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Forces Shaping the Hotel Business

Forces Shaping the Hotel Business. Chapter Eleven. Sections in a Typical Feasibility Study. Market area characteristics Site/area evaluation Competition analysis Demand analysis Proposed facilities / services Financial estimates. Hotel Financing. Hard costs Soft costs

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Forces Shaping the Hotel Business

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  1. Forces Shaping the Hotel Business Chapter Eleven

  2. Sections in a Typical Feasibility Study • Market area characteristics • Site/area evaluation • Competition analysis • Demand analysis • Proposed facilities / services • Financial estimates

  3. Hotel Financing • Hard costs • Soft costs • Permanent financing loans (take-out) • Construction financing loans

  4. Debt Financing Debt Financing from Banks, Insurance Companies, and Conduit Lenders • Mortgages • Bonds • Debentures • Commercial mortgage-backed securities • Mezzanine/gap financing

  5. Equity Financing • Real estate investment trusts (REITs) • Initial public offerings (IPOs) • Secondary stock offerings

  6. Financial Factors Influencing Hotel Investment • Interest rates • Inflation • Leverage • Taxes • Exchange rates

  7. Six Forms of Hotel Ownership / Operation • Independently owned and operated • Independently owned, leased to an operator • Owned by an entity or group, operated by a hotel management company • Owned and operated by a chain • Owned by an independent investor or group, operated by a chain • Owned by an individual or group, operated as a franchise of a chain

  8. Two Kinds of Management Companies Chain organizations • Serve as management companies for hotels under their franchises Independent management companies • Able to offer more control over daily operations to owners of smaller properties and more flexibility in contract terms

  9. Measuring Rooms Division Performance • Average Daily Rate (ADR) • ADR = Rooms Revenue ÷ Rooms Occupied • Occupancy Percentage (OP) • OP = Rooms Occupied÷Rooms Available x100 • Revenue Per Available Room (REVPAR) • REVPAR = OP x ADR

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