Category Archives: Career

Look-a-like

Career, Life

When you create something new that you intend to market for sale, you must be careful about copy right infringement and trademarks, but you also must be careful of making it look like someone else’s product.

There have been 100’s of lawsuits because of look-a-like products. Some years ago, Jeep filed a law suit against Hummer because they said the Hummer front grill looked too much like a Jeep. Hummer won the law suit, but it still probably cost hundreds of thousands of dollars to defend the suit.

I have a client that owned his own hotel brand and had 26 hotels named after his family name. At the time (early 90’s) Doubletree Hotels had started giving out hot cookies when you checked in. This client of mine decided he wanted to give a free bag of candy when the guests checked in. He goes out and buys a 750k candy machine and started packaging candy with his logo on it. The candy bag was brown in color and his logo was two letters side by side with the & mark between them. The problem was that when you turned the bag over and looked at the letters upside down it looked identical like a very popular candy band. The company that owns the very popular brand sent a letter telling him to cease and desist. Ha. Today he has a 750k candy machine in his ware house that has never been used again.

It is like that sometimes on a personal level as well. Some people go to a lot of effort to look like someone else when all they really need to do is look like themselves. Therefore, it is not good business or personal choice to be copycat or look-a-like. It might sound like a good idea at first. but every person and every product needs its own identity because it is the product (or person) individuality that sets it apart and makes it valuable. KT

People will do what they want to do

Career, Life

After 29 years in this business I have one learned one incontrovertible truth. People are going to do what they want to do.

I have this deal I have been working on for a year and it has started and stopped more times than I can count. Two weeks ago, I was thinking about the deal and realized that if the buyer wants to buy it, they will buy it. If a seller wants to sell it, they will sell it. Pretty profound, right? Ha

This is also true of human nature. I was consulting a young man on a car purchase recently that made me think about this. He had this car picked out he wanted to buy, and I sat with him and told him all the reasons, based on my experience he shouldn’t buy that car.  You know what he did? Went out that night and bought the car. Ha.

See he bought it because that is what he wanted to do. Nothing more, nothing less. That my friend is a perfect example of human nature and why most times you try to change someone minds about something, they most always still do what they want to do.

There you have it. 29 years of wisdom wrapped up in one sentence. KT

The dip after the start

Career, Life

With anything new, it always starts with high expectations and promise but there is usually a dip after it starts. Sometime the dip is shallow and short and other times, the dip is long and deep.

Using two familiar examples to explain what I am talking about. Say you start working out. We all have been there when you get up that first day and go lights out on a new workout. Afterwards you feel fantastic and accomplished and ready to tear up the world. It’s what happens after about day five that matters when you hit a dip and talk yourself out it. That is why workout gyms sign up more new memberships the first week of January than any other week of the year. Ha.

By way of another example, think of a plane taking off from an aircraft carrier. It starts will full thrust and power but when it leaves the carrier deck, it most always takes a dip before it really gets going. That is what I am talking about in this blog. What do you do when the dip happens?

There are many examples of a dip from new relationships, new ventures, new investments, new churches, new diets and many other examples. The theme is consistent for all these examples. There is almost always a dip and what really matters most is what you do when the dip happens, and can you rebound from the dip?

I sell hotels for a living and I cannot count the number of well -intended investors that built a new hotel or bought a new hotel that experienced some dip after it opened. Many of them fall short of investor expectations and some never recover from the dip.

In life, investments, relationships etc., the advice would be to, hope for the strong take-off but plan for the dip. If you do. it will not surprise you when it happens, and you will be better prepared for it when it does. KT

When to Sell a Hotel

Career

Today, every hotel owner is making one of three decisions: do I hold, sell or refinance? There have been thousands of pages, reports, articles and books written on the subject, however I believe the answer could be much simpler. If you own a franchised hotel, you should be a seller when there are buyers and when your hotel still qualifies for a new full-term franchise.

Within the US, most franchise companies are what we refer to as, asset light. Meaning, they own very few hotels and very little real estate. Franchised hotels represent a high percentage of the US lodging supply.

I am often asked, “when should I sell?” With franchised hotels, there comes a point in ownership where diminishing returns overtakes the projected value return. Many of the suburban and tertiary select-service franchised hotels you see today will eventually be viewed and valued as brand obsolete and will struggle to maintain operational profitability.

When contemplating exit strategies, the central decision driver should be the brand. In fact, the value of a franchised hotel is tied directly to the brand and that brand’s performance. Therefore, the decision should be based on the longevity of the brand. One example would be a 10-year-old Hilton, Marriott, or IHG hotel that can still be pipped deep enough to qualify for a new full term license. Therefore, one simple answer to the question is to sell when you are certain the buyer can still get a new full-term license. Another example is owning a 15-year-old box when the economy is heading into a down cycle. Since most down cycles last 5-6 years on average, by the time the economy has improved your 15-year-old hotel is now 20 years old and potentially at risk for its brand. If your franchisor is within one of the top tier brand families, the death nail to your investment is hearing the words from the franchisor, “remaining term only.” This basically means that your franchisor does not believe your hotel meets the long-term needs and image of the brand. When you hear those words, it is most likely you waited too long to sell.

Therefore, my market advice is to sell when there are buyers and to sell while the buyer can still obtain a new full-term license. The definition of what makes a buyer a buyer is simple; they can get a loan and can see some upside. The life term of a franchise is continually a moving target and it is incumbent that the hotel owner understands where the brand is heading and the cost to maintain the hotel within brand guidelines. There are, of course, many other factors that impact value, but these are the most basic guide lines that may help a hotel owner maintain value in their real estate. KT

What a Difference a Year Makes

Career

As of mid-October 2019, the hotel real estate market seems to be stable, bordering on bullish. This current market performance is very different from one year ago in October of 2018.

In last August of 2018, the publicly traded lodging companies began to mirror the rest of the stock market in a downward trend. There was investor concern, and by the middle of September, the publicly traded market was showing signs of stress that signaled what many thought was going to be the start of a downturn. In October of 2018 lodging stocks and the greater stock market continued in a downward trend resulting in very compressed EBITDA multiples. The average publicly-traded lodging company lost 10.2% of its equity value just in the month of October.

During that time, I personally thought that we were at the bottom, however, I quickly realized in early November that most stocks were continuing to decline. I remember leaving the office two days before Christmas of last year knowing that almost every lodging stock had hit a 52-week low that day. I believe there were some 92 publicly traded stock companies that were also at a 52-week low during that same week. It gave Everyone in our industry pause for concern as to whether the stock market in January was going to continue to decline or begin to rebound.

The title of this article is, “What a Difference a Year Makes,” and in business, as well as in life, it is always difficult to plan the path ahead. Looking back to January of this year, we saw stocks begin a gradual rebound which, looking back was a welcomed occurrence. During the first quarter of 2019, most of the publicly traded lodging companies saw a 10-20% increase in the equity value of their stock from the levels at the end of 2018. Even with many companies rebounding this year, many lodging company stock values are still short (10-15%) of the trading ranges in late 2017 and early 2018.

Today, in October 2019, lodging stocks are still mostly down from their highs, but there seems to be comfortable confidence that the last quarter of 2019 will not be a repeat of 2018. We are seeing greater amounts of deals under sale contract than a year ago, and there is hope that the transaction market will continue to be strong for the next couple of quarters. Many of the lodging news pundits seem to be split 50/50 as to whether we will see a recession in 2020. Basically, no one knows for certain (as was the case in 2008), therefore the best path forward is one of guarded optimism. I have often said that sellers should be sellers when there are buyers. Pretty straightforward. Am I right? We believe the definition of what makes a buyer a buyer are two things: whether they can get a loan and whether they can see some upside. That is the most simplistic picture of where we see the market today. KT