27 September 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, project description, possible alternative solutions, the budget and timetable.
Hotel sustainability starts with the project concept and is reflected in its business case, financing and investing. Sustainable development principles are adopted for project implementation and operation to produce sustainable and high-performance properties throughout their extended life cycle.
Developers, owners, lenders, investors, operators and staff as well as the community all benefit from sustainable hotel development projects. To achieve project sustainability for all stakeholders, participants must understand and apply sustainability principles in property development and operation.
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.
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 hotel owner determines the choice of the operating model, the parties, and the operating agreement.
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 operating agreements must 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.
Nonbank lending is growing rapidly, driven by alternative finance companies, peer-to-peer (P2P) crowdlending 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.
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 varied expectations of project stakeholders generally make hotel development more challenging than other kinds of real estate development. The more complicated the project, the greater the development risk will be.
Development management is the strategic planning, administration and controlling of a project during its development life cycle – from project planning through to construction completion and project exit. It is performed to minimize project and financial risk while maximizing profit for the developer and the property operator.
Project construction is a multifaceted process that involves the design, development, delivery, fit-out and operation of a hotel. It calls for the analysis and optimization of plans, technical advice and the overall coordination of the development project with contractors and project participants prior to and during construction.
Construction management includes project coordination, budget management, program and quality-assessment reporting and overall project monitoring. This ensures that all specified services, design and finishes are provided for property operation and the conditions in the construction management agreement are met for handover to the project owner and the property operator.
Sustainable property development is the process of applying processes and practices to develop and build structures that are environmentally responsible and resource-efficient throughout the property's life cycle. It is undertaken to meet the goals of the developer, sponsors, investors, the community and other stakeholders for sustainable design and high-performance green buildings.
Sustainable construction spans the value chain of development projects – siting, design, construction, operation, maintenance, renovation and deconstruction. It considers a building's complete life cycle and focuses on the reduction of resource consumption, reusing resources, protecting nature, eliminating toxins, life-cycle costs, and product quality.
Sustainable building development creates more environmentally and socio-economically responsible and resource-efficient models of construction, operation, maintenance, renovation, and demolition of buildings.
28 September 2021 – 9:00-17:00
Breakfast – Wiener Frühstück
An ESG benchmark provides comparable and reliable data on the ESG performance of investments in real estate. Environmental, social and governance (ESG) metrics enable enterprises and undertakings to reach their long-term business goals, improve relations with stakeholders and local communities, and boost their brand recognition and value.
Besides sustainability, an ESG benchmark is used to improve the investment performance of properties. ESG-compliant investments generally perform better than real estate assets that do not respect ESG sustainability principles.
The ESG investment policy of asset managers considers the risks and opportunities associated with environmental, social and governance issues across the investment cycle. This reduces business and financial risk while improving the return on the investments.
Hotel investments are structured for the strategic objectives of the investors. Whether the hotel is being newly 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.
Different 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.
Effective hotel asset management is essential for the success of hotel projects – from project concept through to asset disposition. 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 the investors in the property, the hotel asset manager controls and actively influences the risks and opportunities associated with the property's investment cycle. The asset manager continually monitors the property until asset sale in order to evaluate operator contract compliance and assesses emerging opportunities for improving asset performance.
Revenue managers plan strategic revenue for the year ahead, analyze forecasts, set rates, monitor parity, and report on revenue performance. Technology allows revenue managers to set up rules and alerts to support the revenue management strategy in an automated fashion. AI and machine learning have become essential for strategic revenue management.
It is the goal of total profit optimization to strategically coordinate a property’s mix of revenue and profit centers and exercise control over all revenue operations. The (r)evolution from the fully automated approach to revenue management through AI and machine learning allows revenue managers to concentrate on total, profitable revenue management.
The appraisal and valuation of hotel projects and properties are required for several parties and different purposes. Lenders issuing development finance, new loans or refinancing require valuations for loan security and loan monitoring. Owners and investors need regular valuations for financial reporting purposes and acquisition support.
When lending or investing in hotel real estate, project participants and other stakeholders have to have confidence in the accuracy of the appraisal. Credible valuations call for a depth of market data and intelligence analyzed by experienced hotel professionals and reported with skill and diligence, through the application of best practice 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.