Some interesting takeaways from our call with Neil Amin, CEO of Shamin Hotels.
We hosted a call on Monday with Neil Amin, CEO of Shamin Hotels. Shamin owns 40 hotels with over 4,000 rooms mostly in the Mid-Atlantic region. Neil provided some honest and unbiased commentary about the industry and some of the major players from a decidedly private and independent perspective.
Here are some of our takeaways:
- Bullish on the lodging cycle and so far, there are no signs that positive North American RevPAR trends are slowing down
- That said, visibility is limited and current trends are more reflective of travel decisions made 6 months ago. RevPAR usually lags the macro.
- While it’s still early, brands should be able to get good pricing increases on corporate negotiated rates, since last year was really the first time rates have moved upwards since 2008
- Ability to push rate is largely dependent on the local market in question. Obviously, markets with healthy occupancy are able to get more rate than others
- While overall costs are increasing at 5-7% rates, CostPAR increases are more contained
- Wages are increasing 3%, however, wage pressure is also market specific
- Lots of the cost creep is coming from brand initiatives and required upgrades as the market recovers (eg. HDTV, flat screen TV’s, deferred maintenance and remodels)
- Obamacare will likely lead to more part time workers so employers can avoid offering insurance to all employees or paying a penalty. It will result in higher costs.
- In most markets, it’s still cheaper to buy then to build, which is good for keeping supply growth suppressed over the intermediate term
- Asset prices should continue to see support from low interest rates, which provide buyers an attractive return spread (cap rate less cost of capital)
- Definitely are not a disposer of properties in this environment
- Given the changes in the lodging landscape and the evolution of the various brands, renewing a HOT or MAR flag once the initial contract term expires poses a very high hurdle.
- Size and room design mandates have changed over the last 20 years
- Harder to get a contract renewed in competitive markets where the Brand knows they can get a more “choice” asset flagged
- High flag renewal hurdles are an opportunity for conversion brands; especially some of the Wyndham portfolio brands and Choice’s Quality Inn brand
- Most franchisees view Sales Force One as a conflict of interest
- Hotel owner outsources the reservation function for convention / group business to MAR. Thought process for MAR is that there are synergies to centralizing bookings in a particular market.
- Franchisees view that MAR has a conflict of interest in filling their managed hotels where they have incentive fees ahead of the franchised properties. Franchisees don’t like the idea of relinquishing control of their customer relationships.
- OTAs are a high cost distribution channel that they try to use sparingly