Happy Holidays to PLA twitter followers and Blog readers, check out the link to, “Why is finance so complex”
http://www.interfluidity.com/v2/2669.html
It really makes you think about our industry and how much of success is ‘individually driven’ versus ‘timing with Momentum’. Thoughts? Should we incorporate momentum into our pro-forma analysis for buyers? Post and let me know.
Sanjeev Misra
Email
There is no news today. Not literally, but as I ponder the question, to blog or not to blog (I know the answer is to blog, just need to find the time), I’m realizing that there is something I did not do that I should have, and today is a perfect time to take care of it. It’s not news, but it’s important.
In the business world we are blessed when we develop good relationships with the people that we do business with. We are further blessed when we develop good relationships with the people we actually work with. So as Thanksgiving rolled by, I did nothing, no blog, no tweet, no update on LinkedIn, etc. about the fact that I have obscene amounts of gratitude for the outstanding relationships that I have with my teammates at Paramount. There is not a PLA team member I do not consider a friend unless they are so new I haven’t met them yet (very new, I look forward to meeting you next week btw). In Chicago specifically, I can honestly say I know each PLA Chicago team member knows how I feel about them, as in how much I care about them as individuals, and in return I know how much they care about me.
We work hard, we debate, we can’t always act like we’re all best friends, that wouldn’t be productive. We have to teach and learn from each other which as a father I know is not human nature. Wanting to learn I believe is a skill, so sometimes the teaching and learning is done reluctantly.
We work on extensive projects we can’t or won’t talk about or do press on because we use the term “stealth” so often lately and maintain our ethical standards of confidentiality and respect. Even though this is our livelihood and we are compensated, I’m sure there is some frustration that we don’t get to stroke our ego a little bit. Until the work is complete however, or in some cases even after that point, we won’t let anyone know. I’m sure a part of each one of us wants to. We may celebrate with a bottle or Crown and a diet coke for me however.
Which leads me to my thoughts today. So it isn’t always peaches working with your colleagues. However, there are times to be serious and get down to business (like when I’m done writing this for example, which is completely spur of the moment), and there are times to relax, have fun and enjoy the things we have that are taken for granted even for one minute too long. I didn’t give thanks to the PLA team on Thanksgiving. Tonight however as we have our Chicago team holiday event, I will be truly grateful and thankful for each and every person that is there and that is not, who they are, what they have done and what I know they want for themselves and for this group of misfits, who somehow find ourselves right where we wanted to be.
Lots to be grateful for at the office? Since home is where the heart is, life is good.
Thx PLA.
Who will own hotels that the traveling public stays in moving forward?
I think about this question a lot. Things have certainly changed in the 20 years I have been involved in the industry, and I suspect they will change even more over the next few years.
From what I learned in hotel school, the rules of the trade started with innkeepers laws in the United Kingdom over 500 years ago. I personally started my romantic desire to own, operate, broker and consult on hotels when I saw the musical Les Miserables in my early teen years. There is a song called, “Master of the House”, that details the daily happenings at the Inn and how the Innkeeper manages all the daily chaos. That Innkeeper had revenue management perfected! The song shares his revenue secrets, here is an excerpt:
Charge ‘em for the lice, extra for the mice
Two percent for looking in the mirror twice
Here a little slice, there a little cut
Three percent for sleeping with the window shut
When it comes to fixing prices
There are a lot of tricks he knows
How it all increases, all them bits and pieces
Jesus! It’s amazing how it grows!
So I am digressing a little bit with my fond memories, but it does lead me to my main thought. I wonder if the day and age of the private hotel owner that is actively engaged in the operation of the hotel is slowing exiting stage right. This has been a function of bigger pockets of money (this would be REITs, Private Funds and Institutional Investors) becoming more comfortable with owning hotels.
The thought for the last decade has been that Hotels are Good Real Estate. The reality is and has always been that Hotels are an Operating Business. I thought that the institutional investors figured that out when our industry took a nose-dive at the end of 2008. We have now seen the largest volume of hotel assets in default with their lenders and in special servicing than ever before. Will this deter big money from our industry or serve as a light of opportunity to find undervalued distressed hotels? Only time will tell.
If we look at 2010, private owners were the biggest net sellers, unloading $1.9B of hotel assets, while public companies and REITs were the biggest buyers, with acquisitions of over $2B. Lenders were the next largest buyers of hotel assets with $1.8B in acquisitions (this is really net change to holdings). You could say that Lenders are the ‘involuntary owners’ today and it will be curious where these assets end up.
One might say that the private owner will always have a place because larger investors do not pursue smaller hotel ownership or investment in markets outside the top 25 MSAs. So does that mean that the chance to run into a hotel owner at an actual hotel will only occur at your highway exit hotel or in places like Flint, Cleveland, Des Moines and Greenville? (I have no idea why I listed those places, consider it a random selection of where institutional hotel players don’t want to invest)
So these are my rambling thoughts tonight and I would be interested to see people post comments on who they think will be the most active hotel owners in the future.
Sanjeev Misra
Welcoming Dave Marta to the PLA team in Chicago, adding a wealth of Capital Markets knowledge and relationships, as well as a desire to be a broker in the manner we see brokerage in today’s environment, pure advocacy and unbeatable success. Welcome Dave, we’ll send press over the next couple weeks. We will be redoing our blog site and social media distribution again also, so bear with us, but there will be lots to discuss this year, and we feel it’s important to deliver messages and thoughts that may provide value to our clients and the rest of the industry when applicable.
This morning, Bisnow hosted a real estate capital markets gathering in Chicago with both debt and equity panels.
Here are a few main points I’d like to share with you:
What do you think? I would like to hear your take on this. You can also contact me directly via email.
Back in September, we announced the addition of our new office in Naples, Florida. (If you have not read that Press Release, you can view it here.) In line with this development, we are excited let you know that Howard Bergen has now joined our hotel brokerage and advisory team.
Howard brings the experience that we want on the Paramount team - an extensive hotel operations background that allows us to understand the needs of buyers and sellers in today’s market. The addition of the Tampa office is part of a strategic set-up to be able to cover the Florida and Southeast markets effectively.
You will find more details about this announcement on the Press Release that we have just sent out. If you would like to chat about the hotel market in Florida and the Southeast, send us an email or feel free to leave a comment below.
At Paramount we have discussed how, along with our busy schedules, we should manage our blogging activity. It doesn’t go more than 2 weeks that someone says that they want to start blogging more consistently for one reason or another. Sometimes however it takes a little incentive.
Recently we were informed of a tactic being taken by some of our competition in the brokerage world to win business over us. The tactic itself is one which lacks ethics, but the opportunities that it creates far outweigh any negative impact we could feel from others actions.
In a nutshell we were informed that at least one of our competitors have been making comments to hotel owners in the Midwest regarding our company and specifically my lack of interest in small hotel assets and their owners, that we believe it is not worth our time, etc. Now, for anyone that knows our company, there is no possible way to view this as our business plan, to avoid smaller properties and their owners. On the contrary, Paramount Lodging’s Chicago office has 10 full-time licensed salespeople, which we believe would be the single largest hotel brokerage office in the Midwest if not in the United States. The reason for having so many agents is so that we can create the same value for any hotel owner or interested party no matter where their asset is or what type.
It could be perceived that the Senior leadership of Paramount may not have been as available over the last couple of years to every single property or small portfolio hotel owner as we have been historically, and therefore are not “interested.” For those who know us though, they are aware that for the majority of the past 12-18 months we have been traveling extensively and repeatedly to meet with lenders, special servicers and equity groups who are responsible for the ownership or debt of all types of properties throughout the country. While doing valuation work and light consulting for everything from tertiary economy product to urban luxury product, the actual assignments that have been generated from the majority of this work has been focused on those assets which have the biggest issues. These properties are normally those which were severely over-valued and/or over-leveraged, and have immediate cash requirements on an ongoing basis. Assets that are performing, which tend to be the better brands and better located assets (assuming sound fundamentals not only with respect to capital markets, but brand, room count, location, etc., along with efficient operations) have not been viewed as needing our immediate assistance from a brokerage standpoint. So while Senior leadership at Paramount has been spending more time with these groups who are responsible for tremendous amounts of hotel product, the product type has leaned heavily to limited and focused service product along with full service assets with poor fundamentals or operations. This is one of the main reasons that we have expanded our company to the levels we have, so that for example in the Midwest, we always have at least one agent who is available to give our clients the highest levels of attention, focus, knowledge and most important advocacy that our company is based on.
Anyone who has spent time with us and me discussing the mission and continued development of Paramount has heard numerous times “the single asset owner of non-institutional product can never be neglected, they are responsible for a larger number of hotel assets of those who are living and breathing lodging as owner/operators are the ones who will become the future industry leaders, leading innovation in operations and building impressive well designed and diverse portfolios.”
How is this related to blogging? What I have been reminded again just over the past couple of days is the importance of making certain we educate the entire hotel community on not only how we do business, but why we do it in the first place. Hotel owners need advocates, in particular when they determine it is time to sell their hotel. They are hiring a consultant to assist with quite possibly the single most important event in the life of their hotel investment. In today’s environment, there are many others who need the same advocacy, but actually may need the knowledge that we as former operators and/or investors can provide more even than the single property owner. A lender, special servicer or private investment vehicle which may not have people on staff who have worked in the hotel industry need to know how to handle the ongoing issues they have with their hotel property exposure as well as potential assistance in disposition when appropriate.
Whoever it was that has suggested that Paramount does not see value in working with smaller owner operators deserves our thanks. Not only does it inform us that our clients or future clients may be targeted with mis-information, but reminds us that we need to do what we can to inform and educate about us and the industry. We are lucky to have a chance to work with so many different types of individuals and business entities with hotel interest, and what we learn from them collectively should be passed on to the entire pool of our current and future clients.
One way for us to do the above is clearly to blog, and to do it often. So I challenge our own team to begin again. Make a commitment to blog and inform. We will help ourselves but more importantly continue what we set out to do when we started Paramount and have continued to strive for, assist hotel industry participants wherever needed.
