Mr. Kalanda

Development & Construction

Getting Ready to Sell: Eight Steps to Increasing Your Hotel's Value

By Jan Kalanda, Co-Founder, Morgansheer Hospitality

To make a sale of you hotel happen at a good price you need to be sure you've optimized the property's value before putting it on the market. We at Morgansheer Hospitality at Level Group have identified eight areas that, correctly addressed, should position your property to attract a good offer.

  1. Review Your Management Company's Performance

    If you have retained a management company, review their performance to insure they are performing at the level needed to and grow revenues and occupancy rates. An effective management company is involved day to day in operations. They should be able to answer detailed questions about staffing, standard operating procedures, maintenance status and how the property compares to others in the relevant competitive set. Press the management company, if necessary, for this information. You need an accurate picture of where you are now before you make other decisions.

  2. Conduct a Comprehensive Overview of the Property's Status

    Due diligence is critical. Confirm all facts, such as physical conditions, procedures and anything that concerns hotel operations. Gather a list of employees, including positions, current salaries, salaries and bonuses paid during the last three years, and resumes of key employees. In addition, make sure you have copies of any governmental licenses, permits or consents, and customer information.

    Frequently, hotels for sale are in need of some kind of improvements or upgrades and these will require spending money. In conjunction with your management company, or, if you're self-managed, on your own, identify the improvements or upgrades that are most needed. Prioritize so that you are spending your money wisely, strategically, and where it will most bolster your prospects for sale.

  3. Improve Standard Operating Procedures (SOP)

    Based on your own observation or input from your management company, look for services you can improve that will result in greater guest satisfaction. The goal, of course, is that service improvements will translate into good reviews on Trip Advisor and other travelers' review sites. Engage employees and get their input in developing the new procedures. Whether it's housekeeping or engineering or purchasing, when employees are involved in developing standard operating procedures, the procedures are more likely to be relevant and employees are more likely to follow through. Make sure the new standard operating procedures are detailed, are in writing and are accessible to employees at all times. Have department heads follow up with employees and ensure that they're carrying out all procedures. When managers reinforce standards, employees adopt the new practices more quickly and thoroughly.

  4. Ensure Rate Integrity and Yield Management.

    An effective management company should be keeping a good watch on your property's yield management, that is, whether you're selling the right room to the right customer at the right price, and your rate integrity, that is whether your pricing is reasonable and non-arbitrary.

    Many things affect your rates, of course, such as seasonal fluctuations or special events in the area. Determine your competitive set, that is, other hotels in your neighborhood that offer a similar service level, and watch their rates regularly - weekly, and even daily. Comparing your rates to your competitive set will help ensure you're maintaining rate integrity. It's usually best to assign someone on your team, possibly someone in sales, to develop expertise in tracking yield management. This will help your profitability stay on track.

  5. Strategically Reduce Expenditures

    Your property will be more attractive if costs are under control. So, reducing expenditures is important, but you want to do that without compromising service or standards.

    The big four costs are: labor, utilities, maintenance and purchasing. Of these four, labor costs are the biggest. Look carefully at scheduling your staff, as either over or under-staffing increases your costs significantly. In addition, consider hiring outside labor providers, such as companies that . provide housekeeping staff. Using an outsource labor provider can result in meaningful reductions in your overhead.

    Utility costs are tied to your energy usage, of course, and major investments that reduce energy usage may ultimately produce big savings. For example, infrastructure investments, such as air conditioning or windows, can save a lot of money. Other investments, such as controls that shut energy down when a room isn't occupied, or using LED lights and dimmers will also reduce electricity use and costs. As a bonus, your property will also be more attractive to buyers if you've introduced environmentally conscious and energy efficient measures.

    To reduce maintenance costs, stay on top of needed repairs for the operation and appearance of your hotel. Deferred maintenance often results in much higher costs.

    Practice smart purchasing to gain more budgetary control, in particular, food and beverage purchases as those can make or break your budget. You or your management company should be paying daily attention to food and beverage purchases to spot excess items.

  6. Increase the Digital Presence of Your Property

    All properties need a strong online and social media presence. Frankly, it's surprising and disappointing how many hotels still lag behind on the digital front. It's also really unfortunate because digital technology gives you instant, world-wide reach. The small, independent hotel can be on the same level with the same visibility as big chains. You should be taking full advantage of that resource!

    On the most basic level, make it easy for customers to book their rooms on your site. Make sure your website has the bandwidth to reliably handle your traffic. Strive for an uncluttered website design that highlights booking. Streamline the reservation process. Just a few clicks should get the customer booked.

    For effective ecommerce campaigns, make sure you've hired a good digital marketing firm - one that specializes in digital marketing. Social media is a mature medium now and it is a full time job to successfully use it to your advantage. Don't rely on your cousin-in-law who's more conversant with Facebook and Twitter than you are. Hire experienced professionals. A good social media strategy should yield sales results and customer engagement. Don't be fooled by sheer quantity. 10,000 'Likes' on your hotel's Facebook page may not mean that much. It's possible to buy those 'likes' for pennies and, unfortunately, some firms will do that.

    Instead, look at measures such as conversion rates from site visits to booked reservations. Also, look for customer engagement. Effective social media gets people engaged in a conversation. Beyond 'likes,' look for posts saying that the person stayed at your hotel, enjoyed this meal, or had a great spa visit. Such comments from guests with 500 Facebook friends will be automatically shared with 500 other potential guests. Make sure you're working with a digital marketing company that excels in targeting social media users and developing those kinds of conversations.

  7. Invest in High Tech Capabilities for Guests

    Increasingly, the availability of technology is important in landing new travelers, especially business travelers. Today's business travelers often care much more about the availability of high speed Internet and connectivity than, say, the size of their room. They may not want to stay in their room, preferring the lobby or a working space. Most business travelers are equipped with their own laptops, so a business center, so common 20 years ago, isn't as necessary. However, many business people prize a space to meet and work with others. Note: this is not a bar or a restaurant, but a quiet space to get work done. The ability to provide a reliable high tech experience that supports today's professionals will be key to making your hotel more valuable.

  8. Target Emerging Markets to Increase Business

    Industry observers are predicting that the international market will double by 2020. Much of the growth is expected to come from travelers from China, India and Southeast Asia. To position your hotel to take advantage of that growth, a first step is to have your website translated into Mandarin, Hindi, and other languages. Be aware, however, that some countries, such as China, have their own search engine. An international traveler may not find you via Google. So, in addition to translating your site, register your site with the appropriate search engines.

    Corporate business travel in general can be an attractive way to increase your business. It tends to be reliable, repeat business that bills at a good rate. Business travelers are on the "company's dime" so they often look for premium rooms. You may want to set aside certain floors or rooms with more upscale furnishings, service and or other amenities that appeal to the business traveler.

    To increase corporate business, take the initiative to call on corporate accounts that are near your property. Find out what they're looking for in accommodations for their traveling business guests, whether domestic or international. For example, if they want services such as transportation arranged in advance or restaurant reservations or a spa or hair salon. Highlight whatever would make your property appealing to their visiting business guests on your website, your marketing materials, and in your presentations.

Many variables go into real estate markets that make them hard to predict. But we believe if you study the market and carefully address the eight areas we've identified, you've prepared the way for a good price.

Jan Kalanda is a co-founder of Morgansheer Hospitality, an in-house hospitality team at Level Group, an innovative, full-service commercial and residential New York real estate brokerage company. Born in Czechoslovakia, Mr Kalanda emigrated to the U.S. in 1983, becoming an American Citizen in 1989. Mr. Kalanda began his 32-year hospitality career as Chief Engineer at the Garden City Hotel in New York. This experience at an iconic, 1874 Long Island landmark, with 272 rooms, multiple restaurants, conference facilities and a spa, laid the foundation for his successful career in property and hotel management. Mr. Kalanda can be contacted at 917-593 3037 or Extended Bio... retains the copyright to the articles published in the Hotel Business Review. Articles cannot be republished without prior written consent by

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