Hotel/Motel Management Tips

See below a list of articles related with Hotel/Motel, Resorts, Villas Management Tips

Thirty Easy Ways To Support Your Industry

It's actually 29 ways.....(List provided by the Florida Hotel & Motel Association.)

by Kirby D. Payne, CHA

Kirby D. Payne, CHA is Secretary Elect of the American Hotel & Motel Association, and Chair of the AH&MA's International Council of Hotel-Hotel Management Companies.

In a recent conversation with Bill Fisher, President of the American Hotel & Motel Association (AH&MA) about membership and the value of membership, Bill made a comment which I thought was particularly noteworthy.

He said, "The industry and its trade associations can only be as strong as those in the industry let it be." The first step in supporting the industry is joining a state association affiliated with the AH&MA. The second step is being active in taking advantage of its benefits, volunteering time on its committees and being an active leader so the association addresses the issues you feel are important.

When you avidly support the AH&MA and its affiliated state associations, great things happen: You grow professionally; you advance the well-being of your industry; and, you generate renewed enthusiasm for your own job or profession.

The best news is this: You can support the work of your industry's trade associations almost any time, with modest effort on your part. Here are 30 ways to do just that. (Not all programs and benefits are available in all states.)

Take advantage of association programs designed to improve your bottom line, pare your expenses and extend your education.
Independent hotels & motels and smaller management companies can expand the benefits offered employees with the state association's insurance, retirement and other benefit programs where they are available.
Update your workers' compensation insurance program and risk-management policies by comparing your current carrier to the association's partner in your state.
Observe national and state Tourism Week (usually in May) with special recognition or "thank you" promotions for guests and employees.
Many state association have school-to-work programs to area high schools and their students. Support them and promote them so young people think of our industry as a possible career just as you did when you started.
Make a tax-deductible donation to association's educational trust fund and the AH&MA's American Hotel Foundation which supports scholarship and industry research like the Best Practices survey currently underway.
Drop a note to your state association's conference coordinator offering ideas for the next events. They are, after all, your events!
Call your state association's headquarters or the AH&MA's resource center when you need information on a topic of interest; and, say "thanks" after you receive it.
Keep the names of your state's association officers and staffers handy. When you meet someone who might be a prospective member, pass the names along right away.
Send news releases and other positive information about yourself or your business to both your state association's publications director and Phil Hayward, Editor of Lodging, the AH&MA's management and trade magazine.
Display your membership plaque at your place of business, along with any association awards you've received.
Let your employees know about continuing education and certification opportunities available in their areas of responsibility, through the Educational Institute, now located in Orlando. Consider paying for their courses (when they pass them) and giving pay increases when they complete certification programs.
Renew your annual membership promptly.
When you have occasion to meet legislators and other public officials, speak about the value of tourism to local, state and national revenue coffers ($67 Billion in taxes in 1996). Support both your state association's Political Action Committee (PAC) and the AH&MA's AHMPAC by giving any amount. It is your right and obligation to speak out and the two best ways to do that are directly to legislators in person or in writing and by donating to our PACs.
Volunteer to serve on one committee and there are plenty of them at the state and national level to keep an organization like our running smoothly. You will influence the issues important to you by serving on a committee!
When colleagues make the news, drop them congratulatory notes (if the news is good) or notes of encouragement (if the news is bad).
Pass along copies of relevant newspaper or periodical articles to other members.
Schedule lunch with a nearby member (or non-member) every once in a while.
Leave your association publications in your office waiting area for others to read.
Write a "letter to the editor" of your state association's trade journal or Phil Hayward at LODGING or any other trade publication on a topic near and dear to you about the lodging industry or what they may have recently published.
Encourage properties or companies related to lodging to become members in their appropriate categories. Always give Allied Members an opportunity to quote along with other vendors. They are supporting us, we should support them.
Offer to serve as a mentor to an association newcomer or a student considering a career in hospitality.
Mention your association's (industry's) deeds and principles whenever you speak in front of civic or business groups. These include our supporting over 6.8 million jobs, paying over $121.6 Billion in salary and wages and creating nearly 200,000 new jobs a year for our national economy.
Publicize your association affiliation when participating in media-covered events.
Schedule upcoming dates for association activities-chapter meetings, national conventions, committee meetings-and block out time for professional reading and study.
Evaluate your participation in association activities from time to time. What have you done well? Where can you improve?
Add association membership and certification to your biography or resume.
Encourage subordinates you are developing to attend industry trade events and to serve on committees, too, so they learn valuable leadership and civic skills that will serve you and them well as they grow in this industry.
When considering purchases of products and services, please consult the various annual Buyer's Guide for your state association and the AH&MA and encourage vendors to participate in association membership and trade shows. Recognize Master Hotel Suppliers (MHS) just as you would CHAs.

Our industry is a great industry with proud traditions. It is a profession that people look up to in every community. We are the hosts, the civic leaders and in many cases the shapers of some local opinion for both the public and our government leaders. We do this individually in our communities and as we develop skills we do it at the state and national level. Our trade associations facilitate that effort.

Our trade associations are not a club, but a commitment to profit. Your properties' memberships in their respective state associations and the AH&MA provides opportunities for generating business for all hotels on the international, national and local levels. Forty-eight million room nights per year are filled via listings in the AH&MA's directory, the OAG Business Travel Planner Hotel & Motel Redbook. AH&MA's state associations help fill millions of rooms through their effective directories which are distributed at convention and visitors bureaus and state welcome centers. And finally, our strong and unified voice helps increase national and state tourism budgets. Because growth is the key to a prosperous hospitality industry, our primary focus is to help you keep costs down and profitability up.

For information about the American Hotel & Motel Association, affiliates and the various member state associations and their programs call 202-289-3100 or go http://www.AHMA.com.

What Do Guests Want in Their Room?

by Kirby D. Payne, CHA

Kirby D. Payne, CHA is Secretary Elect of the American Hotel & Motel Association, and Chair of the AH&MA's International Council of Hotel-Hotel Management Companies.

What do guests want in their room? The answer is clearly going to be more than a bed with sheets that have been changed since the last guest checked out! For the purposes of this column I am going to assume you understand the minimum furniture and bathroom fixture requirements, cleanliness standards and a comfortable fresh residential (or at least non-commercial) feel to the room.

Recently (April 1998) Lodging Hospitality (LH) Associate Editor Carlo Wolff wrote an excellent short column on this subject. Apparently Lodging Hospitality which is part of Penton Publishing did a survey among travelers "culled from their Penton Executive Network, which includes readers of about three dozen business publications."

According to LH's findings business travelers favorite amenity was a newspaper at the door followed by basic cable television. Leisure travelers' first and second preferences were basic cable television followed by an iron and ironing board in the room. That surprised me as I expected people to care more about appearances when traveling on business. The iron and ironing board ranked sixth for business travelers.

What else, according to LH, was in the top five: in-room coffee maker; premium TV channels; and pay-per-view TV. The line up for leisure travelers was completed by: premium TV channels; in-room coffee maker; and pay-per-view TV. Pay-per-view was a distant fifth according to their findings. Surprisingly, according to Wolff, dataports in the telephones were not that highly rated by either group though, obviously, business travelers rated them higher than leisure travelers.

USA Today was the "overwhelming newspaper of choice" by travelers. The Wall Street Journal (WSJ) was second. In our hotels I've found that the demand for the WSJ is a function of average daily rate and level of service. As one might expect, higher level hotels typically attract business travelers who are more in need of the information in the WSJ unless the leisure market for a particular hotel is comprised of retirees who follow the market. Hotel chains are responding to this same type of information by making, and rightfully so, USA Today a standard amenity requirement.

How can you use this information? Act on it! If you don't have these amenities in your hotel get them now. Some are obviously good for all markets. In-room coffee makers is an example of this. The cost is so minimal but the guests appreciate them and they make a great additional feature to compete with both for new guests and return guests. Newspapers can easily be delivered to the door. In small hotels with limited staff the night auditor can do it. If USA Today is not available early enough in your area use the local paper or one from a nearby metropolitan area. Who knows it may be the home paper for a lot of your guests.

If your cash is limited, only put the iron and ironing board in the rooms you get the highest rate for. This is also true of the in-room coffee maker, though I encourage you to reach down into your pocket and get them for all rooms. If those "upgraded" rooms are about to sit empty, upgrade people to them. It will help repeat business and word-of-mouth advertising.

I mentioned earlier that these amenities are helpful in competing for new guests. Your reaction may have been to think of noting these and other amenities in advertising and that would be very important. Possibly a more important thing to do is mention them before quoting a room rate. Tell people what your price includes before quoting the price. Say something like, "Our price for that room includes a USA Today delivered to your door early in the morning, an in - room coffee maker with free coffee for you to brew fresh when you get up, and premium cable channels like CNN, ESPN and HBO. All that for only ..." and quote the room rate unapologetically. If you offer a free continental breakfast describe it in glowing but honest terms.

Sell your rooms by offering value before you offer discounts. Remember Average Daily Rate is profit.

In case you missed the Sunday May 10th Star Tribune Travel Section they had a little sidebar from Newsday quoting American Express Travel Trends Monitor. Here are some quotes on how vacationers choose their lodging: "Almost half (49%) look for a courteous staff, followed by cable TV (36%, fast check-in/checkout (33%), complimentary breakfast (32%), knowledgeable staff (18%)..." Remember the telephone inquiry and reservations call is that potential guest's only opportunity to evaluate how courteous and knowledgeable the staff is. Focus on the quality of telephone service while small hotels must keep in mind not taking attention away from people standing right there at the reception desk.

The same sidebar noted that only two percent of dissatisfied guests fill out the comment card placed in their room. Four percent never go back and 14% do nothing. That data sure doesn't give one confidence that we are totally aware of our guest's problems!

Human nature about complaining in hotels probably hasn't changed much over the years but I'm old enough to remember when direct dial in-room phones, color televisions were sought after amenities and USA Today, guest room voice mail and pay-per-view movies hadn't even been thought of.

Bluefin Bay: A Study in Resort Management

by Kirby D. Payne, CHA

You may not have heard of Rysdahl, Buntz and Associates but their biggest success has been written up in consumer publications as, "worth the drive!" I am talking about Bluefin Bay Resort, one of the most successful resorts in Minnesota and possibly the only successful resort with condominium ownership as its primary form of real estate ownership.

What do I mean by success? See if you agree with my definition. The condominium owners are happy because they are either receiving more cash flow than the original projections they were given several years ago or they have sold their units for a nice profit over their purchase price, usually after less than a month on the market. There is a waiting list of prospective buyers now. Bluefin's condominium owners are typically getting an 11% pre-tax return on their total investment or 23% after-tax cash-on-cash return. Dennis Rysdahl and Rob Buntz are happy because they are making money through management of the condominium rental units and ownership of their adjacent restaurant and bar. They also have delivered on all their promises to lenders who either get paid early or at worst on time, a rarity in the hotel business these days, condominium owners, guests of the resort and employees.

How might other resort, hotel, and motel owners and operators benefit from Dennis and Rob's success? They might see if a few of the things that Dennis and Rob believe to have been essential apply to their situation. Dennis mentioned the following items in a presentation to the Condominium Owners Association in late April as being very important:

Continued capital improvements

Dennis and Rob only require them of condominium owners and themselves if the result is either improved productivity or an enhanced guest experience at a value greater than the cost of the improvement. Dennis says, "New bedspreads are an investment, not an expense." And he is not mentioning tax benefits, this is real investment for real return.

Ongoing maintenance

This important daily function reduces operating costs, increases productivity and enhances the guest's experience. Engineers regularly go through every condominium unit with a five page list of things to check everything from shower head flow to loose doorknobs. Dennis estimates that this costs almost $100 per inspection on each condominium unit of one or more bedrooms, full kitchen and living/dining area. He states that the payback is no down-time, reduced repair costs and guests getting what they pay for every time the unit is occupied.

Guest oriented design and amenities

When Bluefin Bay was built and equipped and through subsequent upgrades there were several design and equipment items which in retrospect have proven to be very worthwhile. Among those he mentioned were a whirlpool tub unit overlooking Lake Superior, fireplace, stereo cassette player, coffee makers, microwaves and at least one VCR in every unit. High quality bedding, especially, sofa beds, and upscale furniture throughout the units are complemented by residential style accessorizing. Details such as quality kitchenware, utensils, china and flatware in all the kitchens are required. Regular Quality Control inspections help assure that all owners in the rental program keep their units up to the standards of a four star hotel. Tofte Management, a Rysdahl, Buntz and Associates affiliate which actually manages the day-to-day operations of Bluefin Bay Resort, operate design consulting and bulb furniture purchasing programs in order to make these processes as simple and inexpensive as possible for the unit owners.

Personnel management

Dennis and Rob sponsor an annual retreat for upper and middle management. They accomplish a variety of things ranging from team building exercises to business planning. They firmly believe that in addition to careful recruiting, orienting and training of line employees, that higher pay rates have been instrumental in reducing labor costs. Yes, higher pay saves money! Two years ago their average hourly pay rate was $4.50. It is now $6.50 and their goal for the beginning of 1992 is $7.00. Therefor, in a resort area with a serious labor shortage, they get both the best possible applicants to choose from when there are occasional position openings and they have very a very low employee turnover rate of less than 20%. Dennis calls it "investing in employees." Their kitchen manager is off to the Culinary Institute of America in New York at Dennis and Rob's expense this summer. The Assistant Manager for front office and Comptroller got a $45,000 property management system to tie into the bar and restaurant's new point of sale system. These systems are all first class, no cigar boxes here! Clearly they are investing in people and productivity.

Targeted and creative marketing

Rob coordinates most of the marketing for Bluefin Bay though Dennis gets a few programs going, too. The marketing effort is focused on the slow periods, which they refer to as the "quiet time" of this seasonal resort thereby turning around a negative which must be overcome into a positive to promote. Seasonal is all in the eyes of the beholder though, because Bluefin Bay achieved nearly a 70% occupancy in 1990 while achieving an Average Daily Rate of over $140 giving them a revenue increase from 1989 of about 18%. It wouldn't be fair to give you their market plan but here are a few things they are doing that make them special. They have always considered their return guests as the most important market and communicate with them several times a year with the "Bluefin Fishwrapper" newsletter which Rob publishes.

They adopted two miles of highway to clean and subsequently got radio coverage for doing it. Oh yes, they are going to get their guests to do the actual work next time! This last time the condominium unit owners did most of the work. Good citizenship, you know!

They participate in various programs including the Endangered Species Program with the DNR for which they received honors, contribute to the U. M. Department of Tourism Chair, Dennis chairs the Lutsen/Tofte Tourism Association Golf Committee, help maintain the Superior Hiking Trail, etc.

Their Kitchen Manager's recipes appear occasionally in the TASTE section of the Star Tribune.

They carefully negotiate trade outs with the print and radio media which appeal to Bluefin Bay's target markets.

In the end I believe the secrets to Dennis and Rob's success are focusing on increasing revenues and reducing costs. Nothing new, but their success at achieving these goals is the result of their strategy: working with their staff to develop results-oriented detailed plans and a constant awareness of the need for change and improvement.

Finally, they strive to send each guest home with a sense that the value received was greater than their final bill through a continuous effort to enhance the accommodations, grounds, services and every con-tact with staff members.

One condominium owner told me that his only worry about his investment was something happening to Dennis and Rob and having Rob's dog Booth take over! Booth doesn't think about details much but the guests and staff loves him.

Community Action a Good Solution Forming a Visitors & Tourism Bureau

by Kirby D. Payne, CHA,

Recently our company felt forced to get involved politically with two issues at the local level as opposed to the state and national level where we are more comfortable. At the state and national level, getting involved Can insure your opinions are known by legislators, policymakers and regulators. Depending on the issue making your opinion known can have significant impact on the outcome of very major issues. At the local level community action can have immediate and direct impact.

Issues Arise Over Tourism

The first of these local issues related to forming a Visitors & Tourism Bureau in Hinckley, Minnesota where our company operates the Best Western Gold Pine for owner. The funding for such a venture typically comes from the proceeds of collecting an occupancy tax in the community. In Minnesota, to accomplish that a city ordinance is necessary. In this column I will describe the process and the results.

The second issue relates to the planned development of a new hotel across the street from the Econo Lodge we operate near the University of Minnesota in Minneapolis for two investors. In that case we felt the new hotel would both hurt the our hotel to the point of possibly putting us out of business but was also not in the best interests of the community encompassing the area immediately around our hotel. In a future column I'll detail the events and what happened. The effort is still underway as this column is being written.

VTBFor Hinckley

The need for a Visitors & Tourism Bureau (VTB) in Hinckley was foreseen several years ago by one of our competitors. In 1992-1993 Emmett Erpelding, whose company operates the Holiday Inn Express in Hinckley, began to anticipate declining business among the hotels in Hinckley which were not affiliated with Grand Casino in one way or another. Supply would increase about 150 rooms in 1994 with the addition of the Grand Hinckley Inn and was rumored to be increasing another 300 rooms in 1995 or 1996 with the addition of another hotel immediately adjacent to Grand Casino on the reservation.

When Emmett first discussed his VTB idea with me in late 1993 1 had mixed feelings. When I discussed it with our client, who ultimately would have to live with the VTB's effects on market performance and the potential sales price of his hotel in the future, he was opposed to the idea for two principal reasons. These were the traditional don't get involved in raising taxes of any kind, ever and what if the Hinckley hotels didn't have control and other Pine County hotels and businesses in general did.

In late 1994 we began to realize that the negative impact of the opening of the Grand Hinckley Inn was going to be much greater than we anticipated. At this point Emmett and I discussed the matter again and I did a little research with the help of Tom Newcome, Esq., General Counsel and Lobbyist for the Minnesota Hotel & Lodging Association where Emmett and I serve on the Board of Directors. While I got some good technical advice about the state law regarding occupancy tax, one fact was very important to me. With one exception, counties cannot enact occupancy taxes. Only incorporated towns and cities can do it, Counties only come into play in the case of unincorporated townships. This was important to me because one of our client's principal objections was his fear of a VTB being controlled by entities outside of Hinckley who might have different goals from Hinckley's hotels. With that hurdle out of the way and business continuing to decline I got the go ahead from our client to proceed. With Emmett on an extended trip early in the year the task of getting the process started fell on me.

Letter Writing Campaign

I started by preparing a letter to each Hinckley City Councilperson asking them to enact an occupancy tax for the purpose of funding a VTB. The letter was sent to their homes and included historic information regarding the market's occupancy and reference to the applicable state law. This letter was followed up with telephone calls by several people and discussions in various interested forums including the monthly hotel marketing meetings which take place in Hinckley to coordinate activities with Grand Casino. The feedback we were getting was that the hotel operators in Hinckley had divergent opinions or were ambivalent. The Council Members had mixed feelings also but we felt the Mayor was in favor of the idea.

A second letter was sent to Council Members and about the same time the subject was placed on the Council's agenda as a discussion item. A few hoteliers appeared and commented on the idea. At the Council meeting Council Members took note of which hotels were absent and what the room count in favor and opposed seemed to be. The Council decided to have an informal meeting within a few weeks with the hotel operators in order to try to get them all in one place and hear their views.

First Council Meeting

That meeting was very similar to the Council meeting but the lines between those in favor, opposed or not taking a position were more clearly drawn. The Pine County Tourism Association which wanted a county wide program was also represented. Some of those appearing who were opposed to the idea were not as familiar with the law as they might have been and may actually have hurt their credibility in the process. For example, one person believed that a VTB could not hire paid staff and could only use its money for direct promotional purposes and as a result could only function with volunteers from Pine County Tourism Association. Clearly, most Convention and Visitors Bureaus (CVBS) and VTBs in Minnesota have staff and office space. Look at Bloomington, Burnsville, Minneapolis and Saint Paul for large examples.

Subsequent to that meeting the Council decided to hold a formal public hearing and invite any who had an interest in appearing. Between the two meetings conversation continued among hoteliers and interested community and county parties. Jim Ausmus, Hinckley's City Clerk/Administrator was asked to research the disputed points of law and operational issues with the Minnesota League of Cities and other sources. We sent follow up letters to Council Members and worked with community members to garner support for our position. We also evaluated the position of each hotelier very carefully.

Change of Feelings

Those that we felt would modify their position based on reason were visited with informally in different forums. Fortunately, their positions started to change. In one case, I wrote the President of the owning company detailing the issues. In the letter I asked that he consider directing his General Manager to change his position. That General Manager, for whatever reason, became neutral on the issue. By the time the public hearing occurred in May most hotels were in favor of the ordinance, a few were neutral and only one was opposed.

Some Opposed

The owner of the hotel which was opposed to the ordinance felt strongly that it was inappropriate to add more taxes and that other than 1-35 traffic and Grand Casino there was not much more that could be done to attract additional business to Hinckley. He felt particularly strongly that the average price increase of $1 to $2 in taxes would hurt business in Hinckley and cause people to go elsewhere. That, of course, begged the question that with over eighty communities in Minnesota charging an occupancy tax where would someone go. His more valid argument as a native of Hinckley, which he stated very tactfully, was that he didn't want more business going through the community and didn't feel outsiders should be trying to run the town. My job, of course, is to look out for my client's financial interests even if I agreed with that particular thought.

At the public hearing the Pine County Tourism Association took the position that the tax would be divisive between the county and Hinckley. The proposed solution was for Hinckley to collect the tax and turn it over to the Pine County Tourism Association to be managed. That idea didn't go far but the proponents of the occupancy tax may have had a moment of concern when I jumped up and accused the representative of the Pine County Association of trying to hijack our tax revenues!

Ordinance on Agenda

A few days after the public hearing the Mayor placed the ordinance on the Council's agenda. That was a good sign because for all practical purposes he could have killed the idea by not doing that just as he could have by not having the hearings. During the period between the public hearing and the Council vote, anyone with an interest in the subject was discussing it and lobbying the Council Members and each other in one fashion or another. I was fairly confident that we would prevail and get the ordinance.

Not only did that happen a few weeks later, but both Emmett and I were honored to be appointed by the Mayor along with Jim Ausmus to form the entity and develop the Bylaws. We met about ten days later and discussed the issues relating to the Bylaws. These were drafted in about two weeks and circulated to the hotel operators for comment. After a few adjustments to the Bylaws they were signed the week of July 10th and circulated so that Directors could be appointed appropriately in time for the first meeting of the Board of Directors on July 18th-

The Bylaws are somewhat unique in that the VTB will not have members but rather any one can participate at no cost other than for any services they may buy such as advertising. The VTB will not be competing with Hinckley's Chamber of Commerce for membership dollars. Another unique factor is that in addition to each hotel appointing a Director, three constituencies were identified as having a right to participate and have representation on the Board of

The three constituencies are: the Chamber of Commerce with two Directors representing the other business interests in Hinckley and the surrounding area; the City Council will appoint two Directors to represent the City of Hinckley; and, to insure that Pine County's tourist attractions are considered, the Pine County Tourism Association may appoint one Director.

This was my first time being involved in seeing an idea taken through the entire process at the community level, I learned a lot from it and enjoyed it. It was great to be a part of executing Emmett's idea and it will be rewarding to be active in the Hinckley Visitors and Tourism Bureau and seeing all of the city's hotels reap its benefits.

Get Involved in the Legislative Process

by Kirby D. Payne, CHA , February 2007

The Minnesota Lodging Association, in conjunction with the Minnesota Restaurant Association, like many other state associations across the United States hosts an annual event called Hospitality Day at the Capitol. The American Hotel & Lodging Association (AH&LA) has a similar event in Washington, DC called the Legislative Action Summit (LAS). (To learn when the next LAS is visit AHLA.com.) The recent mid-term elections prompted me to reflect back about how my interest in being more active in the political process evolved. Some people define "active in the political process" as voting in major elections while others define it as being a politician or a lobbyist.

A majority of the people I know fall in the first category every four years and occasionally every two years, if they are really dedicated. Really interested voters may even read the headlines and first paragraph of news articles about the current big issues like minimum wage, congressional ethics, the fallout from the recent election, not to mention the war on terror around the world. Not enough people in our industry, particularly at the hotel operations level, fall into a third category: those that are aware of the issues and make the effort to express their opinions to their representatives or give guidance to sympathetic lobbyists by being involved with industry associations.

Influence of the Individual

The most influential group among us may be individual citizens who simply contact their elected representatives at any level of government.

It doesn't take much effort to vote occasionally and the result is that you and many others have elevated someone to the highest office and responsibility they have ever had. The question arises as to whom is going to keep this elected person's feet grounded in reality? They have to hear from us.

This leads me back to Hospitality Day at the Capitol and the Legislative Action Summit. Several years ago I was asked to speak about sharing my views with legislators. I realized many years ago that writing my state and national representatives about my opinions was not only acceptable but my responsibility. I encourage everyone to do at least that. If you can participate in a more active and personal way, that would have even more of an impact. Believe me, they want to hear from us. They certainly aren’t experts on all issues and they are keenly aware of their need for guidance from knowledgeable people.

Legislators really appreciate hearing from hoteliers and others that provide insights and assistance that helps them determine public policy. They understand that each hotelier employs several of their constituents. They know that by working with you, they are also communicating with many others that they represent.

Most people don’t write to their elected representatives. This is what makes those letters they do receive so important – legislators realize that each letter represents hundreds of their constituents’ views. Another powerful tool is to write letters to the editor of your local paper. Elected representatives read papers just like you and I. However, they tend to read the letters to the editor of their local paper before anything else because they understand that it is their constituents’ opinions that are written there and that each letter reaches their entire district and may represent thousands of people.

Help from the Associations

If you are not sure what to say, simply write a draft letter and send it the Government Affairs department for your association at the state or national level as appropriate. They will be glad to comment on your letter, help you with accuracy and generally make sure you don't put your writing “foot” in your mouth. Even if you don't need their input, it is important that you send them a copy of your letter. This helps the government affairs department staff know what the various members of our industry feel and what comments the various legislators are receiving so they can follow up on them.

For me, the next step was calling legislators on the phone and visiting with them in person. I procrastinated for years out of fear that I was not going to present myself and my industry properly. For those who know me, it may be difficult to picture me afraid to talk to someone. Frankly, I had even visited several prominent national politicians, hosted them in my hotels and visited with former President Reagan and his wife alone over dessert many years ago. Trust me, it's not the same as letting your own representative know face-to-face what you believe and want.

My election to the position of treasurer of the Minnesota Hotel & Lodging Association many years ago prompted me to contact my legislators in person. I realized that if I was going to represent my peers in forums and legislative committees I had to learn to talk to legislators without being awed by their elected position. This served me well when I was elected as an officer of the AH&LA.

Visits a Natural Step

I convinced myself that visiting with a legislator was a natural step after writing to one. With encouragement from Tom Day and Tom Newcome, lobbyists for the Minnesota associations, I started writing to my state senators and representatives advising them that I would be calling to make appointments and to discuss issues. Note that I wrote them to tell them that I'd be calling. Writing first made the steps easier and it set an agenda for the subsequent meeting. I also made sure that Tom Day's schedule allowed him to accompany me so he could go on my first appointment with me. I was, to say the least, apprehensive.

I started with my local legislators but eventually needed to deal with a number of state legislators. Obviously there is a senator and a representative associated with the district where I live, where my office is, and where my hotels are. While the legislators representing one's district of residence are most interested in your views, those representing your business districts are also concerned about the impact of legislation on the business and its employees. Each of us usually has at least two senators and representatives that we should contact.

Before visiting with a legislator, at any level, be sure to know a little about the person and what issues they tend to be interested in pursuing and what side of you issues they may already have taken a position on. Also be familiar with how an issue affects your business and the others in the area. Both state and national elected officials value being updated about what is going on locally.

In addition to you making appointments to visit them, legislators appreciate your inviting them to visit you. Legislators often hold town hall meetings where they hear from their constituents in an open forum. Hotels with large meeting rooms are ideal locations for these events. In offering space for these, hoteliers develop a personal relationship with the legislators and their staffs. Tours of your hotels also provide a great opportunity to educate and develop a close relationship with your representatives. Most people, including legislators, only see the lobby and guestrooms of hotels. They do not understand what it takes to make a hotel run. A simple tour of your property can provide insights to the complexities of running your business, from tax depreciation issues affecting your equipment to immigration issues that allow you to provide the service they expect. Before long, they will be calling you for advice.

Hidden Issues

Issues before our legislators are both big and newsworthy or small, quiet and expensive. Sure, we're all aware of the minimum wage and various tax rates. But were you aware of the elevator inspection issue? Or how about the changing breakfast buffet sanitary requirements and fees or some similar national or state issue that will cost our industry money?

I happened to be sitting on a subcommittee hearing where a union associated with the electricians had their business manager, a unionized electrical contractor and lobbyist testify that elevators are never inspected after they are installed in Minnesota and that any one can work on them. Obviously, they felt that only licensed, union electricians who had gone through the traditional apprentice, journeyman, and master program should be allowed to work on elevators. No one mentioned that electricians don’t know about hydraulics, emergency breaks and the mechanical safety devices on the doors! The legislators need to have this pointed out to them.

For that particular issue, no daily paper or television station reported this minor amendment. They only covered minimum wage, worker's compensation and the local utility’s nuclear waste. Had I not attended the hearing, I would never have known about this important and potentially costly issue being decided by the representatives. If some minor amendments make it through the entire legislative process, costs and hassles will increase at many hotels without an offsetting benefit.

Certainly, I am not recommending that we all start attending legislative sub-committee meetings. At the national level and in most states we are lucky to have an excellent paid staff to monitor legislative and regulatory issues and a politically active membership. Through their Government Affairs and Legislative Committees, Grass Roots Network and Political Action Committees (PACs), the associations' positions on issues are brought to the attention of legislators throughout the various states and in Washington.

Association web sites are a good source of information on issues of interest to our industry. All branches of government and virtually every elected official have a web site as well.

PACs

PACs raise and disperse funds within the guidelines of law for use in funding some of our industry’s efforts to bring our views to Congress and our legislatures. PAC fundraising functions at the state and national levels are also excellent opportunities to get together with your industry peers.

PAC is not a four letter word and contributing to a PAC is not a bad thing only done by the corporate titans and lobbyists. Contributing to the PAC of your choice in any amount, no matter how small, is simply exercising your right to free speech. It is another way to exercise your constitutional right to petition your government. One should seriously consider contributing to our industry’s state PAC in your state and national PACs such as HotelPAC (AH&LA) or that of your company, if it sponsors one.

Grass Roots Networks

Many state lodging associations have a Grass Roots Network. The Grass Roots Network consists of a core group of volunteers from the association. These people serve as the base of a statewide telephone or email network (calling tree). The state is divided into zones made up of several legislative districts. In each of these there are volunteer zone captains who contact about five area managers who, in turn, contact at least five members who have volunteered to participate by contacting their legislators. This system generates hundreds of calls or emails to legislators throughout the state.

The Legislative Action Summit and Hospitality Day at the Capitol are a series of events while Congress or the state legislature is in session. Owners, management, staff and families from the industry come to Washington, DC or the state capitol. The sessions usually consist of legislative updates and an orientation to the current issues before the legislators which affect our industry. Usually several political leaders and consultants will speak to the group.

Before people head over to the legislative or congressional offices, the government affairs staff will refresh everyone's memory on proper etiquette for expressing one's views to a legislator. We're reminded not to threaten them with withholding our vote next election, not to exaggerate, and not to be awed by them.

After the meeting with their representatives people return to meet with their Grass Roots Network members from their zone to discuss their legislators’ responses and to share their own positions on various items of legislation. Usually in the late afternoon or early evening the legislators and/or their staff members join the members for cocktails and hors d'oeuvres.

These events are a tremendously motivating civics class where members of the hospitality industry can participate in government in an encouraging and reassuring environment.

Everyone Benefits

Clearly everyone benefits from the AH&LA’s and our various state associations' efforts in the legislative arena. Those who don't belong to the associations and as a result are not participating at any level in the governance of their state and our country shouldn't complain about what results from the legislative sessions because they did not volunteer to contribute to the process.

Those that participate at any level and especially those that volunteer to serve on the Government Affairs Committees or Grass Roots Network or even just contribute to a PAC have a right to complain because they went a few steps beyond voting. I invite you to become a legitimate, licensed complainer by at least taking that first step of writing a letter.

Hotel Turnarounds - Sometimes You Get Lucky

by Kirby D. Payne, CHA

Usually hotel companies like ours assume the management of hotels which have been run into the ground by the previous owners prior to foreclosure by the lender. With a typical lender's short outlook on their ownership of a property, immediate results are appreciated but usually not easily achievable.

Recently we were fortunate to encounter an exception. The hotel in question is a full service 150-room hotel with a moderate average daily rate with a well known franchise in the capitol of a western state. The hotel's location is about ten blocks from the capitol complex in the opposite direction from the central business district in an area generally known to be on a comeback from its drug and crime problems. The hotel has been in the lender's REO portfolio for about two years and was managed by a moderate sized hotel company which had originally intended to buy it because of its proximity to major hospital complexes.

The original management fee was eight percent of gross revenues but was reduced to five percent in January 1991. The hotel had received a default notice from the franchisor due to failed inspections, primarily in the cleanliness and maintenance areas. We had been in discussions with the lender since early in the year due to the lender's feeling that the approximately $200,000 dollars they had put into the hotel to cover operating losses was excessive and that the operating results were unacceptable. Our assuming management was delayed until August 1st because the lender didn't want to make a change of management when they anticipated selling the hotel in the very near future. The hotel was actually under contract numerous times and the lender's reluctance to change management was reasonable under the circumstances but their frustration increased as losses continued. A closing finally occurred on December 15th, 1991 and as a result we only managed the hotel for 135 days.

We knew about the anticipated sale when we walked on to the property but took the attitude that it might fall through and we would be there for an indefinite period of time. Upon assuming management, we immediately addressed three issues: passing the franchise inspection which was due in six days, cutting expenses and increasing revenues. We addressed these priorities in that order.

Passing the franchise inspection was relatively easy to plan but took a lot of work hours. The previous failures were primarily for guest room cleanliness, failure to paint guest room doors and maid carts, as well as some maintenance and operational issues. All of these items were prioritized based on their point value and corrected. Additional effort went into enhancing things that impact a guest's perception of the property when they enter as these also impact an inspector. Among the enhancements made was planting $350 worth of evergreen bushes in the unkept planters at the entrance of the hotel. For the inspection, twenty-five rooms were selected for their high maintenance level and deep-cleaned as well as possible. Painting was completed (we missed two maid's carts which the inspector found). The change in management companies sufficed on the operational issues. The inspection was passed based on the hard work of a few department heads and the line staff.

Cost reductions were the next point we addressed with the same degree of urgency. The first area of reduction was benefits. As a company that primarily manages for lenders on short term contracts it is impractical for us to offer health insurance, retirement benefits and complex vacation and sick pay accrual programs. As a result, when the employees were terminated by the former management company they lost all these benefits while the lender quit incurring their costs. This was a sizeable amount but no employees were lost in the process.

The preparation for the inspection gave us a tremendous opportunity to see who the competent team players were among the department heads. Based on this information the General Manager, Front Office Manager and Maintenance Supervisor were terminated. The first two positions were replaced with internal promotions of very fine staff members and at less expense. A new Engineer was recruited externally who was technically more able at a slightly higher salary. The Food and Beverage Manager was promoted to General Manager and was not replaced due to the low food volume.

Extraordinary expenses were addressed next. Housekeeping was in the habit of maintaining a low staff and using contract labor during peak periods at the rate of over $10 per hour. Not only do these inexperienced contract laborers cost more to do unsatisfactory work (remember the franchise inspections), but they are not sensitive to the guests privacy and property. By working with the Executive Housekeeper and promoting one of the utility men to Assistant Housekeeper, productivity and staffing in this department improved and contract labor was eliminated.

Other major expenses were eliminated. These included a computerized front office system which was on lease for $500 plus over $400 for maintenance monthly. A used electronic register was obtained for $2,500 and installed within six weeks. The previous company retained a management consultant at the rate of about $500 a month and this was discontinued. Local telephone lines previously on a metered rate were converted to flat rates for a savings of up to $800 per month. Long distance that was previously on AT&T's standard rates were converted to AT&T's SDN rates resulting in a net savings of about 25%. The armored courier service for deposits was discontinued at a savings of over $200. Front office overtime was reduced. All purchases are now reviewed by the new General Manager. Energy expense is now a priority with HVAC units and lights being monitored to insure that they are off when not in use.

As a final expense reduction the lounge was closed rather than investing the time and resources into trying to turn it around. Its location inside the hotel, without street access and signage, handicapped it. We decided the resources necessary to correct the lounge would be better utilized by adding them to the resources necessary to increase the potentially more profitable room revenues. Currently, the hotel's coffee shop is open for three meals a day seven days per week. A majority of the breakfasts served were free limited hot ones included in the room rate. We were analyzing the impact of not serving breakfast on weekdays and simply offering a complimentary continental break fast in the lobby. As an interim step we discontinued the free breakfast for most market segments.

Increasing revenues during the last quarter of the year is an important priority as the hotel's season usually ends in mid- September. We wanted to avoid asking the owner for funds if at all possible. While revenues have increased compared to previous periods this year the trend of the increase is not sufficient to carry the hotel through the winter. The Director of Sales had previously only done limited outside personal sales calls and had relied heavily on direct mail to tour operators.

A new street fighting mini-marketing plan was developed. The first thing we did was modify the name of the hotel by deleting part of the neighborhood reference and adding the word "Downtown". We felt this would distance us from some of the area's negative image without losing our identity while also moving us closer to the central business district. Outside sales calls of area office buildings, government agencies, hospitals and association offices were made a priority. Travel agency commission requests for the past six months found in the former Front Office Manager's office were paid. These agents along with those ordering brochures from the hotel's fulfillment service were added to our company's data base. These agencies known to have an interest in the destination and hotel will be solicited by direct mail.

A direct mail campaign offering an outstanding value was mailed to all high schools in the state and paid for itself within two weeks. Two advertisements were developed and placed in the newspapers of six area military bases offering packages with exceptional values. These are being paid for partly by trade-outs and were coded so we could analyze the results. The ads alternated for six weeks. One feature of the military packages is ten minutes of free long distance which costs us less than two dollars with our new AT&T rates.

The hotel's room rates were modified from a flat rate to a range of rates based on location, amenities and room condition. To appeal to commercial guests, local calls were free. We placed the hotel's middle room rate and the mention of free local calls on the hotel's reader board. This resulted in 15 to 30 additional walk-ins per night. The staff at the front desk offered upgrades to guests arriving with reservations. Nearly 25% of the time they are successful in getting at least another $2.00 from those guests for a nicer room. To attract more attention to the hotel, as sign visibility is poor, we placed small white outdoor lights on all the trees along the main avenue in front of the hotel.

While the full results of our efforts will never be known to us because the hotel has been sold, we did manage to generate nearly $60,000 profit during our brief tenure. In the hotel's three year prior history, it had only had two or three profitable months and, in fact, lost several hundreds of thousands of dollars in one year. Remember the title of this story, "Sometimes You Get Lucky"!

Miscellaneous Ramblings

BY Kirby D. Payne, CHA

I chose this month's title because I am sure I'll do this again someday. Why should every column I do have some point or theme? Why not just pick up some assorted thoughts or items not large enough for an entire column and put them into miscellaneous ramblings?

This column is being written while I am in Orlando for the Choice Hotels International 40th Annual Convention. I am actually sitting in the guest room immediately above the one I was in when I wrote a column over a year and a half ago titled "Little Things Mean a Lot".

Past Reviews, Changes

That column commented on some of the small mistakes made in a first-class full-service hotel managed by an old college friend of mine, Pat, After seeing the column he asked me to speak to his Department Heads and Executive Committee about my observations. It must have been constructive because he let me come back and I see some changes!

The way faxes were handled last time included losing some pages or at least not noting that they had not all been received according to the cover page. This time the Saturday morning FedEx was handled perfectly. The little wooden valet clothes hanger in the room didn't fall apart as it did last time.

On the other side of the ledger, even though there are two people in the room there is still only one bathrobe and the huge bath towels we found in our room the first two days haven't been replaced since! My friend got even with me about my comments last time about no cork screw by simply not having any wine sent to the room. That is one way to avoid repeating a mistake but it certainly did test the staff.

Success Stories

Recently, my wife and I had an opportunity to spend several hours with Jim and Rose Sadler. As many of you know, the Sadlers founded Rochester Economy Lodging Group (REL), originally Sadler Properties. What a success story, from a duplex to nearly 20 hotels!

I got a little insight into how good REL is at what they do when I listened to their Director of Operations, George Rownd, give a presentation at the Small Properties Workshop sponsored by the Minnesota Hotel & Lodging Association last week. George's excellent presentation included discussions of such items as proper use of cleaning chemicals, coding room keys and employee motivation.

The workshop was put together by a committee chaired by Doug Brutger, owner/operator of the Sunwood Inn, Morris and Sandy Lien, the Associations Director of Education. The program, which was presented in several locations around the state by a panel of small property operators, was excellent. If you missed it, call Sandy and see if she'll sell you a set of the handouts from the series. You will find that they alone will be very helpful. They cover marketing, as presented by Allen Faulk (Super 8, Zumbrota) and Bill Foussard (Best Western Americana, Saint Cloud), George's presentation and material presented by Doug and Dave Brott (Country Inn, Bloomington). If you offer Sandy (612-223-7401) $20 for a set of handouts, you'll get your money's worth and then some. You'll also get a chance to see some of the excellent benefits of attending the Association's programs. PS: Unless Sandy reads this column she won't know about this $20 idea!

Thanks to George I finally figured out why the bathroom floors in one of our hotels are sticky. The staff at this particular hotel had suggested to me that it was the deodorant the room attendants were using in the smoking rooms. George pointed out that we may be using too heavy a concentration of tub and tile cleaner and more importantly we probably aren't thoroughly rinsing our bathroom floors periodically. This would, of course, allow the cleaner to build up over time.

Lead by Example

Have you been to Un Deux Trois, the restaurant in Foshay Tower, downtown Minneapolis? Michael Morris who owns and operates this establishment has done a great job of what all hoteliers should be doing.

No, I'm not talking about his excellent service and even better price value for great, down-to-earth, French food, I'm talking about his management style. He personally works the door greeting and seating his patrons. He recognizes his regulars and visits with them appropriately and makes new patrons feel comfortable and welcome. All this, while keeping his staff motivated. Sitting at Un Deux Trois' bar and watching Michael at work being both a gracious host and good owner/operator is truly motivating, The drinks aren't bad either!

Tidbits

At a seminar presented by Jim Cooper, CHA, Director of Education and Training for Choice Hotels International the following sample help wanted classified for a General Manager. I thought both owners and managers would get a chuckle from this:

We are looking for a self starter, motivated, dedicated, experienced manager who will accept full responsibility without the authority. Must be willing to work 70 to 80 hours a week including 40 hours of shift work. We offer no training, low pay, no benefits, no incentives and no vacation. Ideal candidate should be able to squeeze as much money as possible out of a property with 150% turnover, no vacation or benefits for the employees and very little working capital. If you meet these qualifications, are not sensitive to constant criticism or susceptible to burnout, we want you on our team."

At another seminar a panelist fro Metromedia Steak Houses (Ponderosa, Bonanza and Rising Star Grill) shared the mission statement of one of their chains: Together we will do whatever it takes to ensure every guest comes back to (restaurant) again and again."

While I personally feel there should be some reference to profit in the mission statement I think it is a wonderful attitudinal start. Does your hotel have a mission statement? Did your key staff participate in developing it and fully buy into achieving it?

More worthwhile tidbits from Choice Hotels' Jim Cooper: Training tells your staff that you want them to grow, learn and get better, It tells them that you care. If you do not train them, is the opposite true? And finally, does this sound familiar: "The only thing I hear from my (owner) (manager) is when s/he has a problem or needs something." Both "sides" have something to gain from being positive and supportive in their dealings with each other.

Repositioning: It's not Just Renovation

Kirby D. Payne, CHA

Faced with over built markets, ever-changing market demands, and deteriorating physical plants, hotel owners are seeking to stave off decreasing, and often disappearing, profits. Lenders, too, are eager to reduce the possibility of adding the hotel to their REO portfolios. These players have turned to market repositioning as a way to improve operational and financial performance in order to survive.

Unfortunately, however, many so-called repositioning projects are no more than directionless rehabilitation projects or haphazard reflagging (upscale or downscale). Both of these tactics no only fail to reposition the hotel but also worsen its deteriorating financial condition.

These and other undesirable outcomes can be prevented. Here are some tips that are crucial to know for a successful repositioning program:

Learn from manufacturers and apply the principles of consumer product development. A hotel essentially sells many products and services. As such, repositioning a hotel must incorporate the same steps as developing and introducing a consumer good. These include: market research, identification of demand and its needs, test marketing, cost-benefit analysis, design and packaging, distribution channels, public relations and promotion, direct sales, customer service, etc. If any one step is skipped or poorly planned, an otherwise well-conceived program could fail.

Develop a cohesive, all-encompassing repositioning plan. Create a business plan which addresses every step, component, and issue of the repositioning process. As with most business plans, though, not everything can be anticipated and the plan must be flexible and adjusted to circumstances as they arise.

In addition, you must designate one point person to coordinate the various and often distant persons involved to ensure constant and effective communication when implementing this plan.

Create a discernibly different hotel. You do not have to be come a fantasy hotel to accomplish this but you must change the product and particularly the services in order to change the hotel's market position. And repositioning does not always mean going up a notch or two in quality. The condition of the industry is such that often the most financially beneficial goal is to reposition down a notch or two.

Do not hesitate to retain third-party professionals. An effective repositioning program requires dollars, time, and personnel. It is unlikely that in-house personnel possess all the necessary skills. Some professionals to consider include engineers, architects, market research firms, food and beverage consultants, personnel trainers, among others.

There is no substitute for experience and expertise and the risk is too great to do otherwise.

Before you retain them, however, be sure to see their completed and in-progress projects if possible, interview clients, and ask to review a comparable report (if applicable) in their office.

Do not fall into the trap of concentrating on physical renovation at the expense of other components of the program. A hotel's image, quality, and market position are not determined solely by its furniture, fixtures, and equipment. Although physical renovation is important, regardless of whether you are upscaling or down scaling, its visibility frequently distorts it into being the primary focus. Equally as essential to repositioning is the modification of all functional and operational areas through redesigning procedures, marketing, servicing, etc.

Interview and consult with our current guests and patrons during the market research phase. First, this will provide you with a wealth of insight into your hotel. Second, this will also instill in them a feeling of ownership of the changes through their participation. It is essential to minimize the loss of currently loyal guests and patrons during this process.

Interview and consult with your line employees, both back and front-of-the-house, during the market research and planning stages. Just as with your current customers, your employees experience the hotel more intimately than most managers. In addition, this involvement will create a sense of ownership in the new product and services and enable the staff to genuinely and enthusiastically promote the improvements to the guests and patrons.

Perform a thorough and unbiased cost-benefit analysis in order to make an informed "go-no-go" decision. Do not go forward just because significant costs have already been invested in the research and planning process. The potential loss can be many times larger than the investment in studies, etc.

In your analysis, remember to include all marginal costs attributable to the project since the beginning and throughout implementation (you should isolate items such as additional long distance telephone expense to get a true picture of the cost.)

If the projected increase in profit is insufficient to recoup the entire cost of the project in a reasonable period of time, don't do it. Any increase in the hotel's market value should come from the profit projections so don't count it twice.

Make your guests, patrons, and employees aware of the plans and excited by the prospect of a "new and improved" hotel. Interest and support is vital to the success of this always disruptive process. Forewarn everyone of upcoming inconveniences, whether they be physical or operational. Tell your customers and employees how certain changes-in-progress will negatively affect them in the short term (for instance, conversion to a new computerized guest history) and, of course, sell them on the ultimate benefit to them, in the long run.

Retrain the entire hotel staff from guest contact areas to back-of-the-house. Poor, inadequate, or incomplete training will undermine all other repositioning efforts. As stated previously, service and procedures are part of the new product created and must "match" the sought-after new market position. Absolutely crucial to achieving the new position is proper, thorough, and appropriate training of all hotel staff to deliver this new product and provide the attendant services. Considerable money, time, and other resources will have been lost if this crucial step is bypassed or only partially executed.

Take a critical and fresh eye to your Marketing Plan. Although the very prospect of creating this document generally evokes groans, a redesigned and reconceived Marketing Plan is an essential component of the repositioning program. The Marketing Plan should focus on the target market segments in all revenue areas and detail the method of capturing the demand.

Although always important, it is especially critical for all managers and assistant managers to be involved in the development of the Marketing Plan when implementing a repositioning program in order to ensure complete coordination.

Create methods of quickly and regularly measuring the property's advancement toward its stated goals. The very existence of a repositioning program means that the property is experiencing financial and/or market difficulties. Therefore, management cannot afford to wait six months or a year to review the program's effectiveness. Results must be measured and reported continuously. Modifications to strategies, procedures, etc. should be implemented quickly so as not to lose momentum, enthusiasm, and good will.

Secure the full support of owner, lender, and management. This means commitment to the hotel over at least the "near long term" which means through the planning and implementation of the program and at least until some improvements have become manifest.

Often a repositioning program is undertaken by the owner and supported by the lender to increase the hotel's market value for an as-soon-as-possible sale.

With that perspective, there is a tendency to focus exclusively on immediately visible changes. Although often effective for those goals, this will not reposition the hotel or increase its medium-or long-term financial, operational, or market strength.

Repositioning: It's not Just Renovation

Kirby D. Payne, CHA

These and other undesirable outcomes can be prevented. Here are some tips that are crucial to know for a successful repositioning program:

In addition, you must designate one point person to coordinate the various and often distant persons involved to ensure constant and effective communication when implementing this plan.

There is no substitute for experience and expertise and the risk is too great to do otherwise.

Before you retain them, however, be sure to see their completed and in-progress projects if possible, interview clients, and ask to review a comparable report (if applicable) in their office.

Often a repositioning program is undertaken by the owner and supported by the lender to increase the hotel's market value for an as-soon-as-possible sale.

So You Want to Buy a Hotel

by Kirby D. Payne, CHA

Maybe you've been working in the hotel industry for five to fifteen years for either a small group of investors or a major hotel company. At some point you may have thought to yourself, "If I only had my own place." Well, it may be about time but where do you start and how do you go about it? In the following paragraphs, I'll give you a simple and short course on how to go about it.

An important step is finding something to buy. Clearly you want to buy something that you are capable of putting the money together to purchase, fix up and carry until it is profitable. It may not take as much as you might think. For the purpose of this article lets assume you can scrape together at least $100,000 cash. This might include savings, IRA (yes, there are penalties), family, a couple of close friends, home equity loan and a personal line of credit for $5,000 to $25,000. This money will be used for the down payment/equity portion of your purchase, closing costs, legal advice and working capital. Once you believe you have your equity pulled together you can start establishing purchasing parameters.

These parameters are driven by your equity resources, hotel experience, geographic and personal preferences and the mortgage loans you might get. Clearly your equity resources in this example preclude you from buying the Minneapolis Marriott City Center! In fact, if you figure that you'll have to pay 10% to 20% down on a purchase using 75% of your $100,000 you'll only be able to afford a hotel costing between $375,000 and $750,000. That is quite a range and it assumes it doesn't need any fixing up and will immediately carry the mortgage payments. More importantly, it assumes you'll be considered a qualified buyer by brokers, sellers and lenders. However, you can see, minimizing the down payment will significantly assist in leveraging the purchase of a larger hotel. In fact, many sellers today are taking a little as 5% cash with seller financing. With $100,000 equity, the purchase price potential is now $1.5 million.

Before you start telling everyone you want to buy a hotel, set some criteria for yourself. A good one might be that you will only consider a hotel which is immediately self-sufficient and has seller or assumable financing. This can be accomplished in two ways: don't even look at hotels that will not be able to carry the proposed mortgage or negotiate a mortgage with lower payments during an initial period of six months or a year.

Another criterion might be geographic in that you can get to it easily or that you may have to live there! Limit your search to markets you really know the dynamics of as it relates to supply and demand. Swear to yourself that you will not consider hotels just because they are esthetically appealing. Remember this is an investment for a profit!

One way to get on with your goal is to let a number of real estate brokers specializing in hotels know about your interest in a purchase and what your resources are. Focus on brokers dealing in the type of hotel you can afford. Stay tuned to the rumor mill as to what might be for sale in the geographic areas you are interested in by getting to know area hoteliers. There is nothing wrong with driving around and looking for properties that appear to fit your criteria. Are they in bad condition, poorly run, etc.? It might be just right for you! Note the address, go to the county seat and find the office with the real estate records. With a little digging around you can find out who the real owner is, the lender, some of the terms of the original purchase and related loans and whether the owner is current on the loan, bills and real estate taxes. This is all useful information on a prospective purchase when you are bottom fishing.

After all, that is what your doing at this price range! Now it may start occurring to you that if you did start putting a deal together the hotel might need some remodeling. Simply tell yourself up front that the cost of that is either going to have to be a deduction from the purchase price in order to free up some of your equity or that you will have to finance the remodeling. You could get the seller to help you finance it, get some secondary financing, talk to the community's development agency and examine if the cash flow of the hotel might help pay for it.

When you start getting offers to sell (referred to as packages) take a quick look at the location, description and asking price to see if the hotel appears to meet your basic criteria. If it does, go through the package to see if it has sufficient detailed information. This would include financial statements for the most recent two or three years, information about the hotel's physical facilities, market demand, surrounding area, competition and seller financing. If these things aren't there or if the hotel doesn't fit your criteria call the person who sent you the package. Ask for the items you need without letting them draw you into your likes and dislikes about the hotel. If the hotel didn't meet your criteria tell them why.

Once you have the necessary information, do your own estimate as to what the hotel's operating results will be for the next three to five years. Use the seller's insurance and real estate taxes for your estimates for the time being. Watch for expenses that are unusually low or high and find out what is impacting them. Do your own staffing schedule based on your operating style, the hotel's level of service and local wage rates plus whatever premium you might pay to have better employees. Take great care with maintenance and energy expenses. Your estimate should go all the way to the cash available for debt service.

Now take the asking price and subtract what you will pay in the equity down payment. Consider if your offer will include a request that the seller finance some improvements. You might be able to negotiate this up to an amount equal to your down payment as the money will be going directly back into the hotel. The net result is the value of the asset is enhanced for the seller and they have your attention because you have at least $75,000 invested in the hotel. You are both happy, as long as the seller didn't need the cash to pay previous obligations like real estate taxes and past due mortgage payments.

Once you have established what the approximate amount of your mortgage will be, you must examine various amortization scenarios. You might start with 20 years at 8.5% and then examine the effect on the payments if you lower the interest rate a few tenths of a point or increase the amortization period to 25 years. The resulting calculation will need to come out to an amount equal to about 80% of your cash available for debt service. This is the point where you can really tell if you can afford this purchase at an offering price somewhat below the asking price.

One concept to be aware of is the "call" or "bullet". This is when you have a long amortization period for the purpose of calculating the payments but that rather than amortizing (paying off) the loan over the full period you must pay the balance at the end of a shorter period such as five years.

If you are having difficulty making the numbers work for you, look at alternative ways to structure the acquisition. Do not revise your operating estimates without good foundation. Doing that is like trying to print counterfeit money! You might examine Small Business Administration (SBA) loans. A key concept in these is that a subordinated second mortgage from the seller or another source can be considered equity in addition to your cash. While this increases your leverage, it will call for higher debt service as second mortgage loans which are riskier than firsts typically have higher interest rates and shorter amortization periods. This alternative should really only be used if you are short of cash for both the down payment and necessary remodeling and the cash available for debt service is more than adequate.

Once you understand the various scenarios that work for you, make an offer that is most advantageous to you. Don't worry, while it is a big step, you won't have to live with it if you are wrong in some of your estimates. Your offer should be just a short letter and should mention some contingencies. These must include a reasonable time to inspect the property and get detailed estimates for repairs and remodeling, the right to examine the records (revenues and their supporting documents, utility bills and tax records) and subject to a mutually agreeable purchase agreement. The seller will probably counter with a higher price or changes in the terms of financing. Compare them to your previously worked out scenarios to see if they work for you.

When the seller and you have a tentative agreement, have the seller start writing a purchase agreement while you find a good real estate lawyer, preferably one with experience with hotels. Remember it is more expensive to write the contract than it is to review it although the seller will have greater control because it is harder to remove or change wording already in the documents. But an experienced lawyer will help insure that the purchase agreement works to your advantage while you reexamine the investment in great detail from every perspective. Your lawyer can also draw the process out while you raise a little more money or look at another package that may have come to you recently. A properly phrased purchase agreement will still be something you can get out of up until closing with little expense other than legal fees.

Once you decide to finalize the purchase use the period before closing to get all of the things in your business plan in place so that little or no time is lost getting things done to maximize your revenues and minimize your expenses.

Good luck!

Take Care of Allied Members: An Open Letter to Hotel and Motel Operators

Kirby D. Payne, CHA

I want to take a few moments of your time to ask you to help take better care of the Allied Members of the Minnesota Hotel & Lodging Association (MH&LA) and the American Hotel & Motel Association (AH&MA). It is an effort which, if not done, will cost us money, both as hoteliers and as an association.

Allied Members choose to join the MH&LA and/or the AH&MA for a variety of reasons. The three principal ones are probably enhanced marketing potential, to support our causes (as we go, so do our vendors) and because they may even have developed some personal relationships among our members. When they pay their dues and subsequently support us by exhibiting at our trade shows, donating to our PAC and paying to attend our functions, they expect something for their money. They expect us to pay a little attention to them and their efforts. In other words, a higher degree of access than non-allied members.

No, we don't have to commit to buying only from Allied Members or to give them preference in any way other than access. We certainly aren't going to buy from an Allied Member who does not offer and subsequently deliver the best quality, price and service we can obtain in the market place. We should, however, try to do two things:

1. Get quotes from Allied Members and let them know that is why we are getting the quote, whenever we're buying a product they sell.

2. Make our current vendors who are not Allied Members aware of the opportunity they are missing and the responsibility they have as a company deriving revenues from our industry.

Marketing as an Allied Member lets us know that a vendor is serious about serving our industry, that they want to understand it and participate in it. Allied Members get support from the MH&LA/AH&MA in the form of member lists, preferred opportunities on sponsorships and participation in events. In the case of AH&MA Allied Members their is a monthly Construction and Modernization Report and a presence on the new AH&MA internet home page. The Construction and Modernization Report is a tremendous lead list.

In some cases, member hotels and motels are franchised or chain managed and have access to tremendous buying power which smaller Allied Members cannot match. When we make them aware of those circumstances, they understand and they'll appreciate your taking the time to let them know. It is a great way to let a Allied Member know you appreciate their support and that you'll refer them to those who can't make the same deal you can.

On the other hand, you may have an opportunity to do everyone a favor by introducing an Allied Member to your national purchasing organization. Save your company and affiliates money while helping a worthy Allied Member. There is also a special group of individuals, Master Hotel Suppliers (MHS). These individuals have gone to the extra effort to take hotel courses and be tested by the Educational Institute (El) of the AH&MA to receive this designation. A person who has the MHS designation has a deeper understanding of our business than other vendors. This designation, like the Certified Hotel Administrator (CHA) and other EI designations, demonstrates the individual's commitment to our industry and their own professionalism.

In summary, encourage vendors who are not Allied Members to become one and then give Allied Members access to you in a manner appropriate for your business and its needs.

I'm going to work harder to take care of Allied Members, won't you?

Taking Over a Hotel: Checklists and Routines

by Kirby D. Payne, CHA

Our company has managed about 25 different limited and full service hotels during the last six and a half years. That averages out to assuming the management of a new hotel every three months.

This year alone, we have already assumed the management of a limited service motel in Wisconsin (already sold), opened a closed hotel in North Dakota and will be going into one in Pennsylvania.

We believe we are relatively efficient at the process and have had good results retaining staff and maintaining regular accounts.

I thought I might share our checklists for these circumstances. While there are some very extensive manuals with hundreds of pages of detailed checklists for this purpose, we fell that a short check list for the immediate things we have to do on short notice should be a starting point. We use two lists: one relating to things which need to be done prior to assuming management and those things which need to be done the day we assume management.

With these two lists, a supply of necessary forms and foreknowledge as to what front office system, if any, a particular hotel has, we can usually assume management efficiently with two people in a limited service hotel.

One person leaves within two or three days while the other remains until the General Manager and staff are oriented to our procedures or a new General Manager during the first three months in about 20% of the takeovers.

The two single areas where there seems to be the potential for immediate impact on the financial results of a new management situation are increased Average daily Rate (ADR) and reduced Room Attendant and Laundry time.

A key part of successfully assuming the management of a new hotel is the orientation and training of the General Manager and supervisors. It is key that they completely understand our expectations, policies and procedures or we will be unable to meet our commitments to the owner.

Things to Accomplish Prior to Closing/Management Change
1.1 Is owner registered in that state?

1.2 Is operator registered in that state?

2.1. Depository bank account opened, funds transfer arranged?

2.2 Concentrating account coordinated?

2.3 Credit card accounts arranged for?

2.4 T&E card accounts arranged for?

2.5 Checks ordered

3.1 City/county licenses/permits?

3.2 State sales tax arrangements?

4.1 Electricity, special reading and application?

4.2 Gas, special reading and application?

4.3 Water/sewer, special reading and application?

4.4 Garbage/refuse collection continued?

4.5 Telephone service (local) reading and application?

4.6 Telephone service (L.D.) cutoff and application?

4.7 Telephone service (pay and PL's, if any)

4.8 Telephone service releases from prior owner/operator.

5. Personnel Issues

5.1 Obtain payroll listing (w.titles) from seller.

5.2 Discussion w/ GMas to his status/plans.

5.3 Explain to GMchanges in operating/acct. philosophy.

5.4 Explain to GMimpact of sale/purchase on employees.

5.5 ADPforms and new employee packets ready?

6. Inventories

6.1 F.F&E.

6.2 Big Four (China, Glass, Silver and Linen)

6.3 Forms and Stationary

6.4 Supplies

7.1 Advise GMto note folios balances at closing.

8.1 Location of equipment manuals?

8.2 Equipment warranties?

9. Ongoing contracts and leases?

9.1 Billboards9.2 Cable TV

9.3 Others? (List)

10.1 Personal contact with franchisor.

10.2 Franchisor contractual requirements.

11. Insurance Issues

11.1 Building and contents?

11.2 Liability?

11.3 Innkeepers?

11.4 Employee bonds?

11.5 Unemployment?

11.6 Worker's compensation?

11.7 All necessary additional insured (owner and operator)?

11.8 Other?

12. Accounting Issues

12.1 Service Bureau Notified?

12.2 ADPnotified?

12.3 Accounting orientation for GM?

12.4 Interim accounting kit ready?

13. Marketing Issues

13.1 Press releases ready?

13.2 Upcoming Group bookings?

13.3 Upcoming important local events (sports, concerts, etc.)

14. Closing items

14.1 Closing date?

14.2 Attorney handling closing?

14.3 Purchase agreement last reviewed?

Things to Accomplish Day of Closing/Management Change

2. Ascertain cash drawer and petty cash requirements.

2.1 Verify depository bank to ensure funds arrived. Pick up cash.

2.3 Verify new credit card accounts to use.

2.4 Verify new T&E card accounts to use.

4.1 Electricity, special reading.

4.2 Gas, special reading.

5. Personnel Issues

5.1 Verify payroll listing (w/titles)

5.2 Face to face discussion w/GM as to his/her status or plans.

5.3 Explain (again) changes in operating/acct. philosophy.

5.4 Employee meeting to explain impact of sale/purchase.

5.5 Complete ADP forms and new employee packets.

5.6 Orient employees about owners and operator.

5.7 Discuss uniform/shoe/name tag policies.

5.8 Discuss overtime/exemption policy.

5.9 Discuss scheduling policies.

5.10 Discuss hiring/raise/termination policy.

5.11 Discuss harassment policy and have employees sign notice.

5.12 Review personnel files for completeness.

5.13 Insure work time recording system is adequate.

6. Verify Inventories

6.1 F.F.&E.

6.2 Big Four

6.3 Forms and stationary

6.4 Supplies

7.1 Verify that GM notes folios balances at closing.

8.1 Look at equipment manuals.

8.2 Verify equipment warranties.

9. Decide on continuing contracts and leases.

9.1 Billboards

9.2 Cable TV

10. Franchisor Issues

10.1 Personally notify franchisor at closing.

10.2 Franchisor contractual requirements completed?

11. Insurance issues?

11.1 Employee bonds?

11.2 Claims forms and emergency instructions?

11.3 Training on emergency procedures?

11.4 Arrange insurance safety inspection.

12. Accounting issues:

12.2 Payroll training for GM.

12.3 Accounting training for GM?

12.4 Budgeting orientation conducted?

12.5 Budgeting process started?

12.6 Purchasing policies discussed?

12.7 Inventory and storage control discussed?

12.8 Cash management system explained?

12.9 Reporting procedures discussed?

13. Marketing issues

13.1 Press release issued?

13.2 Group booking reviewed?

13.3 Upcoming important local events

13.4 Marketing philosophy discussed?

13.5 Market planning orientation conducted?

13.6 Market planning process started?

13.7 Room and rate management discussed?

14. Maintenance issues

14.1 Room key coding system established, and tags removed?

14.2 Review key/master control policies

14.3 Discuss preventive maintenance (rooms/equipment)

14.4 Exterior/grounds maintenance crew

14.6 Get pest inspection certificate if required by sale.

20 Tips for Success from Kemmons Wilson

by Kirby D. Payne, CHA

An opportunity in my life which I enjoy is chairing the International Council of Hotel-Motel Management Companies. Because of it I have had an opportunity this year to help host a number of functions around the country for my competitors and peers.

This Tuesday I had dinner with Ray Schultz, President of Promus Company (Embassy Suites, Hampton Inns and Hawthorne Suites). He got into the hotel industry while working for IBM where he was responsible for getting Holiday Inns started on their first computerized reservation system. Who says there is no opportunity to move ahead in this country?

Wednesday, while visiting with George Glover, CHA, President of Wilson Hotel Management, I had the opportunity to meet briefly with Kemmons Wilson, founder of Holiday Inns. If you're in the hotel industry you know he's as big a part of our industry's history as Conrad Hilton. Mr. Wilson is an alert man in his early eighties who goes to work everyday. As we were leaving his offices, Mr. Wilson walked out to his car to get a sample restaurant chair he had in his trunk. Imagine, with his position and age still being involved to that detail. An no, he wouldn't let anyone carry the chair for him! Thank you, George, for inviting Mr. Wilson to join us.

In the reception area of The Wilson Companies there was a flier with Kemmons Wilson's Twenty Tips for Success which I picked up. When I met him I asked if I could use his tips in my column. Here they are:

1. Work only a half a day; it makes no difference which half-it can be either the first 12 hours or the last 12 hours.

2. Work is the master key that opens the door to all opportunities.

3. Mental attitude plays a far more important role in a person's success or failure than mental capacity.

4. Remember that we all climb the ladder of success one step at a time.

5. There are two ways to get to the top of the oak tree. One way is to sit on a acorn and wait; the other is to climb it.

6. Do not be afraid of taking a chance. Remember that a broken watch is exactly right at least twice every 24 hours,

7. The secret of happiness is not doing what one likes, but in liking what one does.

8. Eliminate from your vocabulary the words, "I don't think I can" and substitute "I know I can".

9. In evaluating a career, put opportunity ahead of security.

10. Remember that success requires half luck and half brains.

11. A person has to take risks to achieve.

12. People who taker pains never to do more than they get paid for, never get paid for anything more than they do.

13. No job is too hard as long as you are smart enough to find someone else to do it for you.

14. Opportunity comes often. It knocks as often as you have an ear trained to heat it, an eye trained to see it, a hand trained to grasp it, and a head trained to use it.

15. You cannot procrastinate-in two days, tomorrow will be yesterday.

16. Sell your wristwatch and buy an alarm clock.

17. A successful person realizes his personal responsibility for self-motivation. He starts himself because he possesses the key to his own ignition switch.

18. Do not worry. You can't change the past, but you sure can ruin the present by worrying aver the future. Remember that half the things we worry about never happen, and the other half are going to happen anyway. So, why worry?

19. It is not how much you have but how much you enjoy that makes happiness.

20. Believe in God and obey the Ten Commandments.