With 20+ years of experience exclusively in hospitality real estate brokerage, Charlie Fritsch is uniquely suited to write this blog for hotel owners, focused on educations topics and current events affecting hotel operations and transactions.
Updated: May 18, 2020
The hotel industry has had a major shock to its system due to COVID-19 pandemic. Whether this has changed your plans to sell or hold a hotel in portfolio, you will want to know these pricing strategies.
Myth # 1: The higher I price my hotel, the more money I will get for it
Market conditions have just changed very rapidly from a seller's market to a buyer's market. . .
Deferred Sales Trust May Be The Answer.
If you own a hotel, you have two options: hold or sell. If you sell your hotel, you have three options: pay capital gains tax, defer capital gains tax using a 1031 exchange to purchase a new hotel, or defer capital gains taxes using a Deferred Sales Trust (DST).
Current interest rates are at historic lows. Yesterday, the Federal Reserve cut the Prime rate to 4.75% and the 10-Year Treasury has been hovering around 1.7% to 1.8%. However, The Fed has indicated that it will pause any further rate cuts in the near term. Meanwhile, hotel values are strong, and hotel lenders are offering very competitive terms.
CMBS loans offer numerous advantages to hotel borrowers; such as the ability to fix a low interest rate for a 5, 7, or 10-year term. There are also some features that borrowers need to be aware of when getting a CMBS loan. . .
October 15, 2019
Slow and steady revenue growth is keeping the industry optimistic, but it’s the profitability which is worrying some hotel investors and management companies.
According to the HVS presentation at the Lodging Conference, hotel net income, as a percentage of revenue, peaked in 2015 and has declined for 3 years in a row. The dilemma for hotel management companies is how to carry more top line revenues through to bottom line profits.
August 22, 2019
As noted by Felix Richter of Statista in this excellent article, "Inverted Yield Curve: An Ominous Sign?" the U.S. Treasury yield curve is now inverted; meaning that short-term Treasury bond yields are higher than for longer-term bonds.
Hotels are under pressure from rising costs from franchisers, labor, and construction costs for new hotels. One hotelier recently told me he worries that the margins are now too thin; when a downturn hits, some, maybe many hotels, will not be able to maintain a profitable status.
April 3, 2019
There comes a point in the growth of your hotel business when manual entry, separate databases and inadequate reports and data from your legacy back-of-house technology is costing you more time and resources. You know you want one integrated software system that is easy to use, secure, offers time-saving efficiencies, and can help lower your operational costs, but what do you need to get these results? Here are 6 features to look for in modern business systems to get the highest return on investment.
April 3, 2019
Learn how to save money with lodging rates, level 3 credit card processing and integrated accounting and payments. Hosted by Charlie Fritsch, President of MBA Hotel Brokers, with Candra Rader of APS Payments and Chris Hall of Hotel Investor Apps.
What is the cost of doing nothing?
February 28th, 2019
As you consider the effectiveness of your hotel accounting and a possible change in software, you need to look beyond the initial cost of licensing to the impact on operating revenues and expenses; to the total return on investment in a modern technology. Here are 7 Questions to Ask Yourself When Deciding on an Accounting Upgrade:
December 4th, 2018
CSSI is the premier national company providing quality, affordable, engineering-based cost segregation studies and tax analysis studies for businesses for over 16 years. Learn More: http://www.cssiservices.com/mba_hotels/
Hotel Investor Apps Accounting Suite is built on the fastest-growing ERP & accounting platform in the United States. Hotel owners, managers and support staff can: Access a multifaceted web-based accounting solution, Create informative dashboards and customized financial reports most relevant to decision-making, Customize to optimize your workflow, Access immediate and secure file storage, budgeting and forecasting, and Use built in search features, help guides and more. Learn More: http://hotelinvestorapps.com
How to Set Your Hotel Business Up for Success
September 12, 2018
Nationally, hotel performance is growing and the hotel transactions market is strong. Many analysts think there is still time in this extended market cycle before the next downturn. According the Hotel Management, "The hotel industry is predicted to grow comfortably through 2018 and for the next two years".
Whether this will be your first hotel or just the latest expansion of your portfolio, here are 10 tips to consider before and during the due diligence process to set your business up for success:
6 Factors to Consider When Timing Your Exit
August 24, 2018
MBA Hotel Brokers has been selling hotels for 20+ years. We have been through multiple industry cycles, local market boom and busts, and we have sold hotels in every ownership status and resolved countless situations which at first seemed like ‘deal breakers’. We have seen it all.
If you have been considering selling any of your hotels, here are some tips for timing your exit: ... CONTINUE READING
And a Free Online Calculator to Check Current Rates and Compare Savings
July 19, 2018
The hotel financing market is changing. The Federal Reserve has increased prime interest rates twice so far in 2018 and has proposed two possible hikes later this year. Here are a few questions to see if refinancing is a good option for your hotel investment, plus an online tool to check current loan terms. . . KEEP READING
April 24, 2018
Presented by Charlie Fritsch of MBA Hotel Brokers and Hotel Investor Apps and by Ann Hambly of 1st Service Solutions
Hotel Loan Hub is an online financing platform for designed specifically for financing applicaitons for hotel purchases, construction, and refinancing. Learn More: https://www.hotelloanhub.com
1st Service Solutions provide advice and solutions for anything ranging from the addition or removal of collateral on an existing CMBS loan, to the most complex loan restructure for all loan types, nationwide. Learn More: http://1stsss.com
Do Less and Accomplish More! Enjoy work and life!
October 19, 2017
Everyone’s time is precious. We believe that the best technology lets us do less and accomplish more, increasing the efficiency and effectiveness of our work time, giving us time to enjoy this life in whatever way our spirit leads us. Hotel Investor Apps Accounting Solution has tons of time savings features, and it also has the latest technology advantages and disruptive pricing . . .
Steady Growth and Changing Market Dynamics for the Hotel Industry
July 27, 2017
In reviewing the hotel market data, I am reminded of the 1967 hit Sonny & Cher song, “The Beat Goes On”. I think the song's message is basically, even as everything is changing, human nature remains the same. For the hotel industry, as much as things keep changing, the underlying beat goes on, and the tone is in a positive direction.
Its summertime now in the hotel industry, and indeed the beat goes on. The transaction market is HOT! Plus the market impact of RevPAR growth, interest rates, and cap rates. . . CONTINUE READING
2017 Cap Rates, Interest Rates and New Supply and Thier Impacts
March 7, 2017
Hotel sales volume may have been down in 2016, but hotel sales were actually strong in 2016 with $23b . . . CONTINUE
Maybe hotels can also create greater harmony and a little taste of enlightenment in the weary world of a modern traveler.
February 4, 2017
In “ENLIGHTENED REAL ESTATE: Transforming ourselves and the world around us”, by Barry B. Scherr, with a special section by noted Vastu architect, Jonathan Lipman, AIA, the author makes the case that despite acceleration of advances in science and technology; the realization of greater fulfillment in life, achieving a more nurturing lifestyle free from fear and anxiety, eludes almost all of the people in this world we live in.
Brillata is an innovative solution for hotel supervisors, housekeeping and maintenance staff.
December 16, 2016
Hoteliers are embracing technologies in all aspects of hotel operations. However, most hoteliers must prioritize which technologies to adopt to maximize efficiency within their budget. In my view, new hotel software should pay for itself; either in reduced expenses and increased top line or bottom line revenues.
A new software app which reduces expenses by creating efficiencies in housekeeping and maintenance, while being easy to use and affordable is Brilatta.
October 17, 2016
If you own a hotel(s), and plan on selling in your lifetime, you will want to know these pricing strategies.
Myth # 1: The higher I price my hotel, the more money I will get for it
Unlike what some hotel owners may believe, the advertised list price is not independent of revenue and other hotel valuation factors, and it is NOT the case that if you ask more, you will end up with more. Asking too high of a price relative to gross and net operating incomes will simply mean hotel buyers will ignore the offering. The negotiation process is not a set compromise between two values. . . KEEP READING
September 12, 2016
The Hotel Data Conference was held last week in Nashville TN, hosted by STR (formerly Smith Travel Research) and Hotel News Now. As reported by HNN Newswire, STR and Tourism Economics forecast a slowdown of growth for the lodging industry. KEEP READING
August 26, 2016
Occasionally a hotel owner will say to me that they rarely even look at the STR, (STR, ie, Smith Travel Research) report which shows ADR, Occupancy, and RevPAR data for the last week to 4 weeks, and the monthly report which goes back for 12 months at least. Also useful are the franchise ranking report, and the Medallia report of guest satisfaction ranking. Not reviewing this data regularly is a missed opportunity to study your market performance and your hotel's performance, regardless of the size of your hotel, or the size of your market. Doing this can yield actionable knowledge that can help you improve your hotel's performance and maximize revenue. CONTINUE READING
August 12, 2016
The quality of the profit and loss statements, and quality of the record keeping in general are an asset whenever you decide to exit a hotel investment. First of all, it should go without saying that only the revenue that is shown on the statements is used in any valuation of the hotel. The old adage, “garbage in, garbage out” applies to a P&L statement. As a broker, to help you get the most return on investment, we want the opposite. Put in quality data, to get quality intelligence out. CONTNUE READING
August 2, 2016
Presented by MBA Hotel Brokers and Hotel Investor Apps
Learn More about Hotel Investor Apps, and their accounting solution for hotels, Hotel ProfitGuide, at http://hotelinvestorapps.com/
July 29, 2016
Accounting should be able to provide a hotel owner reliable insight into the operations and financial well-being of their business. Insightful reports must be available without delay all the time to all key personnel without the owner or others waiting for their accountant to get around to creating the reports. To operate your hospitality business efficiently, here are some more features available in a good accounting program: KEEP READING
July 15, 2016
In my 20 years of experience in the hospitality industry, primarily as a hotel real estate broker, I have seen thousands of hotel profit and loss statements. Over these years many successful hotel owners have grown their portfolio from one or two hotels, to 10, 20, or 100 hotels. One challenge of this growth of a hotel portfolio is that certain systems and ways of operating one or two hotels become dysfunctional or obsolete. Almost all hotels have had their front office software updated in the last 5 years, so why would you still operate with the same old PC based or even web based accounting programs that have not kept up with the fast paced advances of the latest technology. . . Continue
July 1, 2016
As a hotel broker, one point of contention I see in many deals is the arrival of the franchise property improvement plan, a.k.a. the PIP. Hotel franchise companies often take advantage of the license transfer to require more extensive renovations than is required of the seller to continue with the flag. Franchise companies know that hotel buyers can obtain financing to cover larger renovations included in the acquisition loan. In fact, for the buyer, financing the PIP in the new mortgage is indeed the best way to finance the cost of a PIP. . . Continue
June 17, 2016
The SBA 504 Refinance loan program offers up to 90% loan to value, based on the appraised value, of the real estate property. The effective interest rate on the SBA’s portion of the loan is low, as low as 4.22% in June, and is always fixed for 20 years. It is also possible to get cash out for operating expenses with up to 75% loan to value. . . Continue
June 10, 2016
Hotel values are driven by room revenue and net income. So whether you are considering selling or refinancing now or later, the more revenue your hotel generates, gross and net, the greater it's value and the greater your exit profit. Last month Choice Hotels became the latest Franchisor to join the so called ‘Direct Booking Wars’. . . Continue
May 13, 2016
You're looking for a hotel acquisition. You've identified some target criteria: States or markets of interest, type of service (limited, select or full), possible brands, price limit, number of rooms, etc. You may also have in mind target parameters such as cap rate, price per key or a room revenue multiplier that fit the product and market. . . Continue
May 6, 2016
In many markets, summer is the peak season of the year and hotel investors like to time purchases to take advantage of this strong revenue season. Yet, it may be far more important to time a hotel transaction to the larger ‘season’, or cycle, of the hotel industry. By some accounts, the hotel industry seems to be moving into the ‘Autumn’ season, but for the mid-sized single-asset sale, the data shows we are still in peak ‘Summer’ season. . . Continue
April 26, 2016
You may have heard recent negative forecasts for commercial financing markets, most notably Hotel Management’s April 18th cover story “Why Lending is About to Get Tighter”. The Crittenden Report of April 11 also reported on CMBS loan underwriting fluctuations and tightening for hotels, as well as some pullback later in the year by Life Company lenders. Crittenden notes that bridge and debt fund lenders will then fill the gap that a shrinking CMBS and Life Company pool of funds for hotels creates. We agree that CMBS lending is getting tighter and less attractive, and will have greater volatility this year. MBA Hotel Brokers and our Capital Markets advisory division, MBA Capital Funding, have seen the widening spreads and increased volatility in the CMBS lending market in 2016, resulting in higher interest rates for borrowers. . . Continue
Presented January 20, 2016 by MBA Hotel Brokers and MBA Capital Funding with 1st Service Solutions.
Inverted Yield Curve Hotel Companies Bottom Line continued »
"Even though MBA represented the seller in this transaction, John was also very helpful to us, the buyers, especially in expediting the franchise application and franchise agreement process with Choice Hotels International, where MBA has some valuable business contacts and has formed a strong relationship with the franchisor." - Buyer Comfort Inn and Suites, Pennsylvania