Lodging Industry Investment Council members share what hoteliers should learn from the coronavirus pandemic about investing in assets, management, handling debt and more.
REPORT FROM THE U.S.—The coronavirus pandemic, both in its severity and longevity, has forced the hotel industry to rethink how it approaches almost every aspect of ownership and operations.
In a series of video interviews, members of the Lodging Industry Investment Council spoke about the significant changes the industry is making in response to the pandemic and what lessons hoteliers are taking from it.
The industry might not have been able to anticipate this particular crisis, but strategies exist to help cushion the impact of it, said Sean Hennessey, owner of Lodging Advisors. Hoteliers need to be ready with plans to manage properties during a downturn, which means also having backup plans if revenue per available room continues to fall.
“In that same way, you should have a vision, just like you practice an emergency evacuation plan, to put into play when things change from the current direction or deteriorate,” he said.
That plan should include both the day-to-day operations as well as the balance sheet to conserve cash while deferring assets or putting off liabilities to the extent possible, he said.
To avoid being over-levered, hoteliers must set up the capital stack the right way with the property maturity and modernization level covenants, said Carlos Rodriguez Sr., president and CEO of Driftwood Acquisitions.
Commercial mortgage-backed securities loans have strict terms, so borrowers must pay attention and dedicate time to negotiations to avoid future problems, he said.
In working with banks, it’s important to have good relationships throughout.
“At the end of the day, you really need to have your bankers be your friends so that in times like this, you can sit down and talk to them and negotiate with them, and for them to give you the time of day to understand what you are going through and to work with you,” he said. “Keep close ties with bankers. Keep an open line of communication.”
Watch the videos below for more lessons LIIC members had for the hotel industry.