HB ON THE SCENE: Should I Break Up With My Property?

SALT LAKE CITY—Falling in love is a potential outcome of the chase. Despite the vows—or terms—both parties agree upon, the partnership isn’t permanent. There are times when it’s best to call it quits to avoid additional loss (whether it be emotional or financial). Knowing when and how to break up can help streamline the process. As for how this all applies to real estate, the tale’s often similar.

Held at Hotel RL by Red Lion Salt Lake City, a 394-room property situated in downtown Salt Lake City, the Hotel Business Executive Roundtable—”Should I Break Up With My Property?”—welcomed industry leaders from across the country to discuss the following topics: red flags to consider before continuing to move forward with a property or brand, headwinds impacting both legacy and new brands, and situations where saving a property would be in the parties’ best interest. Arthur J. Gallagher & Co. R.E sponsored the executive roundtable, which consisted of 10 panelists in total.

Industry leaders met in Salt Lake City to discuss breaking up with properties.

Industry leaders met in Salt Lake City to discuss breaking up with properties.

To kick off the discussion, roundtable moderator Executive News Editor Stefani C. O’Connor, managing editor of roundtables at Hotel Business, posed the opening question to the panel: “If you have a brand that you want to move on from or you have a property that may or may not be doing so well, what are some of the flags that make you start to shift your thinking about your hotel or your property or what you’re operating?”

Fifteen-year lodging veteran Kirk Pederson, president of Kokua Hospitality, a San Francisco-based hospitality management company, answered bluntly: “If you’re paying attention, the guest is definitely the lead indicator. If you’re paying attention, the guest is telling you. They’re not stupid.”

Bill Linehan

Bill Linehan

On the same page, Bill Linehan, EVP and CMO at RLH Corporation, pointed out how all the indicators are transparent. “When you look at reputation scores and semantic content, we all see it,” he said. “We no longer need the 50-question surveys for a consumer to tell us their intent to return.” RLH Corp. uses this strategic thinking in practice; there’s a single question on its feedback survey.

If the decision has been made to keep the property, changes more often than not follow, but as far as what needs fixing first, priorities aren’t the same for everybody. “It depends on who you’re asking,” said 25-year industry veteran Mike Hines, chairman and founder of HP Hotels, a Birmingham, AL-based hospitality management company. For instance, if a management company goes to an ownership company for capital, the former learns rather quickly what’s important to the latter.

Andrew Hibbard

Andrew Hibbard

Brand proliferation has hit the hospitality industry hard; it seems there’s a new brand at every turn. While some executives believe this shows a maturing industry, others feel it’s confusing the industry as well as guests. Andrew Hibbard, VP of finance and investments at Vision Hospitality Group, a Chattanooga, TN-based hotel management and development company, addressed his concerns to his fellow panelists: “How many brands can you put out there for guests to choose from? You can name a handful of brands to just any Tom, Dick or Harry on the street, and are they going to be able to identify those brands? Are they going to know those brands? That’s one thing that gives me some pause.” The segmentation of soft brands adds additional complexities.

What some in the industry tend to forget: Consumers hold the power. They’re the ones who decide whether a brand lives or dies. “We try to look at it from the consumer’s perspective and try to come up with all the different segmentations, but ultimately, whether a brand succeeds or not is whether it resonates with the consumer,” said Greenwood Hospitality Group principal Aik Hong Tan, who currently engages in the financial and investment disciplines, and growth strategies of the Greenwood Village, CO-based acquisition and management company. “What does the consumer say about that particular brand or whatever the product may be? It’s not what the franchisor or the developer or owner thinks, it’s really from the consumer perspective.” When it comes to developing new brands, all angles and considerations should always be viewed from the consumer’s eyes.

Michael Cahill

Michael Cahill

From an investors point of view, Michael Cahill, founder and CEO at HREC, a Denver-based investment banking and consulting services, acknowledged that with regard to a property saving a brand, letting a brand go or moving on to another segment, branding helps itself. “I think a lot of people look for that in any teasers that go out,” he said.

Look for additional insights from panelists, including Scott Andrews, managing director at Hotel Franchise Finance at Wells Fargo; Roger Bloss, EVP and president of global development at RLH Corp.; Brent LeBlanc, SVP at Peachtree Hotel Group; and Imesh Vaidya, CEO at Premier Hospitality, in the Oct. 21 issue of Hotel Business.)

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