200 Bedroom Airport Hotel Repositioning

Opportunity

 

  • In November 2011, Focus Hotels Management was approached by a private investor to take over a branded, 200 bedroom, 4 star hotel in Heathrow which was subject to the CVA. 

 

The Issue and Solution

 

  • The CVA provided for the owner to either take the hotel back or accept a much reduced rent.
  • The rent reduction was not acceptable to the owner being insufficient to cover financial commitments.
  • Hotel opened in late 2008, but did not trade well & performing significantly behind its competitor set.
  • Identified a solution to buy the existing lease with a new agreement on rent similar to a management contract.
  • Focus acquired the hotel from the administrators and took over the management in October 2011.

 

Operational Overview

 

  • In 4 weeks after takeover, full review of the business undertaken.
  • Looked at all aspects with an emphasis on revenue management and general operating efficiencies.
  • Established that the issues were with the group central management. The key issues were:
A. Group central yield and reservations making decisions without local management.
B. The group decision to price the hotel outside of its proper competitor set.
C. Operational costs high with no focus to implement efficiencies in line with hotel performance.
  • Focus installed a new revenue management and reservations team based at the hotel, supported by Focus’ central revenue teams.
  • Provided them with necessary yield tools to enable them to compete in the local market. 
  • Developed a revenue and yield culture enabling the hotel to compete effectively.
  • Hotel established itself as a key competitor taking its fair share of the market resulting in a significant increase in occupancy without diluting the net average room rate.
  • Refocused the senior team and reduced where necessary.

 

Branding Review

 

  • The owner and Focus Hotels Management believed that the hotel would benefit from new branding more in line with the standard of the property.
  • Research indicated that the DoubleTree by Hilton brand would do well and have a positive impact on the hotel’s performance.
  • Focus negotiated the brand with Hilton including all PIP requirements
  • Brand went live in July 2012. 

 

Achievements

  • In 2012, Focus improved performance against 2011 (when the hotel was trading under previous management) as follows:
    • Gross Revenue increased by 21.6%
    • Occupancy increased from 55.6% to 74.15%
    • RevPAR increased by 28.9%
    • EBITDA increased  by 28%
  • In 2013, the hotel continued to grow market share and performed in line with its new 4 star comp set and owner’s objectives on profitability:
    • Gross Revenue increased by 20.6%
    • Occupancy increased from 74.15% to 82.03%
    • RevPAR increased by 9.6%
    • EBITDA increased  by 40%
  • In 2014, the hotel continued to trade well with an increase in revenue of 9% and EBITDA of 23.5% on 2013.
  • In 2017, the hotel is on target to continue its revenue and profit growth which will result in another successful year, despite extra competition in the market.
  • The STR RGI (Revenue Generation Index) of the hotel continues to perform above a strong competitive set which includes some national and international brands.