GOLDEN FLEECE HOTEL

Golden Fleece Hotel



Golden Fleece Hotel

Problem that organisation faces

When investing into the Golden Fleece Hotel, it is necessary to consider the risks relating to acts of God, terrorist activity and war which could reduce the demand for lodging, and may adversely affect the revenues.

Acts of God, such as natural disasters and the spread of contagious diseases, in locations where the business is, manage or franchise significant properties and areas of the world from which it draw a large number of customers can cause a decline in the level of business and leisure travel and reduce the demand for lodging.

Wars, terrorist activity, political unrest and other forms of civil strife and geopolitical uncertainty can have a similar effect. Any one or more of the above events may reduce the overall demand for hotel rooms, timeshare units and corporate apartments, or limit the prices that the business is able to obtain for them, both of which could adversely affect the revenues.

One of the most significant changes in the hotel industry in the past several years is the amount and speed of available information.  Industry pundits and Wall Street analysts abound.  There is a major conference every month and published data (print, fax and Internet) overwhelm us.  With all this information, and with Wall Street controlling such a large part of the industry, many would think that lodging would begin to act like an "efficient market" . . . if it were not for one not-so-minor point.  Real estate (hotels included) is a local business. 

The fact that occupancies are falling does not speak to whether someone would be happy to own a hotel in Manhattan right now.  Even within a given locale, individual segments and sub-markets behave differently.  A 60% occupancy sub-market with a variety of brands and hotels of varying age and condition will likely have properties which run 75% and properties which run 45%.   Averages are misleading; as one of my ISHC colleagues is fond of saying, “a man can drown in a lake with an average depth of one inch”. 

The simple fact is, industry generalizations (including my own written above) must be balanced with local market realities.  My hometown, Phoenix, Arizona, is a good case in point.  In the wake of thousands of new limited-service hotel rooms, overall market occupancy declined substantially.  Industry experts bashed the city as one of the most overbuilt in the country causing lenders to redline the market. Indeed, most budget, economy and mid-priced hotels will struggle in the next two years; yet, there are few informed investors who would not be happy to own a luxury resort in this market.   When it comes to understanding why owners miss the window of opportunity for a sale, we find that more often than not, it is not lack of expertise or greed, but rather, carelessness.  Monitoring the real estate cycle in dynamic markets takes a lot of work because many factors must be evaluated on a continuing basis; these include: 

An honest assessment of ...