12 April 2021 – 9:00-18:00*
Breakfast – Wiener Frühstück
The business case provides the reasoning and justification for a hotel project. It includes the business context, problem description, project description, possible alternative solutions, the budget and timetable. The business case is developed at the start of project conceptualization and ends with the plans and processes needed to take the project forward.
The purpose of the business case is to capture the reasoning behind the project, to describe its alignment with the organization's strategic objectives, to provide a justification for the investment in time and effort, and to set out the budgetary needs and constraints. It provides decision-makers with the information required for their approval of the project.
Feasibility studies are used to verify the business case and test the conceptual planning of development projects in order to assess their economic and financial viability prior to their realization. They are adapted to the level of detail required and needs of their users and conducted for different purposes during the different stages of a hotel project.
Feasibility studies are performed for hotel developers, operators, lenders and investors and can cover the whole or part of a project, as in case of mixed-use concepts. They are conducted by independent third-party consultants to provide the different stakeholders the decision basis for the development, financing or operation of hospitality projects.
Project construction is a multifaceted process that involves the design, development, delivery, fit-out and operation of a hotel. It involves the analysis and optimization of plans, technical advice and the overall coordination of the development project with contractors prior to and during the construction phase and the operator during the hand-over phase.
Hotel construction management includes project coordination, budget management, program and quality-assessment reporting and overall project monitoring. It ensures that all specified services, design and finishes are provided for operation of the hotel and that the conditions in the construction management agreement are met for hotel hand over to the operator.
Hotels are highly complex real estate projects involving high risk that typically require the investment of a great amount of time, energy and capital. A combination of uncertainty, broad and ever-shifting market segments, and the high expectations of project stakeholders generally make hotel development more challenging than other kinds of real estate development.
Hotel project development risk is the financial threat that stakeholders are exposed to in a hotel development project. The more complicated the project, the greater the development risk will be. Financial sources must be attracted by the promise of sharing the cash flow generated by development in a manner that properly balances risk and reward.
Whether leased, franchised or managed, each hotel operating model has its distinct advantages and disadvantages for owners, brands and management companies. The models are based on a lease, franchise or management agreement or a hybrid combining a lease or a franchise and a management contract. The requirements and priorities of the owner determines the choice of model.
The operating model determines the source of income, the services provided, and the contractual and fiduciary obligations of the parties involved. These include control over operations and the product, financing, market/operating risks and profit potential. The agreements must be carefully negotiated to ensure alignment of the interests of all parties.
Hotel operator selection is one of the most important issues to consider when developing or acquiring a newly developed hotel or improving the performance of an existing hotel. For operator selection, there is a need to identify the inherent characteristics of a project based on such attributes as the asset class, product mix, positioning, captive market and other factors.
There are many other possible criteria to be considered in the operator selection process, including brand strength/awareness, brand positioning and distribution power, technical requirements, suitability and commercial fit. Deep knowledge of operators and their offering is a prerequisite to capture the necessary information and conduct such evaluations.
Financing of hotels in Europe traditionally involves bank lending or bank intermediation. This includes the lending of revolving credit and term loan facilities, commercial property (mortgage) loans, bridge loans, mezzanine loans and private placements. Large-cap real estate developers and hotel operators commonly also issue bonds.
Non-bank lending is growing rapidly, driven by alternative finance companies, peer-to-peer (P2P) and other online direct lenders. SME and mid-market bank loans are time intensive, more difficult to automate and securitize and have higher costs to underwrite and service. The increased competition in lending has led banks to move toward bigger and more profitable loans.
Sustainability is a critical consideration in every hotel development project and the sustainability issues are reflected along the entire value chain. Hoteliers and investors must be certain that the operation system of their hotels conforms with sustainability principles that further their green agenda. Owners and franchisees must encourage sustainable operational practices and exercise proper control.
Sustainability in the hospitality industry considers the energy and water as well as the moral, ethical, social and political issues for taking action. Sustainable management and recognition as a reliable partner for all stakeholders plays an important role in the development of hotel projects. For this, developers, owners and operators must implement sustainable management systems in their businesses.
13 April 2021 – 9:00-18:00*
Breakfast – Wiener Frühstück
Like a yield curve, the value chain of a hotel project begins with planning, increases through to stabilization and operation, and ends upon exit and asset disposition. Hotel owners may initiate the development project or invest in it by purchasing the property from the developer. The hotel asset manager takes responsibility for the performance of the asset.
Hotel asset management is performed throughout the entire hotel project life cycle – from hotel planning and development through to project exit. All asset and revenue management strategies are targeted to maximize asset value along the hotel project value chain. A hotel asset is valued for it disposition and the investment is realized upon the property's sale.
Hotel investments are structured for the strategic objectives of the investors. Whether a proposed hotel is being developed or an existing hotel is being acquired, the different parties to the transaction must work out and agree to a basic financial structure that determines how the various benefits and risks of the investment are to be divided and allocated.
Various possible structures are employed by buyers and sellers for hotel project exit and asset disposition. The structuring of transactions needs to be carefully considered and arranged to avoid negative tax effects and maximize the return on investment. Deal structuring provides strategic options to buyers and sellers and can help property owners achieve multiple goals through the sale.
Hotels are managed as an asset class that generates income or other returns in multiple ways. Asset management specialists manage the general financial results from hotel assets in order to optimize the return and enhance the value of the asset through every stage of its life cycle, while mitigating risks at the investment level.
Acting on behalf of a hotel's owner, the asset manager continually monitors the property in order to evaluate operator contract compliance and assesses emerging opportunities for improving asset performance. Hotel asset management reflects the evolving process from acquisition, to active ownership, and ultimately to disposition in managing the extended hotel asset life cycle.
Successful hotel revenue management is based on a compset. A value analysis compares the property against those of the compset. Technology allows revenue managers to set up rules and alerts to support the revenue management strategy in an automated fashion. Routine and habits maintain visibility and control over the revenue management strategy.
Revenue managers plan strategic revenue for the year ahead, analyze forecasts, set rates, monitor parity, and report on revenue performance. Although revenue managers are traditionally more tactical and analytical, the goal of total profit optimization is for them to coordinate a property’s mix of revenue and profit centers more strategically and to exercise control over all revenue operations.
The appraisal and valuation of existing hotel properties and proposed projects is required for a number of parties. These include lenders that are considering refinancing or issuing a loan on a hotel or hotel project, lenders and hotel owners needing a value opinion for loan or portfolio monitoring, and accountancy firms compiling large portfolio valuations.
When lending, refinancing or investing in hotel real estate, lenders, owners and potential investors, must have confidence in the value opinion on which to base their decisions. Credible hotel valuations and appraisals call for sound market data and facts, public information and common market knowledge and the application of industry standard methodologies.
There are various reasons for hotel acquisitions. For some buyers, it may be a short-term investment with a view to selling quickly (flipping) at a significantly higher price. Others may have an investment strategy with a long-term view based on the potential of the hotel asset to generate cash returns that meet the acquisition guidelines.
Exit strategy should be determined with the investment strategy. Projects can be sold before completion and potential future buyers determined at acquisition. Exits are generally complicated by the attempt of all parties to secure the most flexibility. Hotel asset disposition is a complex process and will involve the various interested parties.
On-market listing platforms actively market commercial real estate to all potentially interested investors. Off-market listed properties are not actively marketed and typically enable only accredited investors to access and participate in closed club deals at professional terms. The choice of platform generally depends on the property value and exit strategy of the property owner.
Some real estate investment platforms are available only to accredited investors, who have to meet certain criteria for revenue or net worth. Where platforms offer private placements, only a few accredited investors can participate in the investment. Other online investment platforms provide opportunities for non-accredited investors to participate in the listed real estate investment opportunities.
Wrap-Up, Socializing & Networking