Exterior-Corridor Hotel Properties; Blackstone Denies Hilton Breakup
1. Exterior-Corridor Hotel Properties
On June 17, 2009, Bobby Bowers, Senior VP Operations, Smith Travel Research wrote in the HotelNewsNow.com website:
The merits of interior versus exterior-corridor properties have been debated among economy chain hotel operators for some time. Exterior corridor hotels offer convenience, value and a more home-like atmosphere, their proponents argue. Interior-corridor operators stress their properties greater guest security, value and more up-to-date product offering. Both product configurations have unique advantages.
Lest you think that this subject is not relevant, just consider these statistics. There are an estimated 500,000 brand-affiliated exterior-corridor hotel rooms now operating in the U.S., mostly in the South and Southwest.
If you add independent properties, there are probably one million rooms or 30% of all domestic hotel rooms. At a 50% occupancy and a $30 average daily rate, these hotels generate more than $5 billion in annual room revenues and pay $150 million in royalty fees (using a conservative 3% royalty fee).
Bowers reports that 'recent economy chain hotel development has been basically all interior-corridor properties. The five-year average annual supply growth for interior-corridor hotels was 1.3 percent, while exterior-corridor supply growth was flat. Exterior-corridor hotels dominated the early days of interstate and secondary market hotel development. Today, a segment of hotel guests remains that prefers the convenience and feel of exterior-corridor properties.'
Still, there is a dearth of reliable data regarding many of the questions involved in this controversy:
1. How many exterior-corridor properties are in operation in the U.S.?
2. What do travelers think about exterior-corridor hotels?
3. Are these properties considered outdated and undesirable?
4. How many guests would rather park close to their rooms?
5. What percentage of guests would prefer to avoid hotel lobbies, elevators and interior corridors?
6. Do women guests believe that long and dark interior corridors are safer?
And so I ask my question again: When will the hotel industry perform the long overdue primary research on consumer preferences for exterior-corridor hotel? Franchisors and franchisees should sponsor such a research project under the aegis of one or more of the following: American Hotel & Lodging Association, AAHOA, Smith Travel Research, HVS International, The Cornell Center for Hospitality Research and/or other hotel graduate schools.
2. Blackstone Denies Hilton Breakup
Back in August 2007 in my 'Nobody Asked Me, But... No. 31' column (Hotel-Online), I wrote:
f you want my considered opinion about the Blackstone acquisition of Hilton, just remember that private equity investors buy and sell companies usually with other people's money... Some of these equity firms 'rip, strip and flip.' Look at the Hilton family brands one year from now to see which have been sold and discarded.
A recent Sunday story in The Independent of London said that the Blackstone Group was considering breaking up Hilton, among other options, to realize value from the group ahead of debt repayment deadlines three and four years away. Blackstone bought Hilton in July 2007. The transaction was financed with $20.6 billion of debt and $5.7 billon of equity.
Reports said several options are being explored by Blackstone. The private equity house is said to be looking at options to alter Hilton's capital structure, such as a debt-for-equity swap, as well as a trade sale of some of its hotels to rivals.
Since the acquisition, Blackstone is believed to have written down the value of its holding by close to 50%.
3. Definition of a Lobbyist
The term 'lobbyist' was coined in the 19th century in the Willard Hotel in Washington, D.C. (located on Pennsylvania Avenue between the White House and the Congress). During that time, it was the most conveniently-located site where politicians and the persons wanting to talk with them could find shelter from the weather. President Ulysses S. Grant used the Willard Hotel lobby as a refuge from White House pressure. The hotel staff placed a leather armchair in a secluded corner of the lobby where he could enjoy his favorite brandy and cigars in relative peace. Still, he was pestered by power-brokers seeking his attention. It is said that he called such people 'lobbyists'.
4. Quote of the Month
Defendant in a tax case said, 'As God is my judge, I do not owe this tax.' The judge replied, 'He's not, I am, you do.'
Stanley Turkel, MHS, ISHC (www.stanleyturkel.com) operates his hotel consulting office as a sole practitioner specializing in franchising issues, asset management and litigation support services. Turkel's clients are hotel owners and franchisees, investors and lending institutions. Turkel serves on the Board of Advisors and lectures at the NYU Tisch Center for Hospitality, Tourism and Sports Management. He is a member of the prestigious International Society of Hospitality Consultants. His provocative articles on various hotels subjects have been published in the Cornell Quarterly, Lodging Hospitality, Hotel Interactive, Hotel-Online, Blue MauMau, Hotel Resource News, etc. Don't hesitate to call 917-628-8549 or email stanturkel@aol.com.
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