Improving the Bottom Line

By: Richard O. Kopf

In today's economy, occupancy and Revenue per Available Room (RevPAR) numbers have fallen significantly across the country, and hotel owners and operators are scrambling to cover their operating expenses, let alone covering debt service. As a result, finding opportunities to create more income or squeeze expenses is at the top of the "To Do" list. While every item in the budget is a candidate for review and analysis, the following is a list of income generating and expense reduction measures we have encountered that might not otherwise be apparent to an owner or operator. Some of these ideas might apply to individual projects, while others provide bigger picture portfolio-wide ideas.

Income Generating Measures

	Re-branding the hotel. In today's economy, many hotels are improperly positioned in the marketplace and can significantly increase their market share and ultimately their profitability by re-branding. While never an inexpensive proposition, shifting the brand between options within the same hotel company can many times be accomplished through negotiations with the hotel company. Moving to another brand not owned by that hotel company will require an understanding of the termination provisions in the franchise/management agreement. In any event, negotiations between ownership and management will intensify as brand standards come under increasing scrutiny.
	Addition of rooftop antennas for wireless transmission services. Some clients use a rooftop management company to handle these opportunities across their portfolio.
	Addition of Captivate Network as an additional guest service.
	Implementation of Leadership in Energy and Environmental Design (LEED) and environmental programs and associated credits. This can be as far reaching (and, in the short term, expensive) as installing solar panels or cisterns to collect rainwater, or as simple as changing landscaping to utilize more drought resistant plants to reduce expenses by minimizing required irrigation.
	Contract for "after hours" (for example, daytime) parking on the hotel property for adjacent uses such as retail, entertainment, etc.
	Signage/billboard agreements. This can apply on the roof, exterior walls, inside the hotel common areas such as the lobby, in the hotel facilities (for example, in the gym or spa) and in the rooms.
	Addition of ATM facilities.
	Drop box leases (for example, FedEx, UPS, Airborne, etc.).
	Addition of fitness/spa facilities for monthly dues and/or fitness/spa company lease in unleased and underutilized space.
	Addition of on-site rental car facilities.
	Change managed facilities to leased facilities (for example, restaurant, bar, spa, gym, etc.). This can result in a loss of gross revenue but, with a good tenant, can actually improve the bottom line.
	Many recent projects have been developed with associated condominiums or rental units. Income generating ideas related to the associated condos or rental units include:
	Discounts to drive greater food and beverage, spa or related services revenue from the "captive" audience ... more