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Tactics hotel brands should employ to expand and increase portfolio value

Iexpand portfoliot is understood that many hotel brands do not actually hold real estate assets.  The strategy is always to increase the brand’s footprint, market share and value by securing management contracts.  “Asset Light” has been a hospitality industry mantra for many years, and it is a good strategy.  However, how does a brand reach its expansion goals in a challenging, ever-changing economy, and competitive industry?  That is the one-billion-dollar question, but not as complicated as most believe.

In our role as advisors and consultants, Morgensheer Hospitality Inc. enjoys long-standing relationships with several major hospitality brands and secondary operators, ranging from mid-market to luxury.  Most important, we have cultivated a network of investors that include Funds, REITs, Family Offices, Independent Investors and Developers, who are active within the hospitality/luxury residential, single, and multi-family sectors.

We are tasked with identifying development/investment opportunities which include ground-up and acquisition of existing assets, as well as office to hotel conversions.  Over the past 14 years, we have created a methodology to meet and exceed our clients’ and partners’ expectations and investment goals.  In our practice, we have witnessed challenges preventing many hospitality brands from achieving management contracts and expansion.

I thought I would take this opportunity as we approach the end of 3rd quarter, to share strategic tips to help brands expand, achieve revenue goals – to create and maintain Market Share and brand value.  There are nuggets here if you really consider, think of the suggested tactics below, as a ‘Brand Expansion Playbook.’

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And as always, we at Morgensheer Hospitality Inc. are happy to discuss further – answer questions and/or assist.

Review your development team

Do you have the appropriate team with the skill set and connections, to achieve desired goals?

Consider stepping out of the box and reinventing your Development/Acquisition divisions to attract investors and owners.

Your Business Development and Acquisition teams are an extension of your Asset Management/Investor Relations department.  Consider that the BD team is responsible for expansion, increasing value, market share and driving investor returns (via management contracts).  And so, capital market experience, skillset and contacts should be the deciding factor when acquiring Human Capital for your BD, Acquisition and Development divisions and teams.

The following are best suited as BD/Acquisition/Development team members – to expand brand portfolio, identify investor/developer partners:

  • Capital Markets – MDs (Managing Directors) with expertise in hospitality/real estate, from leading Wall Street investment firms and funds.  Why?  They come to the table with a Book of Business!  I.e., Family Offices, Investors, Developers. Some of my best referrals have come from MD’s who have introduced me to their clients (family offices) for the purpose of identifying hotel brand partners.
  • Commercial Real Estate Professionals – Seasoned professionals in this sector who have transacted in commercial real estate (hotels, resorts, hotel residences, luxury condominiums).  Why?  They have an extensive network of developers and investors who are well-capitalized and interested in partnering with hotel brands to diversify their portfolios.
  • Banking/Finance – those who have structured deals – are a tremendous resource as they possess ‘Platinum’ networks. Bonus – they understand deal structure and can be a tremendous resource in closing management contracts.
  • Development Professionals – VPs and SVPs who have successfully led development teams in key and feeder markets, working for entities backed by strong capital partners. Consider their networks of investors – contacts.  This group often will have hospitality (development) expertise.

Build a network of MVPs (Most Valued Partners)

Your next Management Contract, in your target market will be unknown to your competition, or anyone for that matter.  Yes, I am talking OFF-MARKET, that is the source of expansion and acquisition – always.  These opportunities are not listed for a host of reasons including investors not connected to the hospitality industry.

What do I mean by that?  Well, your potential Investor, Partner is not well-versed in the hospitality sector, which is why they seek successful operating partners.  They are relying upon Trusted Advisors (Your Potential MVP) to guide them to find the best Managing Partner for their investments.  So, who are the MVPs?

  • Consultants – Provide Advisory Services – they possess a diverse network of investors and developers (domestic and international) – these folks have expertise in the hospitality sector; and may have launched their careers in the industry, transitioning to the financial and commercial real estate industries (Yes, Morgensheer Hospitality is in that group).
  • Commercial Real Estate Experts, Representing Investors – this group transact in boutique firms or independently, and do not list opportunities, but instead, pull from their network (matchmakers). In this case Size does Matter – Small can be beneficial and net desired returns.
  • Investment Bankers – cultivate relationships with this group – start at the mid-management level.  Why?  They are still building their books of businesses and have their ear to the investment community ground. They consistently expand their networks to meet required KPIs.
  • Independent Commercial Real Estate Executives – this group, like the first bullet point, spend All of their time cultivating relationships.  They are a tremendous resource for you.

Tools of the trade – what to do next?

Assuming you have implemented the above.  What are the next steps for uncovering opportunities for expansion?

There are several globally recognized deluxe and luxury brands within my network, to whom I present the most coveted opportunities first!  Yes, I have favorites, and they know who they are.  The reason they are my favorites is because they excel in the following areas:

  • Communications – my Go to Brand partners are Impeccable communicators. They provide management contract criteria and various deal structure scenarios.  Additionally, they make themselves available for questions.
  • Responsiveness – respond in a timely fashion (24 hours) to emails/inquiries from professionals reaching out to discuss potential management contract opportunities.  Lack of response results in NO Contract.  If you do not have a relationship with the party, it is worth 5 minutes to evaluate the validity of the opportunity, as well as the contact’s expertise.  Every inquiry deserves a response; you are in Hospitality after all and represent your brand. You could miss a contract and relationship by not responding.
  • Do not judge an MVP by Her Cover – Just because an MVP is not on your radar does not mean that She is not a valuable resource.  And/or, does not have an impressive client roster and connections in markets you are targeting.  My most important brand relationships began with the brands’ development teams, taking the time to learn about my network and opportunities. Cultivating a relationship generates revenue.
  • Brand Strategy/Program – clearly communicate to the potential MVP, your brand’s program, and strategy.  I.e., desired markets, investment strategy, management guidelines, BSF, key count, room category and size, as much information as possible.  It will save time and enable your MVP to do their homework to present desired opportunities.
  • Management/Operations Team – If you are not set up internally to enter a market you should not engage in a discussion regarding an opportunity within that market. Be transparent and decline an opportunity at the onset. Your “why” can remain your business and not for public consumption. I had a brand say to me once that they did not have the staff to properly operate an asset I was presenting. Yet they asked for the contract. I was floored! Enough said.
  • The Evaluation Process/Timeline – Be clear regarding your internal processes for evaluating opportunities. It is never acceptable for the MVP to follow up several times after presentation. On the rare occasions I have experienced a lack of response, the brand was eliminated from my Go to Network. The lack of follow-up is a preview of what my investors can expect during the relationship. Consider that the MVP is following up on behalf of her client (investor) and communicating the interaction or lack of response to the investor.
  • Deal Structure – JV/Pure Management/Investment Structure – Provide various scenarios in which your brand may engage as a managing partner. Aside from key money, what are the other structures you would consider? Always keep an open mind and consider that your MVP may have Creative Options to offer up that would benefit all. I have done the latter many times; often saving deals which could have died on the vine. Why is this important to be creative? Well, your investor partner will have a portfolio of domestic and international holdings. Wouldn’t you want to establish a relationship beyond just one management contract? So, your question should be “What can we do to extend the relationship beyond a single asset? Can we take you (Investor) along on our expansion journey?
  • Cultivate Relationships – Again, my favorite hospitality/private membership/luxury residence brands welcome communications from me. They respond immediately, simply because they know at the other end of that text or call, or email there is valuable information: trends, news (upcoming deals), OFF-MARKET opportunities, updates on investors’ acquisitions. Additionally, they make it a point to reach out to let me know what they need. They get it and as a result, are killing it in growth.

I will leave you with this, relationships, communications, transparency and creativity are key to building a network of MVPs to expand your brand. While large real estate groups operate in this space, it is the smaller core group and individuals, with long-term relationships with investors, developers, and funds, who will help you achieve your goals.

Make it a business strategy and tactic, to reach out to those folks, cultivate relationships and enlist their help. This is an opportunistic time to expand as there are investors/developers actively seeking opportunities! Many deals are in the works.

About Morgensheer Hospitality, Inc.

 Morgensheer Hospitality, Inc. Is a New York-based, Consortium of seasoned hospitality, construction/management/development, sales, marketing architecture real estate, design professionals and partners from capital markets operating as one entity – Category of One  Morgensheer Hospitality Inc.’s focus is on hospitality assets offering value, in ideal locations (domestic and international) with maximum returns to investors.

The company was established to address the needs of underserved investors within the hospitality, development and commercial real estate sectors representing the following segments: Family Offices, REITs, Individual Investors and Funds.  The integration of experienced professionals comprises the Company of One includes the following capabilities:  Captial Markets, Real Estate (Hospitality and Commercial) in the U.S., Europe and Caribbean, Strategic Brand Partnerships, Construction, Management and Development, Architecture/Design, Real Estate.

Morgensheer’s team members’ experience includes tenures at some of the world’s leading hotel brands, international destinations, and hospitality management firms.

The consortium was established by Trica Jean-Baptiste, a 25-year veteran of the hospitality industry. Trica Spent her career as manager, director of public relations for some of the hospitality industry’s well-known brands:  Le Parker Meridien, Doral Hotels & Resorts and Days Inns of America (formerly Cendant Corp.).

Trica operated a full-service boutique public relations agency representing: Rocco Forte Hotels, Terme di Saturnia Spa & Golf Resort, Mount Cinnamon Resort, Grenada, West Indies, Visit Scotland Business Tourism Unit, Dubai Tourism Unit, The Kitano New York Hotel, Hotel St-Barth, VHR Hotels, Casa Colonial, Ragosta Hotels Collection, Park Hotel Weggis to name a few.

Trica is the author of Operation Reset Your Career in Any Economy.

 

 

 

Tags: Brand Expansion, portfolio value

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