I have been in the hotel business for 32 years and trust me when I say, I have seen it all. Good decisions, bad decisions, and everything in between.
Jack Ward was my mentor in the business, and he said something years ago that has always stuck with me. “Sometimes,” Jack said, “the best time to sell is when you don’t want to.” I could tell you story after story about hotel owners that had an opportunity to sell and thought, “if it is worth that much now, just think what it will be worth in the future.”
When a hotel owner is building a new hotel, they always have lofty expectations of how great the hotel is going to perform. Sometimes they are right but most times they miss the mark big. I am dealing with an owner now that bought a closed hotel and spent millions renovating it and he called me to discuss values about 90 days before it was going to open. I told him that the most perfect transaction is the one you don’t have to prove value.” Meaning, if you could sell it before it opens, you don’t have to show occupancy and daily rates. I went on to tell him that what you want to see is the buyer using his own proforma for value but once the hotel is opened for business, it becomes about the actual performance.
I gave him my best and most honest assessment and he said the words that are almost always wrong. He said, “Keith, just think what it will be worth after I have a full year of operations.” In the back of my mind I heard, ding, ding, ding, mistake, mistake, mistake. I told him ok and to call me when he is ready.
He called six months after he opened and said, “I should have listened to you.” I responded, “well we can’t undo the past so let’s see what we can do now.” The value had dropped considerably because the hotel just wasn’t performing well.
My point is, not every time, but sometimes, we need to look at the deal that we have in front us now and in Jack’s words, “sometimes, the best time to sell is when you don’t want to.” KT