One of the most unwilling and therefore unhappy hotel owners is a bank or credit company which has a hotel in its real estate owned (REO) portfolio, while it tries to work its way out of the problem loan. 

Lenders in this situation have two primary goals. The lender's first goal is to stop loosing money. The easiest way to accomplish this goal is to quit putting money into the hotel. Their second goal is to put the hotel on the market and sell it as quickly as possible. These are not unreasonable goals. Whoever the lender may hire to act on its behalf as management will only keep its assignment and get additional assignments if these goals are understood.

The issue of putting additional money into the hotel may be a moot point if the business was not covering capital costs but was generating sufficient cash to pay real estate taxes and insurance . If there is insufficient business volume to cover normal operating expenses several issues need to be addressed. One is to reduce expenses from normal to painfully low without having a negative impact on income. Any idea which will produce additional income must be considered. Finally, the lender (owner in this case) must be asked for additional funds by means of a cash flow forecast and business plan. This effort assumes that the lender realizes a hotel sells quicker and for a higher price when it is operating as opposed to closed.

Reducing expenses to minimal levels takes a great deal of care. All business owners aspire to this goal, however, none intentionally try to go to the very edge and most try to keep a long term outlook. 

For a lender there is no long term, only the time from when the hotel was acquired until it is sold. A hotel will sell more quickly and for a higher price if its physical appearance is good and sales are showing an upward trend. A sophisticated lender will work with management to find a balance regarding expenses.

It takes money to make money is a cliche which has merit. Coming up with ideas to increase sales in a hotel is not difficult. The difficulty lies in singling out a number of very cost effective ideas which the market will react to quickly. Lowering room rates usually does not work. Insuring fundamentals such as room cleanliness, employee training and attitudes, maintenance and the quality of guest supplies are competitive will go a long way towards maintaining the current customer base.

Once these things are done, consideration should be given to actually raising room rates and developing a more sophisticated pricing strategy. Making quality outside sales calls always results in improved sales. Nothing produces better results than going out, identifying potential sources of business, meeting their needs and subsequently asking for the business. Giving up a few dollars of income to increase the price value perception is usually worthwhile because often these hotels already suffer from a poor image. Free local phone calls appeals to commercial guests. Free breakfast appeals to all and may contribute to lowering losses if the hotel has a restaurant which is loosing money while trying to serve a full breakfast menu.

Helping the lender and their real estate agents sell the property is a key function of independent management. The role of hotel management in this case is to insure that the hotel shows well and is an extension of the subjects previously discussed. Working with the hotel's employees during this period to help them understand the situation and its potential impact on them ,usually very little, is critical. Another area where management can help is in pricing the property for sale and in developing a marketing strategy. If competent management is retained they should have an understanding of hotel values under a variety of circumstances. Additionally, they should know how to explain the hotel's potential better than the lender or the Realtor and they may be the most credible sales representative available.

Working together, assuming there are no lengthy legal delays, the lender and the management company can get the hotel off the lenders REO portfolio in a reasonable amount of time.