lull in the storm that he called a “mini bubble.”
“In certain markets, it’s time to sell because there is overpaying right now,” he said, adding a lot of the overpaying is coming from public companies with  fresh money or investment funds needing a certain investment level by the end of the year.

Van’s position for the past three or more years is that the tens of billions of dollars in debt maturities coming in 2011 and 2012 are going to cause problems for the hotel industry.

“(2011) and (2012) will be very active,” he said. “I’ve never seen servicers and lenders busier in all my life. We think defaults are going to go up to 30%—we’re already at 19(%) or 20%.”

Invest in sales and marketing
With that in mind, Van said there’s one thing he would encourage all hoteliers to do to drive as much money to the top line as possible. “I would tell my operator to spend money on sales and marketing,” he said. “Double the budget for sales and marketing and increase the revenue.”

Driving rate is far more important that putting heads in beds at lower rates, he said.

“Occupancy improvement means there are just more rooms to clean,” he said. “ADR improvement drops to the bottom line.”

Van then provided five recommendations to lenders and special servicers:

Increase hotel revenue through sales and marketing.
Protect the franchise. That is the most valuable thing a hotel has, especially when it’s a well-respected brand. If a property-improvement plan is needed, get it done.
Control cash.
Staff up for 2011 and 2012. There are a lot of good, talented people out there looking for work.
Sell in some markets. “The most difficult thing is the secondary and tertiary markets,” he said. “One thing we’ve done this year that we’ve never done is recommended that a few hotels should close. If you put in money now, it will never, ever be recovered.”

To read the entire article, click here.

Michael Del Gigante is president and executive creative director of MDG Advertising in Boca Raton, Florida. MDG Advertising is a full-service South Florida advertising agency, with offices in Florida and New York, that specializes in developing targeted franchise marketing solutions, exceptional online executions, and solid branding and media buying strategies that give franchises a real competitive advantage. For more information, call 561-338-7797, email MDG or log on to www.mdgadvertising.com.

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