How to think like a hotel owner

NASHVILLE — At the 15th annual Hotel Data Conference in Nashville last week, a trio of hotel industry executives shared their insight for a panel called “Think Like an Owner.” They talked about the current challenges of profitability, the rising cost of CapEx, important and overrated metrics and reasons why they are optimistic about the future.

The panel included Sam Makani, vice president of Strategic Operations of Denver-based Mission Hill Hospitality; Christoph McLaughlin, vice president of Asset Management Strategy at Dallas-based Ashford; and Dominic Donatoni, senior enterprise client sales consultant at San Francisco-based Revinate. Andrea Belfanti, CEO of Atlanta-based International Society of Hospitality Consultants, moderated the session.

Here are some highlights from the panel:

What metrics are they most on?

Christoph McLaughlin: One of the things that we’re constantly looking at is flow-through within our own portfolio… Something that we’ve also started looking at it is flow-through in the industry. How’s the industry doing? And how are we outperforming relative to the whole industry?

Dominic Donatoni: [We are looking at] how do you incorporate all that data to make it actionable. Are you driving market share, are you able to enhance the guest experience and able to pull those together? What data am I collecting today and is it actionable?

How do they think about CapEx?

Sam Makani: The rising cost of CapEx projects is not going to go anywhere in this inflationary environment... First and foremost, our renovations are driven by change-of-ownership PIPs. Secondarily, when we acquire or cycle renovations, as mandated by the brand, we prioritize our live projects.

In terms of scope, we’re looking at three primary factors: what enhances the product quality; what enhances our market positioning to our competitive set; and primarily, what everyone cares about is what enhances profitability… We’re focused on adding value by finding opportunistic deals that allow us to put in capital to take an independent property, flag it, and then take a property that needs a significant renovation to improve its market positioning, penetration, and competitive set.

I’m very optimistic about our brand partnerships. I think our brand partnerships have actually become much stronger through COVID. And continue to get that way with the transparency we’ve had through data, with them coming into our offices and wanting to find deals with us, even with them finding investments.

Christoph McLaughlin

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How do they think about profitability?

McLaughlin: Across our portfolio a number of our properties are exceeding profitability... But if you look across our portfolio, we’re not seeing the margins we were seeing prior to the pandemic. And so even though rates are much higher than what we had in the past, we’re not seeing that always flow down to the bottom line… Once you get down to either the CapEx or interest-rate increases, making a hotel profitable is becoming increasingly more difficult.

What is an overrated metric?

Donatoni: One of the things that we often hear, especially because it’s from the operator side, is ROI. ROI can be a very loose term. And different people say: I want a 15:1 ROI, I want to 5:1. And some owners say, hey if it’s 2:1 and I’m still able to get all this information [data], I’m okay with that. So, I think ROI tends to be the one where I hear it, and I ask, 'why is that important to you?' Sometimes ROI may not necessarily be what the owner is looking for and that’s where that gap in alignment is a big piece of trying to break that down.

What factors do they consider when taking an independent hotel to brand?

Makani: What we look at is what sort of product, first and foremost, needs to be added to that market. Recently, we found an opportunity to soft-brand many independent hotels, which limits costs, and allows us more flexibility in terms of design… Guests these days are more and more looking for experience. And I think the soft brands allow us more opportunities. Of course, there are trusted brands that are leaders in their categories that we always look for opportunities to convert. Those opportunities are more limited when taking an independent property to one of those traditional brands.

What things are they optimistic about?

McLaughlin: Honestly, I’m very optimistic about our brand partnerships. I think our brand partnerships have actually become much stronger through COVID. And that continues with the transparency we’ve had through data, with (brands) coming into our offices and wanting to find deals with us, even with them finding investments. They were coming to us saying, 'Hey, we have this owner who wants to develop this property. Would you be interested in a JV?' The brand partnerships have gotten much, much stronger.

Makani: I’m optimistic about the long-term trends in the lodging industry. I think the younger generation travels at an earlier age, spends more when they travel and expects more when they travel.

Donatoni: When you look at the technology side,  I’m most excited about the new trends we are seeing and how we can capitalize on them and find all those new travelers out there — being able to identify and help monetize them, and drive that home. The data collection and pulling it all under one solution is where I see the technology going.