February 16, 2010
- When planning topics for columns, I assess issues and concerns that face
hotel owners, managers and professionals. In 2009, I considered
a series of columns that would include specific insights from professionals
who serve the industry in a variety of roles. For several reasons,
I decided to defer the new series, to be known as my "HOW TO" columns until
2010. While the economy is still lagging behind where we hope it
to be, I am confident that delivering optimistic and realistic messages
can have a positive impact on the industry’s forward direction.
The current economic downturn is the fourth I have seen in my business
1. In the 1970s, high rates of inflation and gasoline shortages
dramatically affected the hospitality industry. Many large convention
hotels literally closed entire floors for weeks at a time.
2. From the mid -1980s to the early 1990s, a recession again hit the
industry hard. Substantially caused by the savings and loan crisis from
real estate loans that did not have adequate equity, many major brands
were forced into bankruptcy, mergers or partnerships. There were staggering
statistics from the American Hotel & Motel Association (earlier name
of AH&LA) about the number of hotels that were unable to meet debt
service in the early 1990s, yet the industry adjusted and recovered.
3. The events of 9.11.2001 changed the way the US and global economies
interacted. We recall the eerie silence of no US air travel for almost
a week. Business was no longer conducted “as usual” and attentiveness
to security became intensified.
4. The current financial slump differs from others in its’ global reach
and the connectivity of world credit impacted by unsound lending practices
from many large institutions. The intervention of many governments in an
attempt to bolster certain segments of industry has met with mixed responses.
In the launch of my "HOW TO" columns, I begin with a series of HOSPITALITY
CONVERSATIONS. As every hotel, inn, conference center and lodging property
will eventually change hands, I selected a topic that is of universal
interest to all hotel owners: HOW TO SELL YOUR HOTEL in a sluggish economy.
I reached out to two qualified professionals in nationally known companies,
Steven Marx of Hotel Source, Inc. and Eric Belfrage of CB Richard Ellis
Hotels. I asked each of them these two fundamental questions:
In a sluggish economy, why should hotel owners incur the cost of
a broker? Why not save the commission and sell the hotel privately
within the owner’s network of contacts?
Steven J. Marx, Hotel Source, Inc.
In a sluggish economy, engaging a competent hotel broker is even more
important than in a non-sluggish economy. A few reasons of why to hire
Eric E. Belfrage
Hotel brokers are more likely to achieve a higher price than an owner selling
on their own.
Hotel brokers are able to expose the opportunity to more of the most likely
buyers therefore bettering the owner's negotiating position and increasing
the chances of creating a bidding war. Hotel owners tend to have a "handful"
of potential buyers, and ultimately end up exposing the opportunity to
only a few buyers.
Hotel brokers have a significant incentive to achieve the highest sale
price; they earn more money the higher the selling price.
Hotel brokers have a better understanding of market values and are more
likely to market the property at the most appropriate value.
Hotel brokers have a multi-step marketing process that includes actual
marketing materials. Marketing materials are important in the initial step
of filtering out whether or not the opportunity fits certain buyers' acquisition
Transaction management. In a sluggish economy, many hotel buyers are experienced
hoteliers who have significant transaction experience that include many
strategies for extended due diligence periods, price reductions, etc. Hotel
brokers recognize and are able to counter these attempts.
Confidentiality from staff.
, CB Richard Ellis Hotels
This is exactly when superior exposure is essential to a successful
What are the most critical factors in successfully deciding which
broker to use?
We typically expose a listing to literally thousands of prospective
buyers. We also sell hotels every day.
Owners are excellent operators but are not daily involved in the
We can help buyers find financing.
Often, through the competitive bid process, our efforts generate
Eric E. Belfrage
We find the following to be essential:
Steven J. Marx
Do you relate well with them?
Can they develop a good pitch strategy for the asset?
Do they have the national, regional, and state platform to expose
the asset to the maximum group?
Are they knowledgeable?
Can they educate buyers?
The most critical factors in deciding which broker to use include answering
Does the Broker understand what drives the value of your hotel? Repositionings,
operational turnarounds and stabilized properties all appeal to different
buyer groups, but can be very similar in size, location and franchise.
Actual valuation; Improperly valued hotels will result in a much lower
Marketing strategy; does the broker have a step-by-step process that exposes
the property to the most likely buyers?
How does the broker determine who are the most likely buyers?
Means for reaching the most likely buyers? How does your broker distribute
Marx, Founder and President of of Hotel Source, Inc, has over past twenty-five
years successfully completing a wide variety of hotel dispositions and
advisory assignments during many economic cycles. Steve gained operations
experience with Hyatt, Four Seasons, Fairmont, Sheraton, Holiday Inn and
independent hotels. During his employment with Fairmont, Steve assisted
in the opening of the 700-room Fairmont Hotel Chicago and implemented policies
and procedures required to achieve five-star standards. In addition, Steve
has gained experience working at several Chicago commercial real estate
firms. He is a member of the International Society of Hospitality Consultants
(ISHC), International Council of Shopping Centers (ICSC) and Turnaround
Management Association (TMA). Prior to forming Hotel Source, Inc., he worked
for the Chicago-based hospitality brokerage firm Hotel Partners, where
he was consistently a top sales producer. [email protected]
E. Belfrage, CRE, ISHC, MAI is Vice President Investment
Properties CBRE | Hotels in the CB Richard Ellis' Columbus
office and serves as a member of the Investment Services Hotel and Leisure
Group. Eric's professional knowledge includes almost 30 years of
experience in the hospitality industry and is very well known and respected
for his vast knowledge of hotel properties throughout Ohio. Eric
holds the Counselor of Real Estate (CRE) designation, as well as being
a member of the International Society of Hospitality Consultants (ISHC)
and the Appraisal Institute (MAI Designation). Since joining CB Richard
Ellis Investment Properties | CBRE Hotels, Mr. Belfrage has been involved
in over $70 million of hotel transaction activity within the Midwest and
south regions. Mr. Belfrage has marketed several brands including:
Intercontinental, Hilton, Marriott, Choice, Carlson, Best Western and several
independent brands. [email protected]
“The larger the island of knowledge, the longer the shoreline
Ralph W. Sockman (1899-1970)
Author, Speaker, Minister
TO SUCCESS is the umbrella title for my new 2010 programs, hospitality
services and columns. This year’s writings will focus on a wide variety
of topics for hotel owners, managers and professionals including both my
"HOW TO" articles, and a number of HOSPITALITY CONVERSATIONS.
Feel free to share an idea for a column at [email protected]
anytime or contact me regarding consulting, customized workshops, speaking
And remember – we all need a regular dose of common sense.
Autographed copies of LESSONS FROM THE FIELD – a COMMON SENSE APPROACH
TO EFFECTIVE HOTEL SALES are available from THE ROOMS CHRONICLE www.roomschronicle.com,
www.smartbizzonline.com and other industry sources.
All rights reserved by John Hogan and this column may be included in
an upcoming book on hotel management. The opinions expressed
in this article are those of the author and do not necessarily reflect
the views of this publication
John Hogan is a successful hospitality executive, educator, author and
consultant and is a frequent keynote speaker and seminar leader at many
hospitality industry events. http://www.linkedin.com/in/drjohnhoganchache