Hotel Consultation Essay
It appears to me that the Dreschler Hotel needs to look into their rates. After comparing the other hotels and the Dreschler Hotel their rates seem too high compared to the other hotels and what they have to offer. I think if they would lower their rates this would generate more business and more business means more revenue. This would be reflected on the ADR if they did lower the rates. Yes, if your rates are higher you will take in more money at that moment but you might sell a lot more rooms if rates are kept down while being competitive. I think the Dreschler Hotel could make some improvements and then this would increase the revenue. I think it is very out dated and in order for the owners and shareholders to ever see their investments back in their pocket is to make this a mixed-use which would have hotel room suites, condo’s, pool, gym, retail shops, office building, and several restaurants. This will be projected at a Twenty Eight Million Dollar Project.
It will have many retail shops for the guest convenience and it already is situated in the heart of the town with over 90 shops available now. It will then add a pool, hot tub, spa, sauna, gym, office buildings for lease or sale and many restaurants. We would like to have a tremendous view and possible farmers market in the complex or within walking distance as another food alternative. This is a fairly fast way to get cash flow moving fairly fast and also can sell if interested or they could hire a management company to run the development for them. The options are endless but they will need to do some marketing to get this development out there and get interested parties involved. One thing I feel this hotel is in need of its working capital. They are having trouble with paying the normal operational expenses. The owners have even been putting money in to use for the hotel and cannot continue to do this. They have no working capital to work with to do any renovations or add a few things needed to get more guests staying at the hotel. They have a couple of options to get this done.
The first one is to apply for a SBA 7(a) Loan. They will loan money to a business in need of working capital which the Dreschler Hotel needs. They can use this loan for operation expenses, renovations, inventory, or to add items needed. They also may look into the option of investors which will love to get involved in something this big. This would probably be a great choice for this hotel and its circumstances. I feel the owners and shareholders have already put in all the working capital or cash that they can at this time. They have to do something to start making some money and to do that I feel this hotel needs a lot. The only option would be to sell some shares of the hotel for some cash to use for working capital. Then they would have more owners or shareholders would have a say in how things are ran. Sometimes, this is a good thing and other times it can be a bad thing so it is a tough situation but sometimes they have good suggestions or ideas as well.
They will have to show a good business plan and show they have the ideal location along with the town’s approval or possibly get guarantees on businesses coming to the mixed use such as retail stores, office spaces, and restaurants. You want a variety of restaurants so you have to have many restrictions on who you sell or lease to because you want variety. This will be an upscale hotel with the same in the retail and restaurant end also. We would be adding suites in the hotel rooms along with a pool and gym. While looking at financial schemes you must weigh the good and the bad or the risks involved to do this. After looking at converting the Dreschler Hotel into a mixed-use I found there are a couple of benefits that would be gained if we converted it such as you have a hotel for guests to stay in and then you have restaurants and food options for the guests that they can even walk to when staying at the Dreschler Hotel. They try to put retail, food and accommodations all together and keep them on the same scale.
At the same time there are disadvantages such as you have to have a large piece of land to do this and you have to look at the market around this area to be able to have the economics available to get the revenue there to pay for this. I researched the pros and cons of converting the property into a timeshare. I found the biggest advantage is the return of the money from the project to the owners or shareholders. Another huge benefit would be the construction time is cut way down so you would be up and making money much quicker. A big disadvantage is you are not the original developer and many issues can arise. One main thing is the location. If you have the right location it will usually make a lot of money. The last one I looked at was the conversion of the hotel to a condominium.
I found an advantage would be the increasing revenue by adding things such as a bar, spa, hot tubs, gyms and restaurants. This usually is an upper end hotel and they attract a lot of customers or guests and then the money and revenue will start coming in faster. Another benefit is the owner can sell the units much quicker and then can also hire a management company to run it for him and still bring in money or get his money returned quickly. Many condos have a disadvantage because they come with many restrictions. I think a mixed-use would be an awesome opportunity along with a lot of the things this hotel needed. With the location and the stores in the area it would be a great location so after consideration we will be calling the new mixed-use The Dreschler Village and Suites.
DeFranco, A. L., & Lattin, T. W. (2007). Hospitality financial management. Hoboken, NJ: Wiley. Axia College’s Writing Style Handbook
http://www.sba.gov/about-sba/what_we_do/resource_guides (retrieved 03/06/2014).
http://www.aha-engineers.com/MEP-projects-hospitality.html (Retrieved 03/07/2014)