Positive News for US Hotels: 2011 Performance, 2012 Forecast

February 27, 2012 at 9:06 pm | Posted in Uncategorized | Leave a comment

So, did you hear the good news? The U.S. hotel industry reported increases in all three key performance metrics in 2011, according to data from Smith Travel Research (STR).

Overall, the U.S. hotel industry’s occupancy rose 4.4% to 60.1%, its ADR was up 3.7% to $101.64 and RevPAR increased 8.2% to $61.06.
2011 was the first time since 2008 that the industry ended the year with occupancy of more than 60% and an ADR of more than $100. U.S. hotels reported a 0.6% increase in supply in 2011 and a 5% demand increase for the year. Demand has increased 5% or more only three times since 1987.
“2011 was a strong year for the U.S. hotel industry,” said Randy Smith, co-founder and chairman at STR. “Room-supply growth continued to drift downward as room demand reached record levels during the year. Though occupancy and ADR were still below 2007 and 2008 levels, it was still encouraging to see the industry experience a solid rebound during a period of considerable economic difficulties.”
The U.S. hotel industry is expected to report steady RevPAR increases in both 2012 and 2013, according to the most recent forecast from STR in partnership with Tourism Economics.
Overall in 2012, the U.S. hotel industry’s occupancy is expected to rise 0.5% to 60.4%, its average daily rate is projected to be up 3.8% to $105.45 and its revenue per available room is planned to increase 4.3% to $63.68.
“2012 may prove to be challenging for the U.S. hotel industry,” said Randy Smith, co-founder and chairman at STR. “There are a number of issues that will confront the industry and overall economy this year. We believe that given how well the hotel industry did during 2011, it will be difficult in 2012 to show significant growth. However, we remain optimistic the industry will continue to report modest increases in 2012.”

So, how did your business fare in comparison? As you know, each region and individual hotel can vary greatly from these national statistics. Many of the hotels that I work with were performing well ahead of 2010 until December. The lack of snow hurt the December 2011 performance and continues to reduce room demand in 2012.
Thinking of Selling?
At CenterPoint, we have seen a significant increase in buyer activity. Inquiries on all types of businesses are at a higher level than we have seen in years. Other business brokers are experiencing the same increase. This is a great sign for any hospitality owner thinking about exit options.
If you think it may be time for you to retire, or move on to other ventures, I encourage you to call or email me to talk further about an exit from your business.

O.J. Robinson of CenterPoint has many years in the hospitality industry in New Hampshire. He is the former owner of Parker’s Motel in Lincoln and is one of the owners of the Whale’s Tale Waterpark in Lincoln. He has provided consulting, exit planning, and brokered the sale of numerous lodging properties of various sizes. oj@cpointadvisors.com

When is the Right Time to Sell Your Business?

September 7, 2011 at 9:26 pm | Posted in Building Business Value, Business Acquisitions, Exit Planning & Transition Strategies | Leave a comment
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In my years as a business broker, I have occasionally experienced the sad situation of business owners who waited too long to sell their businesses. These business owners all had different circumstances and situations, but all left their business in less than optimal scenarios.

One of these sellers, we’ll call him Al, established a family business in the 1960’s. Over the decades, he built the business up, raised his family, and became a well-respected businessman and community member.

Throughout most of his time as a business owner, Al worked very hard, put in many hours, expanded his business, and continued to make changes in order remain competitive. As Al got older, he still worked hard, but did not adapt to the changing business climate and competition. He continued to run his business the same as had in the past. While he was doing this, his industry changed, standards changed, technology changed, customer expectations changed, and marketing methods changed. After almost 5 decades of operation, Al lost his drive to create change in his business. He also lost his ability to motivate, or even control, his changing workforce.

In his mid to late sixties, Al did not want to sell his business for the same reasons many long-time business owners are reluctant to sell:

  • His business is his life. He would not know what to do if he “retired”.
  • He did not have enough money to retire.

As Al continued to operate his business into his seventies, he lost customers to more aggressive and efficient competitors. His sales declined. He was unable to adequately maintain his assets which fell into disrepair. His employees focused more on their own desires rather than the interests of the business. As his business began to lose money, he was forced to invest some savings and increase debt in order to remain in business.

As a result of the declining sales and profitability, Al lost value in his business. In addition, he lost his drive and ambition. Unfortunately, over the years, Al did not diversify his wealth. His business made up almost his entire net worth. This net worth was now deteriorating.

Al recently sold his business at a market price that was well below its value 5-7 years ago. The selling price certainly reflected the economic downturn we have all experienced. It also reflected the deteriorating condition of his assets and his declining customer base, competitive edge, sales, and profitability. The selling price was enough to pay his debts and transfer costs, but did not leave him much money for his future. I was sad leaving the closing knowing that Al worked so hard for so many years and yet had so little to show for it.

Looking back is always easy. Everyone familiar with Al’s situation agrees that he should have sold years ago. Looking ahead is much more difficult. When is the right time for a business owner to sell? For every business owner, the answer is different. However, it is important for owners to seriously evaluate their current situation and start planning for their eventual exit. An owner needs to carefully examine their business operation, their personal financial status and needs, and determine a plan for their future.

Business owners need to look out the windshield, not the rear view mirror. Take proactive steps to:

  • Engage professionals to assist you with business valuation, exit planning, and business brokerage
  • Develop a plan to exit your business
  • Diversify your wealth
  • Maintain the condition of your assets
  • Recognize your own limitations, capabilities, goals, and needs
  • Know the real value of your business

Remember that the goal of owning a business is to give you life!

As you face your future as a business owner, be sure to take the time to plan for your future and be ready to sell when it makes the most sense. Don’t be like Al and wait until it is too late. Retain the assistance of an Exit Planning professional or business broker when it comes time for planning or selling. You have spent years building your business, be sure to engage proficient professionals to help you get the most value for all this work.

CenterPoint Business Advisors assists business owners build the value of their business, plan for an exit from their business, value their business, and broker the sale of their business. O.J. Robinson has been a business owner for over 30 years and is using his experience and expertise to assist other business owners to successfully grow and exit their businesses. 

oj@cpointadvisors.com

 

603-505-8980 (direct)
888-988-0999 (ext 103)

 

Improve Your Business in 2011!

January 6, 2011 at 1:27 am | Posted in Building Business Value, Business Strategy & Growth | Leave a comment
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Happy New Year!!

Did you make any New Year Resolutions? Exercise more? Eat healthier? Spend more time with the kids? How about New Year Resolutions related to your business? Will you make a commitment to improve your business in 2011? Can I offer you a challenge for 2011:

Resolve to keep accurate, timely financial records.

In my past experience working with business owners, I find that one of the biggest problems in operating a business is keeping accurate financial records. Many small business owners I have worked with do not really know how profitable their business really is. They judge profitability by their bank accounts more than their financial reports. This can lead to false assumptions, poor planning, poor performance, and decreased business value.

“It doesn’t matter that my financial records aren’t perfect, so long as I am making money”

“I have more money in my account now than I did at this time last year”

Your financial records are the key to revealing the profitability of your business and to increasing the value of your business. Profitability needs to be easily determined.

As the owner, you should be very aware of the profitability of your business. Some business owners only hire a tax accountant to just “compile” their financial data in order to complete the tax return. Instead, you should work closely with your accountant to determine true profitability as part of your tax preparation. Profitability is the basis for determining the value of your business. The more believable your financial records are, the more a buyer/bank will pay/lend for the business value.

When you go to sell your business, re-finance your business, extend your line-of-credit, revise your business plan, or make capital improvements, you will rely on your past financial records for future success.

  • Monitor and control inventory
  • Track margins
  • Track Cost of Goods Sold (COGS)
  • Eliminate personal expenses from your business records.
  • Track accounts payable and accounts receivable
  • Produce and review monthly profit & loss Statements
  • Review your balance sheet
  • Properly record all income
  • Understand the differences between cash and accrual accounting methods

Need help? Hire a bookkeeper to help you set up financial procedures and systems. Take a class in Quickbooks (see SCORE information below).

I cannot stress enough how important good financial records are. They hold the key to building the value of your business.

Have a Happy, Successful 2011!!

O.J. Robinson of CenterPoint has provided valuation, consulting, and brokerage services to over 45 businesses in New Hampshire, Massachusetts, and Vermont. He has owned and operated businesses in New Hampshire and has the experience and expertise to assist with the sale or improvement of your business. oj@cpointadvisors.com

Links:

CenterPoint Business Advisors

SCORE Manchester, NH

SCORE Quickbooks class in Bedford, NH

Upper Valley SCORE

Other SCORE Chapters

A Summary of Positive Signs & Statistics from the Lodging Industry

October 22, 2010 at 1:29 am | Posted in Building Business Value, Business News & Topics, Grocery Store News | Leave a comment
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A Summary of Positive News and Statistics from the Lodging Industry!

By OJ Robinson

Increasingly good news and positive statistics are being reported by the lodging industry based on year to date performance in 2010.

We all know that the 2008-2009 period was devastating for our industry:

  • US Occupancy:    down  14%
  • ADR:   down  $9.40
  • RevPAR:   down   18%
  • Sales of US Hotels 2008: down  42%
  • Sales of US Hotels 2009: down  42.7%
  • Avg selling price/unit:   down  39.0%

2010 year-to-date, and the future forecast show a much brighter period ahead of us. HVS Hospitality is the world’s premier hotel consulting and valuation firm and produces a “Valuation Index” based on historical data and future forecasts. Here are some highlights from their October 2010 report:

2010 YTD:

  • RevPAR:    up  4.3%
  • Occupancy:  up  5.3%
  • Value per room:   up 16.1%
  • Hotel sales volume:  up 21.5%
  • Hotel sales with a per unit price over $200K:  up 120%

What is most exciting about this HVS report is the future projections. After 3 straight years of significant decline, all major metrics are predicted to increase for the next five years. In 2012, the value per room is expected to surpass its previous high, and in 2013, RevPAR is expected to set a new record.

The anticipated rebound in occupancy and RevPAR will lead to hotel values that will increase up to, and then surpass the high of 2006. HVS has attributed the value of a 1987 hotel room as 1.00, and then has tracked the increase/decrease in value over the years, with projections into the future. Here is there data:

In 2009, investors shied away from the hotel sector. In 2010, dealmaking and investment has picked up dramatically. The pace of large deals has increased the most, led by REITs that have cash and can acquire hotels with no financing. For the first 6 months of 2010, hotel sales by dollar volume is up 143% over the first half of 2009. Sales by number of hotels is up 70%.

Hotel buyers are commonly looking to hold the property for a 5-10 investment period. “Flippers” are no longer active in the marketplace as it is no longer makes financial sense to buy, renovate, re-brand, and quickly sell a hotel property.

All of these data are from the whole country. What is the situation in New England? Here are my observations:

  • Buyer activity has increased. I have seen more buyer inquiries lately. In my recent sale of Woodward’s Resort in Lincoln, NH, I had more qualified inquiries in the final 8 weeks of the transaction than in the previous 7 months of active marketing.
  • Banks have money to lend. Interest rates remain historically low. The SBA has extended it waiver of fees.
  • Flagged hotels or well-branded independent hotels remain most in demand with buyers and banks.
  • The New England market is strong. Larger city locations are improving more quickly than average. The Boston market has shown a 14% increase in RevPAR in 2010 YTD, compared to 4.3% nationwide.
  • The local tourist lodging business is reporting a very good summer due to near perfect weather and low area unemployment. The unemployment rate in New Hampshire just reported its 7th month of continued decline!
  • If you are considering a sale of your hotel or motel, you do not need to sit on the sidelines and wait. There are buyers and banks ready to make deals happen.

CenterPoint Business Advisors is sending you this information with the intent of helping you to realize the full value from your hospitality business. CenterPoint assists business owners to build the value of their business, to plan for an exit from their business, to value their business, and to broker the sale of their business. Please contact us if you are considering a long or short term exit from your hospitality business.

O.J. Robinson of CenterPoint has many years in the hospitality industry in New Hampshire. He is the former owner of Parker’s Motel in Lincoln and is one of the owners of the Whale’s Tale Waterpark in Lincoln. He has provided consulting, exit planning, and brokered the sale of numerous lodging properties of various sizes.   oj@cpointadvisors.com

Links:

CenterPoint Business Advisors:  www.cpointadvisors.com

HVS Hospitality Services: http://www.hvs.com/

HVS 2010 U.S. Hotel Valuation Index:   http://www.hvs.com/news/4888/hvs-presents-the-2010-us-hotel-valuation-index/

 

The Cold Winter Air is Coming…

October 21, 2010 at 3:00 pm | Posted in Business News & Topics, Business Strategy & Growth | 1 Comment
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The cold winter air is coming. Will you complain about it, or use it to reduce your electric costs? 

For supermarkets and convenience stores, utility costs have become a major focus in reducing expenses. After labor costs, utilities are generally the greatest expense for convenience and grocery stores. Many store owners are turning to “green” solutions not only to save the planet, but to also save money.

Price Chopper was recently awarded the EPA Green Chill Silver Level Certification for their Warwick, NY store. Their Colonie, NY store was named “Best Green Chill Certified Store”. “Green Chill” recognizes stores that reduce refrigerant charge by 50% and refrigerant emissions by 75%.

Kroger has reduced their overall energy consumption by over 27% since 2000. Part of this was accomplished through their use of LED lighting.

But it is not only the large chains that see the economic advantage to reducing energy costs. In my work with various stores throughout Vermont, Massachusetts, and New Hampshire, I have seen many smaller store owners incorporate green technology into their businesses.

For several years, the Champlain Farms family of store have used outside cold air to keep their beverages cold. Their fresh air exchange system pulls cold air from outside rather than using compressors during much of the winter season. According to the owner, this system has already paid for itself and is now saving them money beyond their original investment.

CenterPoint Business Advisors assists business owners with understanding and growing the value of their business. We have done this for numerous grocery and convenience stores. A key method of increasing the value of your business is to make permanent expense reductions that will result in a higher profit. As energy costs continue to rise, reducing your usage becomes a long term value builder for your business.
CenterPoint is also providing consultation to Freeaire Refrigeration in Waitsfield, Vermont. This company is a leader in designing and manufacturing the controls and systems that allow the use of cold, purified, outside air to maintain a constant and reliable temperature inside commercial walk-in coolers. With the compressor system sometimes not running for months at a time, the FreeaireTM system can save you as much as 50% on your refrigeration energy costs. It’s also eligible for large rebates from your utility company that accelerate the payback period. You can learn more about how they can reduce your long term operating costs at: www.freeaire.com

I encourage you to contact Freeaire today, or one of the many other companies that offer products that can help you reduce your energy costs and increase the value of your business.
CenterPoint Business Advisors is sending you this information with the intent of helping you to better operate your retail food store business. CenterPoint assists business owners build the value of their business, plan for an exit from their business, value their business, and broker the sale of their business. Please contact us if you are considering a long or short term exit from your business.

NHGA Conference

October 14, 2010 at 6:59 pm | Posted in Uncategorized | Leave a comment
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As I left the NH Grocer’s Association annual conference last week, I had two initial reactions:

1. This was a great opportunity! The independent operators seminar was extremely informative. The law firm of McLane Graf, Raulerson & Middleton covered the topics of group purchasing, the new health care law, and planning an exit from your business. This was followed by a group discussion, led by John Dumais, regarding issues faced by store owners. One topic that brought much participation related to choosing an electric supplier for your business. Every participant left with good ideas and a better knowledge of the issues related to health care and exit planning.

2. Why weren’t more store owners present? Sure you have a business to operate. That keeps you plenty busy. Sometimes it is necessary to work smarter, not harder. This conference provided a great opportunity to meet other store operators who share the same challenges, concerns, and problems that you do. This conference provided the perfect atmosphere to build relationships with, and learn from, other store operators.

The NH Grocers Association exists to benefit those in the grocery business. Even the members that stay at their store and do not participate benefit from the legislative work and other programs that the NHGA offers. However, the members that participate and attend the conference certainly benefit more.
As next September rolls around, I encourage grocers to make a commitment to register and attend this informative conference. It will benefit you and your business.
Do you know the value of your business? In the seminar discussion about succession planning, this was one of the main points the presenters made. Most business owners do not know the value of their business, yet this is the first step in planning an exit from your business. And every business owner should be planning for an eventual exit, unless your goal is be to be the richest person in the cemetery. CenterPoint can help you determine the value of your business and point out ways to increase that value and prepare your business for sale.

What’s on Your Website

September 22, 2010 at 5:35 pm | Posted in Uncategorized | 1 Comment

I have viewed the websites of many New Hampshire and Vermont lodging properties and have found many cool, interesting sites and some boring, difficult or outdated sites. Where does your site stand? Now that summer is over, take some time to review your own site, compare it to others, and work to improve it. Here are some items to check for:

1.  Correct Information. One NH motel has a good website design, but the e-mail address on the home page is incorrect. Another resort has a link to their menus. Clicking on “Breakfast” leads to their dinner menu. “Dinner” also leads to the dinner menu. I guess I’ll have the Prime Rib for breakfast. Check your info, rates, links, etc.

2.   Up-to –Date Information. Get rid of your 2009 ski packages or 2009 spring wedding specials. Are your rates, descriptions, packages, and special events up to date?

3.  Dead Ends. Does your site lead to dead ends? Every page should have links to additional pages. “Contact Us” and “Book Now” should be on every page. Don’t let your potential customer go to a page with no additional page links. This gives them the option to go back to the previous page (which is now old news), or leave your site. Don’t give them this choice!

4.Keywords, Search Engine Optimization, Meta-tags, Adwords. Work with website design experts to make your site more visible to people searching on the web. Hotel/Motel searches are one of the most competitive themes on Google.  Pretend you are a potential customer and search for lodging in your area. Where does your business come up in a search?

5. Google Analytics. It is important to know how people are getting to your website and where they are going on your website. Which pages are most often viewed? How long do viewers spend on each page? Where are you getting referrals from? Google analytics and other similar tools can help you understand how viewers are using your site.

6.       Appeal & Functionality. Is your site easy to navigate? Informative? Are the room descriptions and prices on the same page? Or do viewers have to bounce around the site to get this info? Can the consumer book easily online?  Your site should be as easy and informative as possible for the consumer.  Does the quality of the website reflect the quality of your business? A blurry picture that you took yourself might suggest that you also fixed the plumbing leak yourself to the same standard. Your website is a reflection of your business!

Websites should be only one part of your online presence. Social media and blogs have become essential. The following chart shows the overall online activity for various segments of the tourist industry. Keep in mind that this shows “activity”, not direct bookings or inquiries.

2011 Federal Tax Increases: Does Selling Your Business in 2010 Make More Sense?

January 13, 2010 at 7:30 pm | Posted in Business Acquisitions, Business Transfers M&A | Leave a comment
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Are you one of the numerous business owners who want to sell their business but are thinking they should operate one more year? Maybe you are hoping to bring revenue and profits back to prior levels?

Here is one thing to consider as you make a decision about selling: The government might tax away any net increase you may obtain in the selling price.

Since 2003, the top tax rate on most long-term capital gains has been 15% for most people. The current capital gain rates are scheduled to expire effective December 31, 2010. Then, starting in 2011, the top 15% rate is scheduled to revert to its former pre-May 6, 2003 level of 20%.

The big question now is: Will the top rate only rise to 20% or will Congress raise it higher? The recent historical Capital Gains rates are as follows:

Pre 1978:  35%

1978:         28%

1981:         20%

1987:         28%

1997:         20%

2003:         15%

 

Discussions on Capitol Hill range from extending the 15% sunset, to raising the rate above the 20%. Only time will tell. However, if no alternative proposal is voted into law, the rate will automatically adjust to the 20%.

Also it is important to keep in mind that with the pending Health Care Reform, people classified as wealthy will experience an additional tax levy or surtax. There are various proposals that could raise taxes on those earning over $250,000 by 0.5%, increasing to 5.4% on incomes over $1M.

And finally, regular Income Taxes are slated to increase. That’s right, in Year 2011, along with an increase in capital gain rates, the top federal tax rate returns from 35% to 39.6%.

The sale of a business typically causes the seller to incur both capital gains and regular income taxes on the sale proceeds. With both of these scheduled to increase in 2011, it makes sense to seriously consider selling now.  If an entrepreneur wants to experience the lowest tax impact possible from selling his / her business, selling before the tax rates increase is the way to go.

CenterPoint is available to work with business owners and their accountants to individually analyze the tax savings of selling now versus selling in 2011.

STR Predicts Good News in 2011

December 8, 2009 at 2:47 am | Posted in Business News & Topics | 1 Comment
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By OJ Robinson

As part of its monthly forecast program, STR (Smith Travel Research) is projecting the US Hotel industry will report increases in all three key metrics in 2011.

STR’s forecast projects 2011 occupancy to be up 2.4 percent to 56.2 percent, average daily rate to increase 3.0 percent to US$96.81, and revenue per available room to jump 5.5 percent to US$54.41.

“For the first time since 2007 occupancy will improve in 2011,” said Mark Lomanno, president of STR. “With that, we think that finally the industry will have the ability to raise room rates, though we think that it will be very mitigated ADR growth, about the 3 percent range. It won’t nearly come close to getting back to 2007 levels, but will at least be the beginning stages of improvement.

“We think that most of the construction pipeline will be built between now and 2011,” Lomanno continued. “We are looking for supply growth in 2011 to be about 0.8 percent.”

Demand for 2011 also is expected to end the year positive with a 3.2-percent increase.

STR’s revised forecast is expecting 2009 occupancy to end down 8.8 percent to 55.0 percent, ADR to drop 8.9 percent to US$97.30, and RevPAR to drop 17.0 percent to US$53.52.

“The current forecast predicts RevPAR to be down 17.1 percent for 2009,” Lomanno said. “Our latest revision modifies that slightly to 17 percent. Part of the reason for that is the ADR declines have plateaued and didn’t go down as far as we thought they might, which is a good thing.”

The outlook for 2010 looks slightly better than 2009, but still the industry is expected to end the year with decreases in all three key metrics. Occupancy is projected to end 2010 with a 0.2-percent decrease, ADR is forecasted to finish with a 3.4-percent drop off, and RevPAR is expected to close with a 3.6-percent decline.

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Tourism: Cautious Optimism

November 22, 2009 at 3:05 pm | Posted in Business News & Topics | Leave a comment
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By OJ Robinson, CBI

There are several signs that give area hospitality properties reason for cautious optimism for the near future.

After a 2009 summer season that was disappointing for most area operators, a recent survey suggests that leisure travel will improve during the holiday and winter seasons. According to a recent press release from Deloitte:

“While the tourism, hospitality and leisure (THL) sector continues to be challenged by current economic conditions, a new survey from Deloitte suggests reason for cautious optimism heading into the holiday and winter travel season.

Deloitte’s survey of 2,000 consumers in the United States revealed that almost half (45 percent) will take a vacation or leisure trip that involves staying overnight in a lodging facility, such as a hotel, motel or a timeshare, from the beginning of Thanksgiving week through March of next year.”

Read the entire press release and survey results here.

I find it encouraging that 70% of the respondents said they plan to travel as much, or more, than they did during this same period last year. However, the majority of these travelers plan to spend the same, or less, than a year ago. Our industry will continue to be challenged with rates and occupancy that remain lower than before the recession, but we are seeing the signs of a turn-around.

For those of us that do business in New Hampshire

New Hampshire was again ranked 7th nationally for the State Business Tax Climate. This is a very statistical analysis by the Tax Foundation that helps legislators and business executives understand the total tax burden put on businesses as compared to all other states.

Other New England states ranked as follows:

State Ranking
New Hampshire 7
Maine 34
Massachusetts 36
Connecticut 38
Vermont 41
Rhode Island 44

An executive summary of the Tax Foundation report can be found here.

I hope you find this article informative and helpful. Let’s hope for some cooperative weather and a  busy winter season!

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