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 management is a multifaceted function provided to ensure the successful 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.
Financially distressed hotels must be analyzed and evaluated for their going concern assessment. The location and general condition are evaluated, operational strengths and weaknesses are analyzed and a turnaround plan is prepared. The reasons for the operational deficits are identified and a proposal is drafted if and how the hotel can exploit future potential.
The goal of the financial restructurings is to ensure a sustainable increase in value. This is generally achieved through the reposition of the hotel and implementation of structures and leadership strategies according to international industry standards. Hotel turnaround must be managed by respected and reliable partners for the lenders, investors and operators.
13 April 2021 – 9:00-18:00*
Breakfast – Wiener Frühstück
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.
Hotel market intelligence is based on large volumes of quantifiable, real-time performance data collected from numerous external sources. Deep data are indispensable and of essential importance for the strategic decisions of all potential hotel project stakeholders. They are analyzed and leveraged to enhance business operations in the highly competitive hospitality industry.
Hotel market intelligence is used to forecast hotel performance across local areas, to establish business strategy and align resources for execution, and to benchmark hotel performance against comparable properties. It allows investors, developers, management companies and brands to synthesize macro factors and leading indicators into actionable hotel research.
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 several legal and related commercial issues that arise during the sale of hotel assets. These include the relationship between the owners and developer and operators and a hotel’s dealings with its employees, guests and suppliers. Hotel sale must be structure so that the interests of all parties – hotel owners, management and lenders – properly align.
In addition to the negotiation of transaction closing conditions and of contractual covenants, investors, lenders and advisors must perform due diligence, address employment-related issues and risks, and overcome transaction obstacles. Moreover, multi-jurisdictional and hotel portfolio transaction challenges and issues in mixed-use developments may have to be resolved.
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.
After determining the hotel acquisition criteria, the right people in the industry – brokers, asset managers, industry consultants or even the brands themselves – will be contacted to find suitable investment opportunities. This will trigger the actual acquisition process, from submission of an indicative offer to negotiation of the sale and purchase agreement (SPA).
The value of real estate is realized upon project exit and asset sale. Hotels can be sold before project exit or upon or after development completion. Such commercial real estate properties are either on-market or off-market. Exits and sales are generally complicated by the attempt of all parties to secure the most flexibility.
Hotel asset disposition is a complex process and involves various interested parties – the developer, brands, asset managers, real estate brokers and industry consultants. The disposition of a hotel asset requires in-depth knowledge of hotel operations and capital formation in order for the seller to make the best case for value and evaluate the offers.
Wrap-Up, Socializing & Networking