1984 research outputs found
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How Fast Do New Hotels Ramp Up Performance?
No full textUsing an event study methodology and data from 3,494 new entrants in the U.S. lodging industry, this paper examines how quickly new hotels ramp up their performance after opening. For the years 2006 through 2009, new entrants entered with average daily rates (ADRs) above incumbents, and took seven quarters (1.75 years) to ramp up occupancies to the levels of comparable incumbent hotels. These averages include performance behavior of brand-managed, franchisee-managed, and unaffiliated independent hotel new ventures compared with incumbent hotels in similar geographic markets, locations, and price segments. Overall, new hotels reached comparable revenue per available room (RevPAR) performance by the second quarter of the second year of operation. RevPAR ramp-up was earlier for brand-managed hotels (first quarter of the second year), an outcome primarily attributable to higher occupancies and lower initial ADRs. Independent hotels took substantially longer than other new entrants to reach the RevPAR performance of existing hotels. Based on the faster ramp-up of new branded properties, the chief implication is that hotel developers should consider affiliating with a brand for quicker stabilization and short-term gain. The speed of hotels’ ramp-up also calls into question the conventional view that new hotels represent a relatively risky investment
Calculating Damage Awards in Hotel Management Agreement Terminations
No full textWhen a hotel management agreement is terminated without the consent of the manager, the law clearly allows the manager to recover damages (from the owner) as a result of the termination. In most cases, the owners and managers resolve their issues without litigation. For the substantial number that cannot agree and thus must be adjudicated, the courts have supported solid estimates of forgone fees for determining damage awards, based on careful, defensible calculations of the hotel’s performance during the prospective contractual period. The methodology outlined in this paper provides a way to establish with reasonable certainty the damages that occur from the involuntary termination of a hotel management agreement. While many hotel management agreements contain a liquidated damages clause that establishes the termination fee when the parties agree to terminate the contract, these liquidated damages clauses are not applicable in a situation where the hotel management agreement is terminated even though the manager has not breached the contract. This report provides a numerical example demonstrating that the actual damage amount is at least twice and potentially five times the amount of a typical termination fee. An analysis of recent court cases shows that the courts accept the methodology proposed here, although they may debate the assumptions that underlie the calculations (such as the anticipated inflation rate). What courts will not accept are unsupported estimates and certain expense claims not expressly found in the contract language
Developing High-Level Leaders in Hospitality: Advice for Retaining Female Talent
No full textBased on interviews with twenty women hospitality leaders, this report explores what hospitality firms can do to facilitate the advancement of women into the ranks of top leadership. Drawing on the respondents’ observations in semi-structured interviews, we argue that organizations would likely strengthen the retention of their professionals, especially female professionals, if top leaders make a deep commitment to reevaluate and potentially revise current processes and structures. This commitment includes refocusing on purposeful long-term career development that provides a sightline to the top, and ultimately creates more female role models in executive-level positions. Organizations would also benefit from offering autonomy over how work is completed, and designing infrastructures of support to assist professionals during mid-career stages. Hospitality firms that take tangible, consistent, and systemic action that is executed by motivated and supportive leaders will stand the best chance of retaining a valuable resource—their female professional talent—and benefiting from that expertise
The Value of Flexibility: A Finance Application of Options to Real Estate
No full textReal estate is among the most strategic of businesses. Each property class has both independent and linked economic, demographic, and political constituents. Moreover, there are dozens of parties involved that influence the real estate project’s final outcome. At every stage of a given project, the participants learn new information that affects their plan. Developers learn about the market, local government actions, and tenant decisions, while tenants learn about consumers and competitors. The nature of the business requires and rewards flexibility.
This paper focuses on flexibility and its value in real estate dealings. Specifically, it applies the concept of optionality as considered in corporate finance to address the true value of flexible strategies to real estate practitioners. In recent decades, real estate has evolved in terms of complexity. It has adopted concepts related to valuation from the research-rich field of finance. This trend will logically continue as the real estate industry becomes more efficient and institutionalized.
This paper explores the mechanics of real estate optionality and applies the discussed concepts to practical examples. The types of option agreements covered include the following:
• Option to purchase developable land• Option to renew a commercial lease • Option to terminate a commercial lease
Industry examples are used to provide impactful applications of these topics to developers, investors, and tenants. In the first section concerning land options, a seller faces a decision on choosing between two unique offers from independent developers. The optimal choice is determined by recognizing the financial market value of an option embedded in one of the offers.
In the second and third sections of this paper, the renewal and termination options are considered from the eyes of commercial retail tenants and landlords. Unique cases are presented, and the value of each option is demonstrated using advanced, yet applicable, option pricing methods. Additionally, the renewal option is covered with respect to its value dependants, as well as its worth across U.S. markets
Foreword
No full text[Excerpt] Welcome to the 2014 edition of the Cornell Real Estate Review (CRER), a publication that features practical, applied research interspersed with commercial real estate cases and industry awards relied upon by our readers
The Differential Effects of the Quality and Quantity of Online Reviews on Hotel Room Sales
Get PDFWhile it is generally accepted that hotel reviews and ratings posted on travel websites drive hotel sales and revenue, the effects of reviews can be parsed into volume (the number of reviews about a hotel) and valence (the ratings in those reviews). This study finds that the two chief aspects of reviews—volume and valence—have different effects on hotels in various chain scale segments. Industry reports and academic studies show that online reviews influence customers’ choice of hotel and thus drive hotels’ revenue per available room (RevPAR). However, the valence of those reviews has a greater effect on luxury hotels’ RevPAR, while the volume of reviews has a greater effect on lower-tier hotels. Based on a study of 319 hotels in the London metropolitan market, these effects apply equally to urban and suburban hotels, as well as chain and independent hotels. The results further indicate that the rating score effect on RevPAR has little impact on the economy and midscale segments, while an increasing number of reviews actually has negative effects on higher-end hotels
Outsourcing and Role Stress: An Empirical Study of Hotel Spa Managers
No full textHotel owners and managers are increasingly outsourcing their spas to specialist firms that oversee the spa’s operations and personnel. In such spas they assume the role of boundary spanners as they are responsible for overseeing the operational relationship between the hotel and spa companies. In this role, they are responsible for trying to satisfy the hotel and spa companies’ often contradictory expectations while also often adhering to two sets of operating guidelines. As a result, they may experience different levels of role conflict and role ambiguity than spa managers who oversee spas managed by the hotel. The results of a questionnaire completed by 166 hotel spa managers from spas managed by hotels and those managed by third parties found greater levels of these role stressors in managers of outsourced hotel spas. Based on these findings, research suggestions and managerial implications are discussed
Sound Off #1-2 Industry Professional Response
No full text[Excerpt] As Chairman and Chief Executive Officer of Power REIT, I bring with me 25 years of experience in real estate investment and finance. Prior to Power REIT I held leadership roles with several public real-estate investment trusts (REITs). My experience in the REIT sector and previous investment experience with renewable energy projects allowed me to understand how renewable energy and real estate intersect, and how REIT ownership would be a powerful structure for investing in and reducing the cost of capital for renewable energy projects