News for the Hospitality Executive |
Hotel Lawyer on Repositioning: The New York Times reports 39 percent increase in reflagging |
For the most
recent update on this topic, click here By Jim Butler and the Global Hospitality Group® Hotel Lawyers | Authors of www.HotelLawBlog.com January 3, 2013 Hotel Lawyer on the
spike in reflagging hotels. It's often good news for us when
the
business section of a major newspaper explains what is going on in the
hotel
sector. (And nice, too, when the paper includes a quote by yours truly.) The topic? How and why hotel owners reflag
properties. The
reason for the story: the Great Recession has changed just about
everything. In the New York
Times article, Dressing Up for Success, reporter Amy Zipkin
says:
"According to statistics from Smith Travel Research, a research firm in
Henderson, Tenn., nearly 2,500 hotels were reflagged in 2011. While
that
represents just a 5 percent sliver of all hotel properties in the
United
States, it was still a 39 percent increase from 2010." Brand standards
have to mean something. The reasons that hotel owners reposition
hotel properties
with a new flag are not new to us. Repositioning a hotel property is
generally
forced by the market: guest preferences and travel patterns change,
owners'
expectations are not met, ownership changes hands, cash flow decreases
or
mortgages come due, brand standards change. Hotels are reflagged when
it can
help solve a problem or take advantage of an opportunity (or both).
Either way,
the Great Recession forced major changes on the hotel industry, and the
market
is irrevocably different. Now, after a long period of restraint, we
see brands
dropping hotels from their systems for failure to meet the brand
standards. In
most cases, it is not a failure to meet tougher new standards, but
rather a
failure to meet the old standards. During the depths of the recession,
most
brands looked the other way on brand standard enforcement, but their
patience
has run out. And ultimately the value of the flag and guests the brand
brings
depend upon meeting guests' expectations. Owners have
expectations of operators too. On the flip side, hotel owners seek new
management where
better deals are available. They want hotel management agreements that
provide
for more flexibility, efficiency and accountability. Difficult as this
is for
brands, it is necessary for hotel owners to set higher standards, as
well, due
mostly to the post-recession realities for raising capital. I was quoted in the New York Times article
as saying,
"A property can be very different once a hotel changes flags." This
statement is based on decades of experience in assisting hotel owners
in
changing flags. Sometimes the change comes through the careful exercise
of
contractual rights. Sometimes it results from tough negotiations for a
management agreement that is fair to the owner. Sometimes the change is
forced
through litigation or takeover. Why the spike in
hotel repositionings now? Although more understanding for a while,
guests'
expectations for service and amenities have recovered to pre-recession
levels.
Brands' expectations for compliance with their standards are back. And
owners'
expectations for profitability are stronger than ever. As properties change hands and new capital
is deployed,
repositioning is often the right step for everyone. We hope that all our hotel industry
friends -- owners,
lenders, brands and advisors -- have their expectations met in 2013! Happy New Year from all of us at JMBM's
Global Hospitality
Group®. To read the New York Times article, click
here. If you need to reflag your hotel, you would be wise to acquaint yourself with the many issues involved, and get yourself the very best advice possible, from advisors and lawyers who know the ropes. To start, get a free copy of the 2nd edition of the HMA Handbook written by Jim Butler and Robert Braun. To download a copy, go to www.hotellawyer.com, select the "RESOURCE CENTER" tab, click on the "HMA Handbook", and then the download link. __________________________ This is Jim Butler,
author of www.HotelLawBlog.com
and hotel lawyer,
signing off. We've done more than $60 billion of hotel transactions and
have
developed innovative solutions to unlock value from hotels. Who's your
hotel
lawyer?
__________________________ Our Perspective. We represent hotel lenders, owners and investors. We have helped our clients find business and legal solutions for more than $60 billion of hotel transactions, involving more than 1,300 properties all over the world. For more information, please contact Jim Butler at [email protected] or +1 (310) 201-3526. Jim Butler is a founding partner of JMBM, and Chairman of its Global Hospitality Group® and Chinese Investment Group™. Jim is one of the top hospitality attorneys in the world. GOOGLE "hotel lawyer" and you will see why. Jim and his team are more than "just" great hotel lawyers. They are also hospitality consultants and business advisors. They are deal makers. They can help find the right operator or capital provider. They know who to call and how to reach them. |
Contact: [email protected] 310.201.3526 |
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