Title: Biloxi City Council Receives for a 400-Room Wyndham Harbour Pointe Resort
Summary: The Biloxi City Council authorized Mayor A.J. Holloway to enter contract negotiations with Mickey McElroy and Wyndham Hotel Group regarding the building of a 4 star, 400-room Wyndham Hotel on land adjacent to the Hard Rock Casino in the harbour of Biloxi in April of 2008.
The land was to be leased to Mickey McElroy, a local restaurateur who had, before it was wiped away by Hurricane Katrina, owned a seafood restaurant on the same land. His restaurant would have a spot on the first floor of the Wyndham Resort. The top levels of the 24-story building were to be sold as condominium units and the rest rented as conventional hotel rooms.
The business plan of the hotel was to capture the overflow of rooms demand from the Biloxi casinos and offer various packages that included fishing, charter boat rides and other Biloxi attractions. It would market itself as a destination with a local flavor that offered an experience that mirrored the Biloxi culture.
The proposed lease would require a $2 million rent payment up front on a $150,000-per-year lease and 1 percent of the resort's profits paid to the city of Biloxi.
Reflection: This article is a depiction of the pre-recession lodging industry. It references one unviable initiative after another, which is probably why the project was never actually built. Its two most obvious faulty initiatives are:
1. Its condominium component: This business model has failed and failed miserably over time. What made the model attractive at one point was that it provided an immediate source of cash to service debt b y way of selling off the condominium units. This wasn’t so, developers would eventually find out, if no one purchased the units.
2. To soak up leftover rooms demand from the casinos: In order to soak up leftover rooms demand from the neighboring casinos, the casinos would have to ALL sell out EVERY night. Not even in the height of the gaming industry was this ever the case. If it would have been, one of the big players like MGM Mirage, Harrah’s or Boyd would have put up another 500 rooms at the snap of a finger with a casino floor and more impressive amenities than any Wyndham hotel. Steve Drown, the “would-be” developer of the project, said that the Wyndham Hotel would not be competing with the casinos. This is simply not the case, in my mind. The casinos have hotel rooms. The Wyndham would have had hotel rooms of similar quality, and probably a more expensive rate. Customers can choose between staying in a casino hotel room or a Wyndham hotel room. This is competition, especially when the hotels are so close in proximity.
Aside from these initiatives, there are several threats to a 4-star hotel looking to compete in a casino market. Chief among these threats is the amount of weight held by the opinions of the local gaming commission and local governments. Gaming is the largest source of tax revenue in all regions where it is present. Hence, local governments want to see as much revenue being generated by casinos because it means more tax revenue for the city.
Other references of a pre-recession environment in the article are of Wyndham’s interest in investing in a vacation-ownership property in the Biloxi-Gulfport area. Vacation-ownership is a similar concept to condominium units in hotels and has also failed miserably with major brands like Marriott eliminating the component altogether.
One initiative the proposed property would have supported that I think would have been viable was offering an experience that mirrors the Biloxi culture. Biloxi sees the majority of its travel come in from about a 750-mile radius. I think that this demographic would appreciate this type of offering as well as a market foreign of this 750-mile radius who had never been so far south as Mississippi.
Source: Hotel Online
Hyperlink: http://www.hotel-online.com/News/PR2008_2nd/Apr08_WyndhamBiloxi.html
Monday, March 29, 2010
Sunday, March 21, 2010
Lodging Hospitality Magazine
Date: March 10, 2010
Title: Analysis: Why Blackstone’s Troubles Won’t Bruise Hilton’s Brand
Summary: Hilton has long enjoyed a brand name that has been associated with quality, integrity and great services. Since being bought out by private equity firm, Blackstone Group, this brand name has been subject to potential tarnishing due to Blackstone Group's financial troubles. The brand name has also seen a significant threat regarding legal issues that Hilton has dealt with over recent years regarding their complications with Starwood Hotels and Resorts. This article reflects on the effects of these recent happenings on the brand name and how they can potentially become more threatening to Hilton moving forward. For instance, Blackstone may, if some of their other investments prove not to be profitable, sell or break up Hilton.
Reflection: Blackstone Group is one of the largest private equity funds in the world and Hilton is their single biggest investment. Hence, they will use Hilton in whatever way they can to maximize their own profits. This simple fact will have to be taken into consideration by any hotel developer thinking about waving the flag of any Hilton brand as long as Blackstone continues to struggle.
The two drastic moves that Blackstone can make are to sell Hilton altogether or divest certain brands like Hampton Inn or Hilton Garden Inn. The latter, I think, would hurt the brand much more. If the company divests, say, Hampton Inn and Hilton Garden Inn, Hilton would become a less diverse entity. Diversity is paramount in the lodging industry, as we have seen in the recent economic downturn, because it provides the opportunity to survive through tough times, with economy/mid-market and prosper through the good times with brand names like Conrad and Waldorf.
Divesting certain brands is an attractive move to a firm like Blackstone Group because they will be sure to generate cash, which they are in dire need of. However, they must consider the effect that the divestiture of one of these brands will have on the willingness of developers to wave the remaining Hilton brands. It also decreases the amount of properties that Hilton customers can utilize ther HHonors points, which hurts all the brands under the Hilton umbrella.
Hilton’s legal troubles could also have an adverse effect on franchising. If the outcome of the case puts a damper on the Hilton name, Hilton may struggle with franchising new properties or even lose existing properties, which would decrease revenues, which may cause Blackstone to divest a brand.
Right now, there are very few customers that are even aware of Hilton’s dilemmas and few people, who are aware, care. Hence, Hilton is still in a position to prevent anything significant from happening.
Source: Lodging Hospitality Magazine
Hyperlink: http://lhonline.com/distressedinventory/blackstone_troubles_wont_bruise_hilton_0309/index.html
Summary: Hilton has long enjoyed a brand name that has been associated with quality, integrity and great services. Since being bought out by private equity firm, Blackstone Group, this brand name has been subject to potential tarnishing due to Blackstone Group's financial troubles. The brand name has also seen a significant threat regarding legal issues that Hilton has dealt with over recent years regarding their complications with Starwood Hotels and Resorts. This article reflects on the effects of these recent happenings on the brand name and how they can potentially become more threatening to Hilton moving forward. For instance, Blackstone may, if some of their other investments prove not to be profitable, sell or break up Hilton.
Reflection: Blackstone Group is one of the largest private equity funds in the world and Hilton is their single biggest investment. Hence, they will use Hilton in whatever way they can to maximize their own profits. This simple fact will have to be taken into consideration by any hotel developer thinking about waving the flag of any Hilton brand as long as Blackstone continues to struggle.
The two drastic moves that Blackstone can make are to sell Hilton altogether or divest certain brands like Hampton Inn or Hilton Garden Inn. The latter, I think, would hurt the brand much more. If the company divests, say, Hampton Inn and Hilton Garden Inn, Hilton would become a less diverse entity. Diversity is paramount in the lodging industry, as we have seen in the recent economic downturn, because it provides the opportunity to survive through tough times, with economy/mid-market and prosper through the good times with brand names like Conrad and Waldorf.
Divesting certain brands is an attractive move to a firm like Blackstone Group because they will be sure to generate cash, which they are in dire need of. However, they must consider the effect that the divestiture of one of these brands will have on the willingness of developers to wave the remaining Hilton brands. It also decreases the amount of properties that Hilton customers can utilize ther HHonors points, which hurts all the brands under the Hilton umbrella.
Hilton’s legal troubles could also have an adverse effect on franchising. If the outcome of the case puts a damper on the Hilton name, Hilton may struggle with franchising new properties or even lose existing properties, which would decrease revenues, which may cause Blackstone to divest a brand.
Right now, there are very few customers that are even aware of Hilton’s dilemmas and few people, who are aware, care. Hence, Hilton is still in a position to prevent anything significant from happening.
Source: Lodging Hospitality Magazine
Hyperlink: http://lhonline.com/distressedinventory/blackstone_troubles_wont_bruise_hilton_0309/index.html
Saturday, February 20, 2010
Lodging Magazine: Marketing
Title: Thinking Green
Summary: The greening of the hospitality industry has become a worldwide phenomenon. The mix between corporate social responsibility, government/private incentives for environmentally sustainable action and the willingness of certain niches of travelers to pay a premium for eco-sustainable lodging has made considering going green worthwhile in all respects. When considering whether or not to spend extra money to be green, one must as in any business decision, weigh the costs with the potential benefits. Companies are now seeking ways to leverage green practices to improve their bottom lines.
Reflection: Going green has been a great way for hotels to save money during the economic downturn via energy efficiency and other conservative measures. Implementing green policies has been surprisingly easy for hotel companies as employees are feeling a sense of empowerment being part of such a crucial movement. Once management and the entire hospitality team is on board, green practices will be influential to the bottom line.
The real challenge for hotels and hotel companies is marketing their green efforts to increase revenues. New markets are arising that will actually pay a premium to stay in green hotels, the “scuppy” market. This niche identifies itself as “socially conscious upwardly mobile persons.” Such travelers are likely to seek out environmentally sustainable properties when traveling as they “demand higher standards for themselves and the companies they do business with.” If this is a market that a property can penetrate effectively, then going green could prove to be immensely profitable as the green movement is sure to grow as the environmental crisis furthers. The dilemma is how to reach them in a cost-effective way.
Moving forward, it will be interesting to see how brands such as element and aloft market themselves as green. I think there is a substantial amount of risk in doing this being that all properties raising the respective flags will be expected to adhere to strict green standards and if one environmentally conscious customer sees these standards not being followed, their reputation as a green brand could be severely tarnished as most socially forward people are savvy when it comes to the use of social media. It will also be interesting to see how quickly the “green movement” customer base grows. Will they become significant within the next one or two years? Or will it be more like five or six?
Source: Lodging Magazine
Hyperlink:http://www.lodgingmagazine.com/ME2/dirmod.asp?sid=&nm=&type=Publishing&mod=Publications%3A%3AArticle&mid=8F3A7027421841978F18BE895F87F791&tier=4&id=2F0200A4B7C846C3B247A6B056955B75
SmartBrief 2
Date: February 11, 2010
Title: Relaunch Aims to Put Holiday Inn Back on Travelers' Maps
Summary: With the Holiday Inn brand struggling with consistency across properties and brand image in general, Intercontinental Hotels Group made a decision to relaunch the brand and remove flags from all properties not complying with new standards. Now, Holiday Inn and Holiday Inn Express are among the most successful brands in the industry.
Reflection: A brand-wide mandatory revamp is a move that is going to get a lot of attention. This decision by IHG has been covered widely by many publications and admired by the entire industry. In a market where there is little capital investment taking place, IHG was able to get many of their hotels to invest millions of dollars in their properties in order to keep their flags.
The most important change that I think took place in the revamp has to do with the consistency of the brand. As an international brand with such a large volume of rooms that mostly draw overnight travelers, consistency is paramount. Consistency creates loyalty and when your flag can be found in almost every major city, loyalty is very profitable.
Now, about half of the hotels flying the Holiday Inn flag have been relaunched. With the brand's growing success and popularity, the decision for the remaining hotels should be a no-brainer.
It should also be noted that IHG assumed substantial risk with the revamp. Franchisees not looking to invest in refining their properties lose their flags, which in turn, results in a decrease of management contract revenue.
Source: The Columbus Dispatch
Hyperlink: http://www.dispatch.com/live/content/business/stories/2010/02/11/holiday_inn.ART_ART_02-11-10_A8_T4GICJB.html?sid=101
Title: Relaunch Aims to Put Holiday Inn Back on Travelers' Maps
Summary: With the Holiday Inn brand struggling with consistency across properties and brand image in general, Intercontinental Hotels Group made a decision to relaunch the brand and remove flags from all properties not complying with new standards. Now, Holiday Inn and Holiday Inn Express are among the most successful brands in the industry.
Reflection: A brand-wide mandatory revamp is a move that is going to get a lot of attention. This decision by IHG has been covered widely by many publications and admired by the entire industry. In a market where there is little capital investment taking place, IHG was able to get many of their hotels to invest millions of dollars in their properties in order to keep their flags.
The most important change that I think took place in the revamp has to do with the consistency of the brand. As an international brand with such a large volume of rooms that mostly draw overnight travelers, consistency is paramount. Consistency creates loyalty and when your flag can be found in almost every major city, loyalty is very profitable.
Now, about half of the hotels flying the Holiday Inn flag have been relaunched. With the brand's growing success and popularity, the decision for the remaining hotels should be a no-brainer.
It should also be noted that IHG assumed substantial risk with the revamp. Franchisees not looking to invest in refining their properties lose their flags, which in turn, results in a decrease of management contract revenue.
Source: The Columbus Dispatch
Hyperlink: http://www.dispatch.com/live/content/business/stories/2010/02/11/holiday_inn.ART_ART_02-11-10_A8_T4GICJB.html?sid=101
Friday, February 19, 2010
SmartBrief 1
Date: Feb. 18, 2010
Title: Macau Helps Sands Cut Losses
Summary: With Las Vegas' lodging and gaming industries struggling worse than ever, Las Vegas Sands Corp. has seen big losses. With new developments in Macau, however, they have been able to offset some of their shortcomings in the American gaming mecca.
Reflection: Macau's success poses some serious problems for Las Vegas' once dominant control over the gaming industry. The article references that Macau's revenues accounted for 3/4 of total revenue for Las Vegas Sands Corp. The Venetian Macau posted operating profit of US$119.7 million in the fourth quarter of 2009, from US$61.3 million a year earlier, the company said.
Numbers like these reinforce the general sentiment that there will be no new building in Las Vegas over the next several years and that all new major gaming entertainment development will shift to Macau. Declining Las Vegas property values may attract more and more investors looking to buy on the cheap. Billionare investor Carl Icahn, for instance, has bought up two casinos (The Fountainbleau in LV and the Tropicana in Atlantic City) within the past two years for pennies on the dollar and is in the process of buying Trump Entertainment Resorts in Atlantic City.
Macau's growing popularity also poses a threat to the international travel that Las Vegas has seen over the years. The super-wealthy, elitist traveler looking to be "wowed" is more likely to seek an experience that is up and coming, not declining in popularity.
Source: The Straits Times
Hyperlink: http://www.straitstimes.com/BreakingNews/Money/Story/STIStory_491862.html
Title: Macau Helps Sands Cut Losses
Summary: With Las Vegas' lodging and gaming industries struggling worse than ever, Las Vegas Sands Corp. has seen big losses. With new developments in Macau, however, they have been able to offset some of their shortcomings in the American gaming mecca.
Reflection: Macau's success poses some serious problems for Las Vegas' once dominant control over the gaming industry. The article references that Macau's revenues accounted for 3/4 of total revenue for Las Vegas Sands Corp. The Venetian Macau posted operating profit of US$119.7 million in the fourth quarter of 2009, from US$61.3 million a year earlier, the company said.
Numbers like these reinforce the general sentiment that there will be no new building in Las Vegas over the next several years and that all new major gaming entertainment development will shift to Macau. Declining Las Vegas property values may attract more and more investors looking to buy on the cheap. Billionare investor Carl Icahn, for instance, has bought up two casinos (The Fountainbleau in LV and the Tropicana in Atlantic City) within the past two years for pennies on the dollar and is in the process of buying Trump Entertainment Resorts in Atlantic City.
Macau's growing popularity also poses a threat to the international travel that Las Vegas has seen over the years. The super-wealthy, elitist traveler looking to be "wowed" is more likely to seek an experience that is up and coming, not declining in popularity.
Source: The Straits Times
Hyperlink: http://www.straitstimes.com/BreakingNews/Money/Story/STIStory_491862.html
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