Hotel / Hospitality Overview - Interview Guide
Hey guys,
Haven't seen an interview guide hotel focused on this site and there seems to be a few recent posts about it. Anyone in the industry have point to hit at the analyst/associate level on what to know going into interviews at big hospitality REITs or owners?
Knowing RevPar, ADR, Occupancy and how they flow through to the bottom line and the type of customer (business vs leisure) and what amenities/services are needed to attract that customer base. Knowing room revenue and F&B expected income when looking at limited/select/and full service operations. Understanding union vs non union labor costs and potential changes to make a hotels when considering acquisitions. Doing in house banquet and F&B operation vs 3rd party managed and the positives/negatives of both as it relates to NOI/EBITDA.
Hey there!
You're on the right track with your understanding of key metrics like RevPar, ADR, and Occupancy. These are indeed crucial in the hotel industry. Here are a few more points you might want to consider:
Variety of Properties: Hotels come in all shapes and sizes, from different brands/flags to varying levels of service. This diversity can be a point of interest and a challenge at the same time.
Operations-Intensive Asset Class: Hotels require a lot of operational involvement. The cost of operations can vary significantly between a basic hotel and a full-service hotel.
Customer Segmentation: Understanding the type of customer (business vs leisure) and what amenities/services are needed to attract that customer base is crucial.
Income Streams: Apart from room revenue, other income streams like Food & Beverage (F&B) and banquet services can significantly impact the bottom line.
Labor Costs: Union vs non-union labor costs can significantly impact the hotel's operations and profitability.
Acquisitions: When considering acquisitions, it's important to understand potential changes that can be made to the hotel's operations to increase profitability.
Third-Party Management: Weighing the pros and cons of in-house vs third-party managed operations, especially in areas like F&B, can be crucial.
Remember, every hotel or hospitality REIT might have its unique focus areas, so it's always a good idea to research the specific company you're interviewing with. Good luck with your interview!
Sources:
Following
Following. Have you found out more? It is a fascinating space.
I don't have a guide, but can help address questions if you PM me.
Great name, RevPAR Riser
Thanks, I think in general questions around volatility. Why have some owners succeeded and others haven't?
On that point I know some guys like Ben Mallah that are smaller and have people they know running hotel (not sure if they're brand managed). Others like the Tishmans of the world seem to brand manage and have on site staff which can be expensive?
So seems you can go different ways on management (in house, 3rd party, or brand managed), but what dictates profitability/success. Is it running lean, keeping expenses low, property clean. Is it mostly market driven due to the volatility of it? Seems with hotels it's more market driven than other assets like multifamily that are stable throughout in good locations.
This is more from the viewpoint of someone starting out, not with a balance sheet and hundreds of millions in liquidity.
Edit: Looking at post, I already went through an interview with a large firm. Questions were thoughts about x brand I worked with, what did I do day to day, what would you look at (we looked at RevPar CAGR, Opex CAGR, to bottom line over time on existing assets). On new deals it was more price per key to market (so standard comp analysis) and can we rebrand it to something not as dominate in the area (ie alot of Marriot branded hotels in area, any others that want to make entrance and would give us $). How have Occ, RevPar, Opex, NOI looked compared to historicals. For STR reports are we above comp set currently on different metrics (suggesting there may not be much room to grow).
Some owners succeed because they've purchased assets at a fair price, accounted for CapEx, and were realistic about future performance. Self-operating allows you to run a property lean, but most of these folks miss the boat when it comes to revenue management and underpenetrate relative to their comp set. On the other hand, investors who got aggressive, purchased at a low cap rate with a high LTV on the assumption of post-renovation gains, and did not understand the submarket (office tenants vacating, competitors opening at their doorstep, etc.) have landed on their face. Be careful not to get brokered by the brokers selling fairy dust.
Above all, your exit needs to be your primary focus when developing a business plan to acquire a new asset. You can grow NOI and clip a good yield, even in a tertiary location, but if your money is locked up and you can't return capital to your partners because the pool of buyers for an exit is thin, a problem is inevitable. In most instances, renovating a 25/30 year-old DoubleTree, Courtyard, Marriott, or Homewood may increase your bottom line, but future buyers will ding you for deferred maintenance/obsolescence and risk of minimal franchise extension, challenging you to hit your exit assumption. Oh...and who wants to dump $40k to $50k per door into an aging asset where the renovation is almost exclusively defensive. (Land constrained submarkets may be somewhat insulated from this dynamic)
Aside, many players in the market today, whether owner-operators or PE shops, are motivated by fees. They'll happily contribute their 5% to 10% GP equity, but usually make up a bulk of that in fees, so their true exposure is limited and they bank on the upside if the deal goes well. As it relates to the benefit of investing as a larger platform, there are economies of scale that come with owning thousands of keys: leverage with brands when negotiating management agreements or PIPs, pooled insurance across many assets, the clout gained by smaller shops when doing deals with Blackstone, KKR, Apollo...
Eos quia rem rerum aut id ducimus. Hic illum iste expedita enim et fugit.
Alias repellendus sunt possimus occaecati id voluptatibus possimus. Voluptate tenetur dolorem molestias est. Dolorem nulla quidem dolorum fuga facere inventore. Voluptatibus ea maiores cupiditate sit rerum eum. Cum quaerat incidunt distinctio pariatur aliquid. Et voluptate voluptatem est. Est voluptas qui sunt eligendi. Aliquam enim voluptatem neque iste aut.
Sit est cum consequatur tenetur. Aut et sapiente vel porro accusantium.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...