New Blog – Nov. 7
Welcome to our blog! We’ll break down industry data, offer profitability tips and share expert advice to benefit hotel owners and operators alike.
In our fifth Crown Jewel we’re discussing Net Operating Income (NOI) – a crucial performance indicator as hotel investors determine a property’s value estimation. To ensure that operators and investors are maximizing NOI, it’s important to strategically minimize operating expenses.
First, start with a thorough review of insurance to evaluate coverages and pricing, and also, contest real estate taxes annually. Be sure to note any capital improvements made throughout the year or disruptions to business operations due to renovation that could impact your property values. If your property has suffered damage from recent storms, be sure to take advantange of supplement income offered by filing a business interruption claim.
Next, you’ll want to evaluate all current energy costs, and in deregulated states such as Texas you may even consider changing energy providers for potential savings. Sustainability investments can also be beneficial in increasing NOI. Implementing new energy saving technologies may ultimately boost NOI so this is the time to make improvements where possible to reduce costs.
The final step in increasing NOI involves reviewing owner options for greater return on investment (ROI). Implementing depreciation and cost segregation strategies could reduce the owner’s tax liability. Additionally, structured returns such as rent payments can ensure a certain “return” to ownership on a monthly basis.
Take a look at the video below for more tips on increasing NOI.
Next time we get together, we’ll look at improving Net Asset Value (NAV) our sixth and final Crown Jewel.
Industry News
Planning for the Downturn: Prepare Now or Repair Later
Proactive measures are key to survival and success in the hospitality industry. Getting ahead of what is considered to be the eventual economic downturn was the topic of a recent think tank hosted by Hotel News Now/Castell Project. I was pleased to participate in the panel discussion alongside fellow industry leaders during the International Society of Hospitality Consultants’ 30th annual conference and share a few tips that you can employ to get prepared.
As we seek out ways to get in front of potential declines, we suggest first looking at full-time employee ratios. Labor costs are a significant part of the profitability story and you have to start there to make sure that you have the right team, across the board, in place. Additionally, cross-training staff makes them more adaptable to whatever situation arises in the future which will be helpful in those lean times if we do have to re-balance staffing.
It’s also important to look at current year and previous year bookings, as well as bookings that were passed up due to high demand. A hotel can sell out -command premium rates – but the business that gets displaced is often your base business. We suggest actively reaching out to this misplaced business, providing actual need dates and offering a discounted rate for those periods. Also, be mindful to develop strategic partnerships. Reach out to those people now to build that business so that when you find yourself in need, you are able to leverage these relationships.
Other important points to note:
- Communications is key. Engage the staff on the front end so they understand the purpose any downsizing or changes to staffing.
- Diversify product offerings, packages and amenities. Doing this now can go a long way in softening the blow when a downturn strikes.
- Be diligent in ensuring that internal controls are properly overseen and efficiencies are consistently sought after. Finding the right balance now could help avoid cuts during a recession that could potentially affect guest service.
For more tips from the industry leaders panel discussion, click here to read the Hotel News Now article.
US Hotel Data Update
After data dips on the heels of multiple natural disasters, the U.S. hotel industry has reported positive results in the three key performance metrics in recent weeks. In comparison with the week of 22-28 October 2017, the industry recorded the following:
- Occupancy: +1.2% to 70.7%
- Average daily rate (ADR):+4.0% to US$134.39
- Revenue per available room (RevPAR): +5.2% to US$95.02
Overall, 18 of the top 25 markets reported an increase in RevPAR.
*Data source: STR
Why Hire Crown Hospitality Consulting?
We leverage years of diverse industry knowledge and attention to detail to ensure you are able to focus on your core business. When you engage Crown Hospitality, it’s our committment to our clients to…
- Protect your time
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- Maximize return on investment
- Increase hotel profitability
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