BLIS: Day Deux
Technology is driving both the owner and guest experience in hotels, said Starwood Hotels SVP Mark Purcell (right) at our national hotel conference ("BLIS") yesterday. Travelers want the latest and most convenient tech options in rooms and common areas, and owners/operators need updated systems for revenue and booking management, says Mark (joined by Virgin Hotels' Allie Hope and Woods Bagot's Jeffrey Holmes). Allie says Virgin's first US hotel will open in Chicago this fall, and that most big markets are "fair game" for the firm to develop in. (So not just Virginia.)
Huge levels of capital are chasing hotel deals, Savills' Marc Magazine says, creating a tremendous level of deal volume this year. But according to Mark (second from left, joined by Walker & Dunlop's Andy Coleman, Allied Advisors' Richard Rudd, and Wright Johnson's Aaron Goforth), many investors are priced out of gateway markets, looking instead at secondary ones for good deals. On interest rates, financial guru Andy says he has no idea where they'll go. He does expect 10-year Treasury yields, currently hovering around 2.5%, to inch up to 3% by the end of the year.
The owner/operator panel tackled the sometimes dicey relationships between hotel/resort owners and the operating companies that run the show. Urgo Hotels’ Kevin Urgo says he’s seeing agreements where incentive fees are tied to profit margins. (Incentivized contracts work for athletes—and we think Kevin is the LeBron James of comfort.) The industry is also seeing shorter management contracts. PM Hospitality Strategies Joe Bojanowski says the average management agreement is five years with options to extend. But private owners want longer terms to avoid disruption. Interstate Hotels’ Jim Abrahamson says his company crafts operator agreements based on what the owner wants out of their asset, which allows for a little more flexibility.
On termination fees, Vornado’s Fred Grapstein (with Marriott’s Noah Silverman with Greenberg Traurig attorney Nelson Migdal) says a thorough financial analysis is key. Before changing a hotel’s management company, the owner needs to think about what that company brings to the hotel versus another management company. Marriott recently changed its management agreement to make it simpler and easier to read, says Noah. It hasn’t been used as much in the US since most of its agreements are for franchises, but it's being well-received for overseas transactions.
On our lifestyle hotel panel, Salamander Hotels’ Prem Devadas, RD Jones’ Rebecca Jones, Marcus Hotels & Resorts' Tom Riley, independent consultant Mark Morris, and moderator and CohnReznick's Greg Remeikis had different definitions for boutique and lifestyle hotels, but all agreed on making the guest experience more personalized. The staff affects the experience, as well, even if the hotel is as massive as the Marriott Marquis or a small boutique. Some trends to watch: bunk beds, smaller rooms, little interaction with the front desk, and boutique hotels moving into smaller cities.