December 2013 I January 2014

HotelManagement.net

THE HEADLINES
JANUARY

FEBRUARY

Fiscal cliff sidestepped, but industry still

cautious about political environment

INTERNATIONAL
The annual International
HOTEL INVESTMENT FORUM
Hotel Investment Forum
Berlin, Germany
in Berlin delved into
Europe's overall weak economic performance
but showcased economists bullish on investment
and development in the regions. In addition to
opportunities in the eurozone, show speakers
explored development in Russia and Africa.

U.S. taxpayers breathed a sigh of relief when January's

fiscal cliff was avoided, and hoteliers were happy to
have some increased clarity in order to plan for the
future. However, worries over payroll tax increases,
higher capital gains taxes and the uncertain debt
ceiling continued to loom over hoteliers well into 2013,
particularly those interested in buying and selling
properties.

Wyndham, Choice, Aimbridge get in

on Jameson Inn portfolio deal
The first significant portfolio deal of the year
involved the distressed Jameson Inn portfolio
of hotels. In December 2012 America's Best
Franchising purchased the brand name and 12
properties operating under the name from Argila
Jameson Brand in an all-cash deal. In early January,
owner Colony Capital tapped Aimbridge Hopsitality
to manage 103 former Jameson Inns comprising
the rest of the portfolio. Forty-nine of those became
Baymont Inn & Suites hotels, six became Howard
Johnsons and one became a Days Inn. Forty-two
others became Quality Inns, two became Comfort
Inns and two became Econo Lodges.

IHIF: Investment
opportunities grow
in Europe, Russia
and Africa

Hotels dive into ADA regulations

Feb. 1 marked the date for hotels with swimming pools
fitting certain size guidelines to comply with updated
Americans with Disabilities Act legislation requiring
pool lifts. The industry fought these updates for a year
and ended up winning an extension to the compliance
date. While some organizations continue to push back,
the pool lift issue is essentially a done deal, and hotel
owners and operators continue to educate themselves
on the best practices for choosing and installing lifts.

Katherine Lugar appointed

president/CEO of AH&LA
In late February Katherine Lugar, former EVP of the
Retail Industry Leaders Assn., was named to succeed
longtime American Hotel & Lodging Assn. president and
CEO Joe Mclnerney. Lugar, who officially took the seat
in April, made government advocacy a primary mission.
In the first months of her leadership the AH&LA would
change its membership model and begin the transition
to boost its advocacy activities.
See 2013 headlines I Page 6

December 2013 I January 2014

HotelManagement.net

2013 headlines
Continuedfrom page 4

The Hyatt House Minot in Minot, N.D. (shown here in

a rendering) opened in late May to cater to the local oil
and natural gas mining industry surrounding the B a ^
Formation.

Legendary hotel industry trailblazer,

developer Hammons dies at 94
John Q. Hammons, hotel developer and
philanthropist, died in May at 94. Over the span
of a 52-year career in the lodging industry,
he developed 210 hotels in 40 states, having
"introduced the hospitality industry to signaturestyle, full-service hotels featuring atrium lobbies,
expansive meeting and convention space,
large guestrooms, podium check-in stations
and complete business traveler amenities that
have become staples in a guest's exceptional
experience," according to a statement from John
Q. Hammons Hotels & Resorts. "Hammons was a
giant in the hospitality industry and was unwavering
in his commitment to exceptional quality and
service and to giving back to the community,"
said Jacqueline Dowdy, CEO of John 0 Hammons
Hotels & Resorts. "He was a great mentor and
friend and will be missed by all who came to know
him, but his legacy will live on forever."

North Dakota's hotel construction boom

The North Dakota Division of Tourism in March released
data showing 80 new hotels sprung up primarily around
the Bakken formation between 2002 and 2012, with
slightly more than 50 percent constructed since 2011.
The investment spotlight turned on oil- and natural gasrich regions in North Dakota, Texas and Pennsylvania,
among other states as fertile ground for ground-up hotel
development to house long-term oil field workers and
cater to the city growth surrounding the regions.

Solid fundamentals push higher pricing

By April, the industry was experiencing continuing
improved occupancy, average daily rate and revenue
per available room, leading to improved hotel pricing,
according to brokers. Brokers said pricing definitely was
returning to peak levels and in some markets surpassing
it. Markets like New York, San Francisco, Miami and
Chicago showed strong pricing levels, and midscale
hotel products with branded loyalty programs showed
the most promise.

New York Hilton Midtown gives

roomservice the red light
In late May Hilton Worldwide made news by announcing
it would end roomservice at its huge New York Hilton
Midtown in August. Instead, the brand opened an
outpost of its new grab-and-go Herb n' Kitchen F&B
See 2013 headlines I Page 8

HITEC: It's all about the Cloud

This year's annual hotel technology show addressed all facets of cloud computing, answering questions like:
How can moving projects and systems to the cloud save money and create efficiency? What does it mean
for security? How much do operators really need to know about the cloud and what vendors should they
choose? The major takeaway: Hotel owners and operators migrate functions to the cloud so they don't have
to worry about technical minutiae, but the process still requires a good amount of planning.

Cloud-based PMS gain momentum as

industry streamlines technology
In 2013 "cloud" became a major buzzword in the hotel
industry, referring to all sorts of data storage and
communication strategies. Property-management
systems proved to be advantageous systems to
migrate to the cloud. Vendors and hoteliers lauded the
advantages of cloud-based PMS, particularly to reduce
stress on a hotel's infrastructure.

H NEWS

December 2013 I January 2014

2013 headlines
concept, saying the demand for roomservice at the
midtown Manhattan property just wasn't there, since the
majority of guests preferred to sample neighborhood
fare. The end result: Hotels around the world are taking
a closer look at how the service pencils out at their own
properties.

J.D. Power study shows overall guest

satisfaction hits seven-year high

After two years of consistent

declines in hotel guest

satisfaction, a report from
J.D. Power shows that guest
satisfaction is finally on the
rise. Not only is this the first
year where guest satisfaction is
posting gains, satisfaction also
reached its highest levels of the
past seven years, according
to J.D. Power's 2013 North America Hotel Guest
Satisfaction Index Study. Of a possible 1,000 points,
guest satisfaction is averaging 777 points, up 20 points
from 2012. This is the highest score on the satisfaction
index since 2006. The largest increases in satisfaction
were found in the areas of reservations, costs and fees
and check-in/check-out.

HotelManagement.net

SEPTEiVIBER

Lodging Conference: It's a sellers' market

Continuedfrom page 6

It's a sellers' market, and by September's Lodging Conference,

hotel owners were taking advantage of thator at least
preparing towhile operators continued to contribute to the
overall transactions climate with strong operating fundamentals.
The general feeling was optimistic, as industry executives
shared examples of pricing near peak, operating fundamentals
at or surpassing peak levels, and transaction volume on
pace. High demand for undervalued assets in a favorable
pricing environment among various types of buyers (whether
private equity investors, real estate investment trusts, foreign
investors or others) makes 2013 "a great opportunity to acquire,
rebrand and reiaunch properties," said Joel Eisemann, chief
development officer, the Americas, for IHG. In order to optimize
those opportunities, all partiesfranchisor, owner, developer and
managerare working to make deals pencil out while time is on
the industry's side.

FOR
SALE

AUGUST

rr

Comparing year-to-date for 2013

with the same period in 2012,
the number of major sales douhied.

184

>300

Total volume of major

transactions

Projected total volume of

major transactions

Source: HVS/STE Hotel Valuation Index

Hotel valuations point upward

According to HVS International data, hotel values had
returned to their 2006 levels by summer, which helped
jump-start a significant boost in hotel transactions by
the middle of the year. Looking back to 2006, the value
that year of $99,000 per room dropped dramatically by
50 percent during the following three years to $56,000
per room, according to the HVS Hotel Valuation Index,
compiled in conjunction with STR. However, once
the industry recovery got under way in 2010, values
increased roughly 20 percent a year through 2012.
HVS and STR have projected that this vaiue growth
will continue at an average of 12 percent for each of
the next three years. "In 2016, valuations will probably
reach their stabilization point and start to plateau," said
HVS President and CEO Stephen Rushmore Jr. "As in
See 2013 headlines I Page 10

Midscale development hits a sweet spot

The midscale and upper-midscale segments got a lot of love from investors and developers in 2013, thanks to
manageable construction and labor costs and higher profit margins. According to PKF Hospitality Research,
m
fe|i 2012 midscale hotels had the highest percentage gains in net operating income and total revenue.
cording to Lodging Econometrics, the upper-midscale and upscale segments accounted for 76 percent
of all hotel projects in the pipeline at year's end 2012. Hotel Management gathered a roundtable of midscale
franchisors in September to discuss the value propositions behind this hot segment.

Raj Trivedi, EVP franchise and

CDO at La Quinta Inns & Suites
(middle), says that while U.S.
brands historically have expanded
overseas, brands that are more
recognized In other parts of the
world may soon expand to the U.S.
He is flanked by Jessica Junker, CIO
of Cobblestone Hotels, right, and
Ron Burgett, EVP, lodging and brand
development. Red Lion Hotels.

December 2013 I January 2014

2013 headlines
Continuedfrom page 8
any cycle, you reach a high point, which then starts to
moderate. All things being equal, the industry therefore
should have at least two to two-and-a-half more good
years."

Hilton Worldwide preps for IPO

In mid September, Blackstone Group made known its
intention to take Hilton Worldwide public through an
initial public offering of up to $1.25 billion. While trading
is expected to begin in early 2014, sources are reporting
Blackstone will retain ownership of a majority of voting
shares. The New York Times estimated the company's
value could approximate $30 billion before trading. Hilton
was taken private by Blackstone in 2007 during a $26.7
billion deal, counted among one of the largest leveraged
buyouts to take place before the 2008 financial crash.

OCTOBER

The changing face of group travel

While 2013 was characterized by general optimism
across the board, one segment felt the pinchgroup
business. Today's group performance troubles stem
from the recession-era shunning of perceived bloated,
corporate-subsidized pleasure trips in the name of
business. Over the past few years the overall group
segment of hotel business has struggled to return to
profitability, and while groups are coming back, most
agree they often look a little bit different than they did
before. On the demand side, STR's SVP of strategic
development Jan Freitag said that despite selling more
rooms than ever, "our data shows that indeed group

HotelManagement.net

NOVEMBER

GMs earning more, spending more and getting more social

According to the results of this year's Hotel Management Voice of the GM survey, now is a good time to
be a hotel general manager. Salaries showed upward movement this year, as 58 percent of GMs reported
earning $60,000 or more per year. The majority of this year's respondents said their operating and purchasing
budgets were up this year, and they made the most of it. Technology was a big spending focus in 2013, most
notably in wireless infrastructure. But even more than technology, bedding and softgoods spending topped
GMs' lists this year. Finally, more and more GMs are getting involved in social media efforts to boost their
property's profile. The fastest-growing social channel in popularity? Pinterest.

Did you upgrade any of the following pieces of technology equipment in the last 12 months?

Televisions Telephones
12.8%

Wireless infrastructure
including adding bandwidth

Property-management
systems

In-room
entertainment

PTAC/
HVAC

Did not perform

any upgrades

40.0%

5.5%

2.8%

9.5%

22.0%

2.3%

What piece of technology are you considering upgrading next?

Televisions

Telephones

Wireless infrastructure
including adding bandwidth

Property-management
systems

In-room
entertainment

Lighting

14.7%

10.9%

22.3%

15.3%

10.1%

16.0%

When will the next renovation

of your hotel occur?

How long since your

property was last
renovated?

Within 6 months

Less than 1 year

1 to 3 years

13 to 18 months

4 to 5 years
6 to 10 years
More than 10 years ago

Have you made any

brand-mandated
changes/upgrades
at your property in
the last 12 months?

19 to 24 months

18.7%
5.0%

2 to 3 years

19.5%

Yes 53.2%
No 46.8%

4 or more years
Source: All charts Hotel Management 2013 Voice of The GM Survey

Government shutdown
puts squeeze on national
park lodgings
When the U.S. federal government
shut down from Oct. 1 to Oct.
16, many lodgings felt the loss,
particularly those within federally
funded national parks and those
catering to government travel. Park
lodging operators reported losses
in the millions per day during the
shutdown. Midway through the
shutdown some states stepped
up to strike deals with their federal
counterparts to get parks and
park operations open again on
the condition that they would be
reimbursed later. This move helped
some lodgings through the worst
part, but year-end operating results
will show the after-effects of this
legislative measure.

demand has not recovered." According to STR, total

group demand in 2013 so far is 2 percent lower than
it was in 2007. Despite the changing metrics, industry
experts agree that group business isn't going awayit
is changing and today's operator needs to recognize
that.

Recovery momentum picks up outside

major gateway markets
According to the September 2013 edition of Hotel
Horizons, PKF Hospitality Research forecast in the Oct.
21 issue of Hotel Management that properties located
outside the nation's major lodging markets will achieve
superior growth in pertormance in 2014. During the year,
PKF-HR predicts hotels operating in secondary, tertiary
and rural markets will enjoy an aggregate revenue per
available room gain of 8.5 percent in 2014. This is the
result of a 2.8-percent increase in occupancy and a
5.5-percent boost in average daily rate. While larger
markets will continue to lead the recovery, secondary
and tertiary markets will enjoy improved operating
fundamentals in 2014, according to PKF-HR.

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