5 ways to turn around distressed hotels
5 ways to turn around distressed hotels
15 AUGUST 2012 7:34 AM

Reviving distressed properties requires creative solutions that keep momentum going to ensure the turnaround is not only successful but also sustained.

The difference between a rapid hotel turnaround and business as usual is only one thing—money. A six-month turnaround versus a twelve-month cycle will save half a year's increased income, which otherwise would be lost forever. That's why the lessons learned from taking over distressed hotels and quickly transforming them into healthy cash-flow performers are valuable in all hotels. As hotel management companies with established expertise in distressed hotel management and receivership can attest, successful experiences in distressed hotel management have inspired the kind of creative solutions that have profound implications for the entire industry.
Today, even the most successful hotels can benefit from adopting a turnaround mindset that relies on the following five critical tips:
1. Speed matters
2. "It's the employees, stupid"
3. Have an effective plan
4. "It's the GM, stupid"
5. Restart, reenergize and renew the sales effort
Speed matters

The engine for a rapid turnaround is momentum. However, generating that momentum is often the biggest challenge. Experienced takeover/management teams know the importance of imparting a sense of urgency and energy to a distressed hotel. A distressed hotel and its employees are always in the doldrums—typically, they experienced a slow and agonizing decline with little hope for a change in their fortunes. The entire takeover should be choreographed as a rapid action drama from the opening scene.
"It's the employees, stupid"
Wake them up! Show the employees that you care about them; do whatever it takes. Maybe on day one, you paint the employee cafeteria and serve pizza for everyone. Executives from the new management company should get their hands dirty picking up cigarette butts, making up beds, helping guests with their luggage, etc. There is no room for big shots in the urgency and energy of a change in hotel management. Little things matter, such as calling employees by their first names. Be willing and able to learn from them, especially the sales department. Remember, no one cares how much you know until they know how much you care. It’s also important to set and address expectations. Let your team know what to expect in the coming weeks. Usually they have been neglected and leaderless for months, so they will welcome the newfound support, structure and assistance you can provide for them.
Have an effective plan

Long before the formal takeover, the new management company should have a detailed plan for immediately improving all departments. From a psychological standpoint, setting a new tone and getting off to a fast start can help generate invaluable momentum—both on your staff and in the broader marketplace—that is often difficult or impossible to recapture. Don't lose this valuable opportunity. Hit the ground running by using your plan to institute specific and strategic operational initiatives, such as aggressive sales, strategic revenue management and smart expense controls as quickly as possible. That kind of preparation, structure and rapid deployment is the single best way to make the numbers start moving in the right direction in a timely manner.
"It's the GM, stupid"
There are no great businesses without great CEOs. The GM is the CEO of the hotel and critically important to its operational and financial success. Do not be afraid to make a tough call. Determine immediately if the GM is great. In some cases, a GM may have the potential to be great but has had little emotional, professional or financial support from the previous owner or management company, but if the GM does not have clear abilities to excel, then replace him or her immediately. Leaving unproductive and uninspiring leadership in place is a huge drag on momentum. Most experienced takeover management companies have a stable of experienced and talented interim GMs and that is a resource that can and should be utilized while finding the right long-term leadership solution.
Restart, reenergize and renew the sales effort
No turnaround can be successful without a reenergized, motivated and well-trained sales staff. In a distressed hotel, the sales staff typically has been the most demoralized of the entire team. They have been working hard to try and sell an undercapitalized hotel product with the pall of foreclosure hanging over it. Ever try to sell a wedding to the mother-of-the-bride when everyone in the community knows the hotel is in trouble? Even in a stable and performing hotel, the treat of change and fear of the unknown has all but stunted sales for a period of time. In either scenario, you must first get your sales team motivated by educating them about the future. Make it clear that there will be fresh capital, better service and services to sell, new initiatives and better support from the new management company. Then give them a real boost by bringing in a group from the management company to accompany the hotel sales staff on a marketing blitz to generate new business. Again, the psychological aspect here is almost as important as the strategy itself: Let them know you care and that help has arrived.
The bottom line is that, whether you are reinforcing operational best practices or introducing new ways to improve structural and financial efficiencies, applying elements of the receivership skillset to a more traditional third-party management role facilitates measurable and meaningful results. The most exciting part is that it does so faster than traditional strategies, while simultaneously improving both the guest experience and the bottom line. Remember to keep that management momentum going by finding ways to recognize and celebrate success. That support and recognition will go a long way toward keeping your team engaged, enthusiastic and ensuring that the turnaround is not just successful but sustained. And that is a sure formula for both a profitable hotel and a happy owner.

Steve Van, President & CEO of Prism Hotels, leads Prism to increase the value of clients' hotels. Founded in 1983 Prism works for special servicers, lenders and owners to rapidly reposition and turn around under-performing hotels.
Dallas-based Prism Hotels & Resorts is one of the fastest growing full-service hotel investment, management and development companies in the United States. The company currently manages more than 55 hotels for multiple owners including urban, suburban and resort destinations. Prism is approved to manage all major brands, as well as has extensive experience with independent destination hotels. For more information, please visit

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No Comments

  • Colin lim August 20, 2012 3:08 AM

    Enjoyed reading your 5 ways. It starts from the top down and leadership is important. There are 2 main types of leaders - one that stifles innovation,always fearing his position being threathened by potential talented junior (s).
    The other, where mentoring and encouragmment is always at its core. Unfortunately, many fall in the former category.

  • Gerardus Dirks September 19, 2012 1:42 AM

    Hello Steve, Great article,I would like to add, keep it simple, make it simple and success is almost guaranteed Gerardus Dirks

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