During a recent webinar on the impacts of COVID-19 on European hotels, STR Managing Director Robin Rossmann drew on his experience at Deloitte and shared with viewers an important practical application of benchmarking.

No hotel has escaped the COVID-19 pandemic unscathed, which may make performance benchmarking appear less important. Rossmann warned against such complacency, reminding listeners, “that day will come” when lenders and lessors undertake restructuring analyses. When that happens, benchmarking will be more important than ever.

Downturns cause financial distress

Downturns of any nature can cause hotels or hotel portfolios financial distress. Rossmann explained that during the Great Financial Crisis, hotel lenders and landlords would prepare restructuring analyses or evaluations in order to determine optimal outcomes for hotels that were unable to meet their financial obligations.

Rossmann described it as “pretty easy” for landlords or lenders to make restructuring decisions when the choice came down to a well-benchmarked hotel that was able to use data to explain why it underperformed and a hotel that couldn’t do that or wasn’t benchmarking at all. A look into historical data confirms his assertion.

Benchmarking can help hotels restructure debt

STR analysts studied hotel closures in the United States and the United Kingdom between 2008 and 2013. Closures were divided into two categories: hotels that participated in STR’s hotel benchmarking program, and hotels that did not. In both countries, the data revealed a close relationship between closed hotels and performance benchmarking.