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REV: AUGUST 2, 2001
WILLIAM POORVU
ARTHUR SEGEL
Astor Park Hotel
Steve Goldman sat at the desk in his room at the Astor Park Hotel in the Astor section of Pacifico,
a large Pacific Northwest city, thinking about his upcoming presentation to Barry Sternlicht,
Starwood Hotels and Resorts’ (Starwood) Chairman and CEO. Goldman was the Executive Vice
President of Acquisitions and Development at Starwood and responsible for growing Starwood’s
worldwide portfolio of hotels. His job entailed originating, structuring, and negotiating development
related investments for the nation’s largest Real Estate Investment Trust (REIT). It was March 9, 1999
and Goldman’s due diligence work on the Astor Park was about to come to a close after weeks of
investigating everything from the fire preparedness to the quality of the kitchen floor at the 257-room
all-suite hotel. His exhaustive efforts over the past month had convinced him that the bankrupt Astor
Park was undervalued and had not maximized management efficiencies because it was an
independently managed property. His analysis led him to believe that Starwood would do well with
its investment if he could propose a sound strategy for purchasing and repositioning the property
from its current position at the low end of the luxury hotel segment. Contemplating the numerous
issues that he faced in preparing his investment recommendation, Goldman began to put pen to
paper developing a list of outstanding issues regarding financing, deal structure and repositioning
that he needed to address before his meeting with Sternlicht which was less than a week away:
“Given the market, how should the hotel be repositioned? Is the deal structure I have proposed
really attractive to both Starwood and our equity partner? Can we pull this property out of
bankruptcy at a reasonable price and generate an attractive return for our shareholders?”
Background
The Astor Park Hotel was originally constructed as a dormitory for the University of the
Northwest (UNW) in 1969. By the mid 1970’s, the property had changed hands and was converted
into a retirement home. The conversion was financed by Wells Fargo, a large California based bank.
The property’s stint as a retirement home lasted only a year as the property quickly fell into default.
Wells Fargo took over the asset and brought in Hyatt to remodel and operate the property as a hotel.
In 1979, Andrew Pimentel, a Pacifico based real estate developer purchased the hotel from Wells
Fargo for $9 million (financed with $6 million of 10% interest only debt for 10 years) and changed the
name of the property to the Astor Park Hotel.
________________________________________________________________________________________________________________
Entrepreneurial Studies Fellow Matthew C. Lieb prepared this case under the supervision of Professor William Poorvu and Senior Lecturer
Arthur Segel. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of
primary data, or illustrations of effective or ineffective management.
Copyright © 2000 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685,
write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be
reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical,
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Astor Park Hotel
Pimentel successfully positioned the Astor Park as one of the exclusive hotels in the Pacific
Northwest. The success of the Astor Park in the early 1980’s prompted Pimentel to take a 25-year,
$40 million non-recourse loan with interest accruing at 10.69% from Equitable in 1987. $6 million
from the loan was used to payoff Pimentel’s original acquisition financing and consolidate other
loans on the property. $10 million of the Equitable debt was used for improvements to the property.
The remaining $24 million from Equitable was distributed to Pimentel and his partners. In 1990,
Pimentel added more debt in the form of a $5 million, 20-year second trust deed with a constant of
11.75% provided by Equitable. The proceeds from the new Equitable loan were used for hotel
improvements. At the time of this loan, the Astor Park Hotel was valued at $75 million.
In the early 1990’s the hotel market in the Pacific Northwest began to change dramatically for two
reasons: increased competition and a precipitous decline in the health of the Pacifico economic
environment. By 1992, a new Four Seasons and The Inlet, a luxury boutique hotel, had come on line.
As a result of the altered competitive and economic landscape, the performance of the Astor Park
began to erode dramatically (see Exhibit 1 for historical financial performance of the Astor Park). As
a response to this decline, Pimentel and his lenders restructured the property’s loans allowing for a
future debt service deferral of $6 million, which was to be used for renovation. Additionally,
Pimentel and his partners committed an additional $6 million in equity in an effort to bring the hotel
to a quality level commensurate with that of the new local competitors. From 1993 to 1996, the Astor
Park underwent significant renovations at a cost of $12 million, bringing the total cost of renovations
since Pimentel’s acquisition to $27 million.
Pimentel had conducted detailed analysis on the market and the property and believed that a
significant facelift would drastically improve the performance of the Astor Park (see Exhibit 2 for
Pimentel’s forecast of the property’s performance following the scheduled $12 million renovations).
Suites on floors 10 through 16 received new carpeting, wallpaper, lighting, fixtures and entire
bathrooms. Additionally, the lobby received new wallpaper, marble floors and furniture. Despite an
excellent location, recent renovations and first-class amenities, the Astor Park continued to perform
poorly. By 1998, the hotel’s poor performance caused deferred interest to grow from $6 million in
1993 to over $18 million leaving the property encumbered with a total of $63 million in debt. The
debt burden proved to be too much for the property and Pimentel was forced to file for Chapter 11
bankruptcy proceedings for the Astor Park (see Exhibit 3 for a description of Chapter 11 as it relates
to real estate).
Astor Park Hotel
The Location
The Astor Park was situated in a central location bordered by three of Pacifico’s most exclusive
neighborhoods: Emeraldville, De Pere and Bayview Hills. The hotel was within walking distance of
Astor Village’s numerous shops, restaurants and theaters as well as the UNW campus. In addition,
the Astor location afforded hotel guests convenient access to the large supply of well-occupied class
“A” office space situated along the West Water Corridor of Pacifico. While the Astor locale had many
advantages, it was considered a very good, but not premier location relative to the hotels in the
trendy section of Bayview Hills or the scenic beachfront of Inlet Sound.
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The Property
The mix of rooms at the 257 all-suite Astor Park included 177 one-bedroom suites, 39 twobedroom suites, 2 three-bedroom suites and 39 penthouse suites. Standard amenities included multiline speaker phones, voice mail systems, fax and modem lines, 27-inch remote controlled televisions
and deluxe bathroom accessories. The Astor Park offered a variety of food and beverage options
consisting of the fine-dining Denmark Room, the three-meal Bayview Terrace, the poolside dining
Café Solaris and the Astor Lounge. The hotel currently maintained minimal meeting space consisting
of five separate rooms totaling nearly 4,000 square feet. The Astor Park Room, the largest of the
meeting rooms, was capable of accommodating 150 guests. In addition to the suites, restaurants and
meeting spaces, the Astor Park maintained a 170-space underground parking facility, a wellequipped exercise room and two outdoor swimming pools situated within an attractively landscaped
garden area. Consistent with its location and amenities, the Astor Park offered premium services
such as valet parking, 24-hour room service, a concierge, same day laundry and complementary
chauffeured transportation to area shopping destinations.
The Competition
The Astor Park Hotel faced competition on two fronts. The primary competitive set was
comprised of the lower end of Pacifico’s luxury market. The Northwest Hyatt, Pacific Inn, Nakota,
Emerald Hilton, Sheraton Mirvue, Matilda and Porcouver Bismarck all competed with the Astor Park
for business and leisure guests. These seven hotels plus the Astor Park represented a total of 2,594
rooms. The Astor Park also competed against Pacifico’s premier luxury hotels. This secondary
competitive set consisted of the Inlet, Four Seasons, Regent Emeraldville, Lane Forest Hotel and
Windows on the Sound. Along with the Astor Park, this secondary competitive set operated a total
of 1,672 rooms (see Exhibit 4 for description of competition).
Current Operations
In Goldman’s opinion, the Astor Park was suffering as a result of its market positioning and
management inefficiencies. In evaluating hotel properties, Goldman and his Starwood peers
considered average daily rates (ADR) and occupancy levels to be the key measures of the hotel’s
general strength. While occupancy levels often reflected industry wide patterns, they were also a
significant measure of a hotel’s position within its local competitive market. As of September 1998,
the Astor Park was garnering an ADR of only $175 (not including “ownership related” rooms).
Worse yet was the property’s low occupancy rate. The Astor Park was running at only 65% of
capacity in relation to competing hotels that achieved occupancy levels of over 70% on average.
Goldman speculated that the poor performance of the Astor Park in recent years was due to the
fact that undisciplined management had allowed the property to slip from the top tier of the Pacific
Northwest luxury market. He cited an inconsistent and deteriorating guestroom mix on the lower
floors, management turnover, and overstaffing with poorly trained employees as significant
contributors to the poor performance of the Astor Park. As a result of slipping from the top of the
luxury segment, the Astor Park management team had been forced to rely heavily on discounted
government and corporate business which brought down the property’s ADR (see Table A for the
Astor Park’ current market position).
3
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Table A
Astor Park Hotel
Astor Park Competitive Position
Astor Park ADR vs. Two Competitive Sets
Trailing 12-Month ADR
as of 7/96
$245
$225
$205
$185
$165
$145
$125
Lower Tier*
Astor Park Hotel
Upper Tier**
Goldman believed there were a number of areas where Starwood management could generate
dramatic improvements in the performance of the Astor Park. Obvious cost overruns included food
and beverage operations which lost over $320,000 in 1998 due to generous staffing and an
extravagant, money-losing weekend brunch. Goldman also sited the excessive use of complimentary
or discounted rooms in his analysis. According to his calculations, 6% of total room nights in 1998
were devoted to “ownership related” guests at a $65 ADR (“ownership related” guests are not
included in the $175 ADR from September 1998).
While Goldman believed that Starwood’s management practices could result in significant
improvements at the hotel, he also knew that the turnaround would not be easy. After all, hotels, as
compared to residential, retail and office projects, were perhaps the riskiest and most complex form
of real estate management, development and ownership. Hotels were generally characterized by
large capital building costs, complicated design and construction, high fixed costs of operation,
management intensity, and high levels of uncertainty relating to occupancy levels. Hotels, in effect,
had to ”rent” their entire facilities every night, a constraint which significantly increased operating
risks, and which imposed a need for specialized management expertise and an ongoing refinement of
market positioning. Occupancy was heavily affected by changes in the economy.
Room rates were often used as a benchmark to determine the feasibility of new hotel construction
or acquisition. One industry rule of thumb for full service hotels was that for every $1,000 of project
costs on a per room basis, a hotel must achieve $1 of average daily room rate. If, for example, total
development costs of the hotel amounted to $250,000 per room, an average daily rate of
approximately $250 per room must be achieved. Goldman wondered if this rule of thumb was
applicable to the Astor Park in this case.
Starwood
Starwood Hotels and Resorts was the world’s largest hotel operator generating over $4 billion of
revenue in 1998. The company had grown from relative obscurity in the early 1990’s to international
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prominence through a series of bold acquisitions led by Chairman and CEO Barry Sternlicht
(Harvard Business School class of 1986). In 1995, Sternlicht purchased Hotel Investors Trust (a hotel
REIT) and Hotel Investors Corporation (a hotel management company). Hotel Investors Trust and
Hotel Investors Corporation allowed Starwood to benefit from a rare paired-share REIT structure.
This structure permitted income from the management company as well as income from real estate
gains to be exempt from corporate income tax, as long as the company paid out 95% of its earnings as
dividends. Any tax due was paid by the individual investors in the Trust. Although the pairedshared status was outlawed in the early 1980’s, Hotel Investors Trust and Hotel Investors
Corporation were “grandfathered” under the 1984 law. As a result of its paired share structure and
unique ability to avoid "leakage" between the management company and ownership entity, Starwood
was able to raise large amounts of equity and debt. At the end of 1997, Starwood further increased its
market presence through the acquisition of Westin Hotels.
By the end of 1997, acquisitions had given Starwood an ownership stake in over 110 hotels.
Despite rapid growth from 1995 through 1997, 1998 proved to be the breakout year for Starwood.
Early in the year, Sternlicht approached ITT's Chairman, Rand Araskog, as a "White Knight," and
subsequently beat out Hilton for the acquisition of ITT in a well-publicized battle for control.
Starwood paid $14.6 billion for ITT which was comprised of Sheraton Hotels, Ciga Hotels, Caesars
Casinos, World Directories, and a 50% interest in Madison Square Garden. The acquisition of ITT
propelled Starwood to the top of the hotel industry and made Sternlicht, at age 38, a household name
in the hotel industry.
Later the same year, Congress eliminated the paired-share status of Starwood causing Sternlicht to
combine Starwood’s operations into a single C-corporation, but not before the company had amassed
a portfolio of over 700 hotels in 75 countries including such marquis properties as the St. Regis in
New York City, the Phoenician in Scottsdale, the Gritti Palace in Venice, and the Princeville Resort in
Kauai. The repeal of Starwood’s paired-share status eliminated Starwood’s advantageous tax
position versus other hotel companies, but it also gave the company access to internally generated
cash flow that could be used for further expansion.
Acquiring the Astor Park Hotel
Acquiring the Astor Park would require Starwood to work closely with Andrew Pimentel, the
property’s owner since 1979. Goldman had been introduced to Pimentel by Michael Schedler, a
prominent real estate attorney who was advising Pimentel on the bankruptcy issues the Astor Park
was facing. Seeking a mutually beneficial partnership, Pimentel and Goldman entered negotiations
in an effort to buy the Astor Park out of bankruptcy. Goldman had only recently received word that
Equitable, the largest current creditor of the Astor Park, would be willing to sell its interest in the
property for $33 million. Goldman viewed this as a positive sign as Equitable had over $63 million in
debt against the property. Whether $33 million was the bottom line, he did not know.
After weeks of negotiations, Goldman and Pimentel had come to an agreement on structuring a
partnership deal that broke out cash disbursements according to both ownership interests and
management responsibilities. Under the agreement, Starwood would commit the equity capital and
manage the property. Starwood would receive an 11% preferred return and a management fee equal
to 3% of gross revenue. Following Starwood’s preferred return, distributions would be split 90% to
Starwood and 10% to Pimentel in the form of his carried interest in the property. In addition to his
carried interest, Pimentel also had the option to commit up to 20% of the equity capital.
5
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Astor Park Hotel
On the surface, the deal appeared to be equally attractive to both parties. Starwood would gain an
underperforming hotel at a potentially attractive price and Pimentel would preserve a carried interest
in the property (which allowed him to avoid the $4.65 million tax liability he would be burdened
with if he sold the property outright).1 However, Pimentel would still have to pay the taxes on the
debt forgiveness of $2.4 million in the event of a continuing interest in the partnership. Pimentel’s
role was critical to Goldman in that Starwood could not bypass the bankruptcy process without
Pimentel’s consent and involvement.
Repositioning
As Goldman began to craft his proposal for Sternlicht, it became obvious that he could not
separate the acquisition decision from the repositioning strategy for the Astor Park. After all, the
success or failure of the investment would be a function of the capital committed and the returns
generated from the investment. The positioning of the hotel would be a critical driver in both the
capital requirements for the hotel as well as the average daily rate, occupancy levels and overall
returns.
To position the hotel effectively, Goldman carefully considered the type of customer that would
be most desirable and profitable, given the Astor's favorable location and size. Typically, hotel guests
are divided into four discreet categories (see Exhibit 5 for customer profiles). By segmenting the
market by customer type, Goldman could more effectively position the hotel by catering to specific
customers in the Pacifico area.
In positioning the hotel, Goldman would be relying on one of Starwood’s most powerful assets:
the company’s portfolio of well-recognized brands. Starwood utilized five distinct brands around the
world, with each brand serving a specific segment of the hotel market. These brands included
Westin, Sheraton, Four Points, St. Regis and the new W brand (see Exhibit 6a for a description of
Starwood’s brands).
In thinking through his branding options, Goldman quickly eliminated Four Points as a
possibility:
The location of this hotel is not consistent with Four Points. That is not to say that a
moderate priced, full service hotel would not do well here, but from Starwood’s perspective, it
does not make sense to move the property downscale.
Having said that, Sheraton, W, St. Regis and Westin are all real possibilities. We have a
proven track record of success with St. Regis Hotel and Westin brand, which helps to mitigate
some of the risk of the deal. Sheraton gives us the option to operate a less expensive hotel in a
1
Sale Price
Book Value (1)
Gain on Sale
Tax @ 25% (2)
$ 33 million
24 million
$ 9 million
$2.25 million
Mortgage (3)
Sales Price
Debt Foregiveness
Tax @ 20%
$ 45 million
33 million
$ 12 million
$2.4 million
______________________
(1) Costs $36 million less $12 million depreciation.
(2) Rate based on recapture of depreciation.
(3) The original mortgage of $45 million had unpaid accrued interest of $18 million for a total of $63 million; but
the deferred interest had not been expensed for tax purposes.
6
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Astor Park Hotel
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good location, which I think could be successful here. W, though relatively unproven, is a new
and exciting brand and the Pacific Northwest seems to be an attractive market to continue the
rollout of the W name.
At the end of the day, the projected economics for all four options are relatively similar at
this location (see Exhibit 6b for Goldman’s pro forma financials of each brand at the Astor
Park location). Despite the financial similarities, I need to make the right recommendation
based on the current state of the market, where I think the market is headed and Starwood’s
overall corporate objectives (see Exhibit 7 for a description of the current state of the hotel
industry).
Conclusion
Goldman checked the clock and realized it was almost 2 a.m. and he had not come to any firm
conclusions on either the acquisition or the repositioning of the Astor Park. Weary eyed, he
summarized his thoughts:
I’m convinced that this property is undervalued because I know that we could significantly
improve cash flow through a variety of different strategies. If we can purchase the property
for approximately $33 million and reposition it effectively, we will do very well, but the
repositioning decision is anything but straightforward.
On one hand, positioning the property more downscale has the advantage of limiting our
capital commitment for renovations and seems to address a need for less expensive rooms in
the area. On the other hand, this market seems like it could easily support another upscale
property catering to business customers if it is done properly. While occupancy rates in this
market are typically well above 70%, I know that the industry average is only 68%. No matter
how we reposition this property, we will be extremely vulnerable to any dip in occupancy
rates and I need to be very cognizant of how sensitive our returns are to capacity utilization.
Of course this isn’t all about positioning. I have to make sure Pimentel goes along with my
plan and that we don’t either overpay for the property or overspend for the repositioning.
This would make a great addition to the Starwood portfolio because it would improve our
presence in the Pacific Northwest.
One last option is to find an independent investor to take out a mortgage and put up the
equity. The investor could own the property and receive the 11% preferred return and the 90%
share of the remaining profits. We would receive a long-term management contract with a
management fee equal to 3% of revenue and possibly 10% to 15% of the investor’s 90% interest
as an incentive fee.
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Exhibit 1
Historical Financials of the Astor Park Hotel
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
12,400,957
4,969,718
862,747
493,310
18,726,732
277,305
19,004,037
12,675,426
4,956,965
850,781
545,639
19,028,811
252,624
19,281,435
12,440,669
5,129,323
819,054
582,308
18,971,354
241,248
19,212,602
11,314,812
5,018,440
807,703
523,823
17,664,778
234,068
17,898,846
10,471,075
4,618,122
830,288
521,161
16,440,646
149,585
16,590,231
8,930,232
4,198,076
676,116
506,930
14,311,354
140,074
14,451,428
8,162,805
3,807,507
604,160
506,228
13,080,700
231,918
13,312,618
8,717,598
3,735,146
647,489
573,114
13,613,347
113,481
13,726,828
8,628,228
3,602,662
613,577
431,207
13,275,674
105,987
13,381,661
10,240,039
3,841,829
697,438
504,174
15,283,480
96,669
15,380,149
Operating Costs
Rooms
Food and Beverages
Telephone
Garage, Gift Shop, Spa
Total Operating Costs
2,788,823
4,554,227
600,226
308,250
8,251,526
2,945,670
4,835,599
656,897
392,539
8,830,725
3,069,783
4,996,384
659,536
357,432
9,083,135
3,291,780
5,153,636
562,592
495,695
9,503,703
3,391,327
5,045,616
552,387
539,011
9,528,341
2,963,615
4,642,319
479,613
462,367
8,547,914
2,961,758
4,335,504
466,078
464,873
8,228,213
2,794,550
4,071,494
389,578
363,179
7,618,801
2,858,151
3,836,174
366,275
285,834
7,346,434
3,173,654
3,937,228
395,948
313,985
7,820,815
Earnings before Other
10,752,511
10,450,710
10,129,467
8,395,143
7,061,890
5,903,514
5,084,405
6,108,027
6,035,227
7,559,334
Other Operating Costs
Administrative and General
Heat, Light , and Power
Advertising and Sales
Repairs and Maintenance
Total Other Operating Costs
2,467,801
614,655
501,952
907,739
4,492,147
2,294,961
640,387
983,394
900,349
4,819,091
2,210,391
680,823
1,005,029
941,996
4,838,239
2,022,500
718,097
952,145
1,008,488
4,701,230
818,541
1,155,292
673,414
1,079,336
3,726,583
721,530
919,740
664,950
934,511
3,240,731
792,245
1,036,067
690,522
1,067,338
3,586,172
673,911
1,088,844
725,274
1,093,376
3,581,405
722,557
1,393,484
670,862
1,052,275
3,839,178
961,056
1,517,163
692,863
1,200,371
4,371,453
Operating Income/Loss
6,260,364
5,631,619
5,291,228
3,693,913
3,335,307
2,662,783
1,498,233
2,526,622
2,196,049
3,187,881
Other Expenses
Management Fee to Owner
Real Estate Taxes
Insurance
Depreciation
Total Other Expenses
855,182
190,738
49,156
1,276,274
2,371,350
867,665
189,135
48,018
1,124,621
2,229,439
864,567
191,168
72,506
1,060,365
2,188,606
804,046
197,092
99,201
968,215
2,068,554
746,560
208,192
324,998
932,830
2,212,580
650,314
206,621
256,999
933,864
2,047,798
595,391
220,342
221,855
849,617
1,887,205
617,707
222,876
285,545
933,864
2,059,992
605,976
224,037
284,610
933,864
2,048,487
692,107
216,793
299,312
990,744
2,198,956
Net Income
3,889,014
3,402,180
3,102,622
1,625,359
1,122,727
614,985
-388,972
466,630
147,562
988,925
Add:
Depreciation
Management Fee to Owner
1,276,274
855,182
1,124,621
867,665
1,060,365
864,567
968,215
804,046
932,830
746,560
933,864
650,314
849,617
595,391
933,864
617,707
933,864
605,976
990,744
692,107
6,020,470
5,394,466
5,027,554
3,397,620
2,802,117
2,199,163
1,056,036
2,018,201
1,687,402
2,671,776
4,276,000
0
0
4,276,000
1,744,470
4,276,000
587,500
0
4,863,500
530,966
4,276,000
587,500
0
4,863,500
164,054
4,276,000
587,500
(1,465,880)
3,397,620
0
4,276,000
587,500
(2,061,383)
2,802,117
0
4,276,000
587,500
(2,472,737)
2,390,763
(191,600)
4,276,000
587,500
0
4,863,500
(3,807,464)
4,276,000
587,500
0
4,863,500
(2,845,299)
4,276,000
587,500
0
4,863,500
(3,176,098)
4,276,000
587,500
0
4,863,500
(2,191,724)
70.33%
$188.00
257
69.50%
$195.15
257
66.08%
$202.84
257
62.14%
$199.99
257
63.83%
$183.08
257
60.90%
$183.11
257
Renovation
Year
257
58.96%
$157.02
257
56.84%
$161.83
257
63.63%
$171.09
257
Revenue
Rooms
Food and Beverages
Telephone
Garage, Shop, Spa, Rentals
Net Revenue
Other Income
Total Revenue
Cash Flow from Operations
Debt Service
$40 million Loan
$5 million Loan
$6 million Debt Deferral
Total Debt Service
Cash Flow Less Debt Service
Occupancy
A.D.R.
Rooms
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800-194
Exhibit 2
Previously Projected Financials Assuming $12 Million in Renovations from 1992 to 1994
1992
1993
1994
1995
1996
1997
11,017,890
4,405,108
774,275
425,426
171,371
16,794,069
222,956
17,017,025
12,618,780
4,625,363
828,474
455,205
183,367
18,711,190
238,563
18,949,752
13,842,990
5,087,899
994,169
546,247
220,041
20,691,345
286,275
20,977,620
15,712,265
5,596,689
1,093,585
600,871
242,045
23,245,455
309,177
23,554,633
16,715,175
5,932,490
1,170,136
642,932
258,988
24,719,722
330,820
25,050,542
17,718,086
6,110,465
1,216,942
668,649
269,348
25,983,490
344,053
26,327,542
18,386,693
6,293,779
1,265,620
695,395
280,122
26,921,608
357,815
27,279,423
Operating Costs
Rooms
Food and beverages
Telephone
Garage
Health spa
Total operating costs
3,800,182
4,427,574
597,826
267,885
188,509
9,281,974
4,168,946
4,737,438
625,342
303,196
217,397
10,052,318
4,199,569
4,872,409
637,648
318,860
221,524
10,250,009
4,211,997
4,958,679
641,800
321,724
230,737
10,364,937
4,284,896
5,298,998
665,734
343,744
239,534
10,832,906
4,354,933
5,589,516
703,240
362,541
253,019
11,263,249
4,541,311
5,806,069
731,197
376,553
263,071
11,718,200
Earnings before Other
7,735,051
8,897,434
10,727,611
13,189,696
14,217,635
15,064,293
15,561,223
Other Operating Costs
Administrative and general
Heat, light and power
Advertising and sales
Repairs and maintenance
Total other operating costs
2,225,984
850,851
986,307
1,054,022
5,117,163
2,299,340
890,638
1,039,095
1,118,035
5,347,109
2,315,212
946,651
1,095,009
1,136,288
5,493,160
2,352,094
957,432
1,125,276
1,164,648
5,599,449
2,447,155
971,412
1,247,903
1,166,964
5,833,434
2,536,220
1,006,029
1,311,518
1,213,526
6,067,292
2,602,609
1,066,741
1,358,936
1,264,632
6,292,918
Other Income/Loss
2,617,888
3,550,325
5,234,451
7,590,247
8,384,201
8,997,001
9,268,304
Other Expenses
Management fee to owner
Real estate taxes
Insurance
Depreciation
Total other expenses
768,046
195,696
85,085
1,424,000
2,472,827
855,278
208,447
92,854
2,085,732
3,242,311
951,537
212,294
97,651
2,155,426
3,416,908
956,803
220,236
98,105
2,166,203
3,441,347
1,017,568
234,223
104,336
2,177,034
3,533,161
1,069,440
246,163
109,654
2,187,920
3,613,177
1,108,106
255,063
113,619
2,198,859
3,675,647
145,061
308,014
1,817,543
4,148,900
4,851,040
5,383,824
5,592,657
1,424,000
768,046
2,337,107
2,085,732
855,278
3,249,024
2,155,426
951,537
4,924,506
2,166,203
1,068,430
7,383,533
2,177,034
1,136,284
8,164,358
2,187,920
1,194,208
8,765,952
2,198,859
1,237,385
9,028,901
Revenue
Rooms
Food and beverages
Telephone
Garage
Health spa
Net revenue
Other income
Total revenue
Net Income
Plus:
Depreciation
Management fee to owner
Cash Flow from Operations
Occupancy
ADR
-9-
65%
$180
67%
$200
70%
$210
71%
$235
71%
$250
71%
$265
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71%
$275
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800-194
Exhibit 3
Astor Park Hotel
Chapter 11 Bankruptcy Description
What is Chapter 11?
An out-of-court restructuring between a debtor and its creditors is not binding on creditors that do
not consent. If the out-of-court workout fails for this reason or if time does not permit structuring of
an out-of-court solution for a troubled debtor, bankruptcy may be the only viable solution. For the
business debtor, liquidation can be sought under Chapter 7 of the Bankruptcy Code or the debtor can
seek to reorganize under Chapter 11. The Bankruptcy Code is a federal law, which is administered
by United States Bankruptcy Courts located in each federal judicial district. All conflicting state laws
are pre-empted by the Bankruptcy Code.
A primary goal of Chapter 7 is to sell assets of the business as quickly as possible, usually by auction.
Although this procedure has the advantage of speed, assets are usually sold at liquidation rather than
going concern value. Conversely, the primary goal of Chapter 11 is to reorganize and restructure a
company so that it can again become a viable entity. Chapter 11 essentially embraces two main
policies: (i) the policy of equality, i.e., there should be an equal distribution of gains and losses
among creditors of equal rank, and (ii) the rehabilitation policy, which promotes the restructuring of
a business to preserve jobs and businesses and to enhance going concern value for creditors.
Although the equality policy may produce painful results, it is subject to objective application. The
rules underlying the rehabilitation policy are not nearly as clear. As the debtor stabilizes and seeks to
reorganize, secured creditors and landlords must stand still so long as their interests are “adequately
protected” and there is a reasonable prospect for reorganization. This result favors unsecured
creditors and sometimes the equity holders of the company. However, the rehabilitation policy may
also benefit secured creditors since lenders are likely to realize more on their claims if assets maintain
their “going concern” value, rather than being sold by liquidation.
A plan of reorganization may be either consensual, in which all classes of creditors vote to have the
plan confirmed, or non-consensual, in which a process referred to as “cram-down” is used to confirm
a plan despite the lack of sufficient creditor support. For a plan to be confirmed by cram-down,
however, the Court must find that certain statutory safeguards designed to ensure fairness are met.
The necessary findings include the determination that creditors under a cram-down plan would
receive at least as much as they would receive if the debtor’s assets were liquidated.
If it appears that a plan of reorganization cannot be confirmed within a reasonable time or if the
debtor’s assets are diminishing, the Court may order a reorganization converted to a Chapter 7
proceeding where the debtor’s assets will be liquidated and the proceeds distributed to creditors.
Source: Prepared by Bruce Levin, Esq.
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800-194
Exhibit 4
-11-
Primary and Secondary Competitors of the Astor Park Hotel
Profile of Competitive
Facilities—
Pacifico
Regent Emeraldville
Mobil Stars
AAA Diamonds
Stories
Number of rooms
Opening year
Single
Double
Estimated Market Mix
Commercial
Group
Leisure
60%
15%
25%
Facilities/Amenities
Restaurants
Lounges
Total meeting space (sq. ft.)
Largest room/ballroom (sq. ft.)
Square feet/guest room
Swimming pool
Exercise room
Gift shop
Parking
Tennis courts
Other amenities/services
Occupancy
!
Full year 1996
!
Full year 1997
Four Seasons
Porcouver Bismarck
Inlet
Windows on the Sound
4
4
4
4
4
4
5
5
4
4
12
16
17
4
7
395
285
367
196
198
1928
1987
1988
1991
1993
$285-$425
$385-$440
$305-$430
$325-$575
$269-$399
$294-$424
$325-$450
$355-$480
$395-$495
$350-$550
Penetration
117%
69%
92%
45%
20%
35%
Penetration
85%
89%
125%
The Dining Room
Garden Café
Lobby Lounge
Bar
50%
40%
10%
Penetration
93%
175%
35%
60%
15%
25%
Penetration
125%
74%
98%
40%
10%
50%
Penetration
85%
50%
199%
Inlet Garden
Water Cafe
Window Lounge
Northwest Grill Dining
Room
Bar
The Club Inlet Bar
Lobby Lounge
25,529
14,300
64.63
9,650
4,200
33.86
11,000
4,032
29.97
4,532
1,380
23.12
6,745
3,645
34.07
outdoor
yes
yes
valet/covered
no
beauty shop
Outdoor
Yes
Yes
Covered
No
business center
heated indoor pool
yes
yes
valet
no
concierge
rooftop pool
yes
yes
valet
yes
golf course
outdoor
yes
yes
indoor/valet
no
business center
75.0%
75.0%
73.4%
73.0%
63.2%
71.5%
76.8%
80.2%
83.1%
81.5%
Total
Competitive
Market
1,341
51%
22%
27%
73.1%
75.3%
ADR
!
Full year 1996
!
Full year 1997
$305.00
$317.00
$279.05
$293.00
$177.33
$182.79
$347.00
$367.61
$258.79
$289.50
$268.03
$280.68
RevPar
!
Full year 1996
!
Full year 1997
$228.75
$237.75
$204.82
$213.89
$112.07
$130.69
$270.66
$294.82
$215.05
$235.94
$195.84
$211.46
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Primary and Secondary Competitors of the Astor Park Hotel
Exhibit 4 (continued)
Profile of Competitive
Properties—
Pacifico
Lane Forest
Opening year
Matilda
Pacific Inn
Northwest Hyatt
Sheraton Mirvue
Emerald Hilton
Total
Competitive
Market
Nakota
1989
1961
1984
1988
1978
1955
1999
Mobil Stars
AAA Diamonds
3
4
3
NR
3
3
4
4
3
3
3
4
4
4
Stories
8
12
9
17
10
8
7
341
224
200
367
301
581
297
$300-$535
$240-$290
$300-$450
$205-$510
Same
$294-$424
same
$295-$345
$295-$345
$195-$335
$500-$1,000
$290-$330
$315-$415
Ocean Grill
Matilda’s Table
Pacific Bistro
Ocean Bar
Club Oceanic
2 Restaurants
2 Lounges
Lobby Lounge
Trader Jeff’s
Lobby Bar
Northwest Grill
Dining Room
Bar
Panoramic
Restaurant and Bar
Halo Lounge
10,886
3,960
54.4
11,000
4,032
30.0
20,000
7,400
66.4
53,332
20,000
90.1
10,000
4,375
33.7
Outdoor
Yes
Yes
Valet
business center,
private kitchens, and
balconies, dataports,
florist, salon, art
gallery
indoor
yes
yes
garage
concierge, business
center
outdoor
yes
yes
yes
beauty salon,
beachfront location,
disabled facilities
outdoor
yes
yes
garage
business center,
comp. transportation
services
yes
yes
Number of rooms
Single
Double/suites
Facilities/Amenities
Restaurants
Lounges
Total meeting space (sq. ft.)
Largest room/ballroom (sq. ft.)
Square feet/guest room
Swimming pool
Exercise room
Gift shop
Parking
Other amenities/services
Occupancy
1996
1997
1998
-12-
17,000
6,188
49.9
indoor/outdoor
yes
yes
valet
massage, business
center, and concierge
77.2%
80.0%
77.6%
2,500
2,500
11.2
Outdoor
Yes
Yes
Garage
CD players, minibars
Voicemail/data ports
Modern Art,
Concierge
39.7%
77.4%
77.6%
79.3%
78.9%
74.5%
63.2%
71.5%
72.0%
79.9%
80.3%
80.3%
Sarto’s Pool Bar,
Coco Café, Kiwi Club
2,569
valet
business center,
videoconference
facility, remote
control panels for
lighting, TV, AC
74.3%
70.0%
71.6%
70.2%
70.0%
68.0%
69.3%
73.0%
72.7%
ADR
1996
1997
1998
$181.38
$197.26
$229.75
$127.02
$223.08
$254.82
$136.18
$142.83
$159.40
$177.33
$182.79
$239.20
$172.71
$187.65
$201.64
$141.89
$168.00
$171.21
$163.98
$171.00
$174.00
$159.43
$181.32
$200.97
RevPar
1996
1997
1998
$140.03
$157.81
$178.29
$ 50.43
$172.66
$197.74
$107.99
$112.69
$118.75
$112.07
$130.69
$172.22
$138.00
$150.68
$161.92
$105.42
$120.40
$122.59
$115.11
$119.70
$118.32
$110.51
4132.35
$146.19
This document is authorized for use only by James Dennany in Hotel and Resort Market Analysis-1 taught by Larry Yu, HE OTHER from January 2018 to May 2018.
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Astor Park Hotel
Exhibit 5
800-194
Customer Profiles of the Hotel Industry
Corporate/Commercial Individuals: This demand segment consists of individuals whose purpose
for traveling is related solely or predominantly to their jobs or businesses. Its peak days of demand
are Monday through Thursday.
Corporate Groups: The purpose of travel for this demand segment is also business. This segment
is distinguished from the corporate individual segment by virtue of its booking of rooms on a block
basis. The specific purpose of travel is likely to be a company-sponsored meeting in the hotel or at a
nearby location.
Convention and Association Groups: Conventions and association meetings can have thousands
of attendees, many of whom travel as corporate groups or book rooms on a block basis through the
sponsoring organization.
Tourists and Leisure Travelers: This demand segment encompasses most pleasure travelers and
includes many family groups. Double (or higher) occupancy of rooms is common. Travel tends to
occur at peak periods of demand. Room rates are infrequently discounted for tourists. Lengths of
stay vary widely from one-night stopovers a day’s drive from home to vacations lasting a week or
longer at a resort thousands of miles from home.
Typical Profiles for Four Hotel Demand Segments
Corporate
Individual Traveler
Corporate
Group Traveler
Leisure
Individual Traveler
Leisure
Group Traveler
Seasonality
None
Fall and spring are
peak
Summer and winter
are popular
Varies with
destination
Day of Week
Weekday (Wednesday
and Thursday are
peak)
Weekday (Monday
arrival and Thursday
departure are popular)
Friday arrival and
Sunday departure
are peak
Stays are usually for a
week or encompass
both weekdays and
weekends
Double Occupancy
Limited
Rare
Frequent
Always
Price Sensitivity
Varies, but not
extremely sensitive
Varies, but not
extremely sensitive
Often sensitive, but
varies
Very price sensitive,
commissions paid
Average Length of
Stay
2 nights
2.5 to 3 nights
2 to 6 nights
3 to 6 nights
Facilities/Amenities
Needs and
Preferences
Business center,
modems, room service,
video checkout
Recreational facilities,
breakout rooms,
audiovisual equipment
Recreational
facilities, variety of
restaurants and
nearby amenities
Double/double rooms,
on-premises
restaurant,
large lobby
Repeat Patronage
Often
Often
Occasionally
Repeat tour operators
Source
Travel agents,
corporate travel
departments, individual
secretaries
Corporate meeting
planners
Travel agents, selfbooking
Travel agents, tour
operators
Source: Hotel Development, ULI-the Urban Land Institute, 1996.
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800-194
Exhibit 6a
Astor Park Hotel
Starwood Hotel Brands
St. Regis Luxury Collection comprise a unique family of over 55 hotels and resorts in 20 countries,
with more than 15,000 rooms. These properties offer exceptional service to an elite clientele. Many of
the hotels, some of them centuries old, are internationally recognized as being among the world’s
finest. Competitors of the St. Regis Collection include Four Seasons and Ritz-Carlton.
Westin Hotels & Resorts is a global network of more than 105 upscale hotels and resorts in 23
countries, with over 45,000 rooms. This leading hotel brand was rated the best U.S. Upscale Hotel
Chain for an unprecedented four years in a row by “Business Travel News” in 1997. Westin
competes primarily with Hyatt Hotels.
Sheraton Hotels & Resorts caters to upscale business and leisure travelers. Recognized the world
over, the Sheraton brand is represented in more business and resort locations than any other brand in
its category, with over 340 properties in 60 countries and more than 115,000 rooms. Sheraton typically
faces competition from brands such as Marriott and Hilton.
Four Points Hotels by Sheraton serves the needs of price conscious business and leisure customers,
delivering the amenities of a full-service hotel at more competitive rates. Four Points Hotels is the
fastest growing full-service, mid-priced brand in the U.S., with more than 100 hotels in 5 countries
and over 20,000 rooms. The Four Points Hotels compete in many markets with Courtyard by
Marriott and Hampton Inn.
W Hotels offers a new product of business hotels quite unlike anything else available to the corporate
business traveler. W Hotels provide the personality and chic style of a boutique hotel, while
providing the reliability and comprehensive business services that these travelers expect. Initially, W
Hotels will be comprised of 12 sophisticated properties, all opening in gateway U.S. cities by the year
2000. Starwood’s newest brand would compete with boutique hotels such as Ian Schrager Hotels.
Exhibit 6b
Financial Assumptions for Repositioning of the Astor Park Hotel
As Is
Occupancy
Average rate
RevPAR
Total revenue
Cash flowsa
Capital Expenditure for
Repositioningb
Sheraton
Westin
W
St. Regis
65%
$
175.00
$
113.75
$16,112,000
$ 2,810,000
70%
$
180.00
$
126.00
$16,901,000
$ 5,070,000
70%
$
220.00
$
154.00
$22,247,000
$ 7,899,000
75%
$
250.00
$
187.50
$29,550,000
$ 8,273,000
68%
$
325.00
$
221.00
$33,132,000
$ 8,955,000
$ 6,000,000
$10,000,000
$19,000,000
$20,000,000
$25,000,000
aCash flows available for distribution to partners reflect Starwood base management fee of 3.0% and 4% capital reserve.
bIf the property is repositioned, the acquisition of the hotel will be financed with 100% debt at 9% interest over 20 years. The
capital expenditures associated with the repositioning will be done with equity financing. If the property continues to operate
as is, the acquisition and capital expenditures for repositioning will be done with 50% leverage financed over 20 years at 9%
interest.
14
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Astor Park Hotel
Exhibit 7
800-194
1999 Landauer Real Estate Market Forecast based on 1998 Hotel Data
HOTEL
The emotions evoked by the ups and downs of
the hotel industry are worthy of a melodrama. Every
feeling is heightened. The collapse of a decade ago
was fraught with despair. The comeback of the ‘90s
moved from elation to euphoria. In the past year,
anxiety has started to swell. By the time the curtain
rings down on 1999, the audience can anticipate
being psychologically exhausted and mentally
perplexed. Perhaps the actors and spectators might
need a vacation to sort things out. If so, there may be
some cheap rooms at the inn.
Nowhere has the drama been more publicly
played out than in the stocks of hotel operating
companies and REITs. Hilton’s stock fluctuated
between 12 1/2 and 35 1/2 in the course of the past
year. Starwood’s 52-week trading range was 18 3/4
to 58. For Host Marriott the figures were 9 7/8 and
22 1/8. In November, Patriot America’s inability to
meet forward equity guarantees sent its stock to new
lows. Total returns for hotel REITs were -40.1% for
the first three-quarters of 1998, compared with
positive returns of 35.6% for the same period in 1997.
By some estimates, hotel companies were trading at a
25% premium to net asset value in 1997, and at a 35%
discount to NAV in 1998. No wonder investors
suffered from a severe case of vertigo.
What was going on? No one seriously suggests
that the value of the hotels themselves swung so
violently in such a short period of time. Indeed, the
speculative buying frenzy for limited service hotels,
which saw average cap rates dip below 10% for these
inherently risky low-end facilities, had run its course
by mid-1996. More recent transaction evidence
pointed to higher-quality facilities, with solid pricing
above $110,000 per room at fairly conservative cap
rates in the 11% to 12.5% range. There was a 50-100
basis point rise in cap rates for full-service hotels
between late 1997 and the fall of 1998, but nothing
like the roller coaster in hospitality share prices.
On one level, investors were making a judgment
about the hoteliers’ business prospects. While on the
way to their stock valuation peaks, investors
concentrated on the operating efficiencies gained as
the chains and trusts added facilities and
consolidated operations.
Companies with the
foresight to scoop up facilities when prices were low
had a compelling story to tell, and investors provided
the capital to encourage them to do more of the same.
And,
supporting
it
all,
supply/demand
fundamentals
for
hotels
were
improving.
Occupancies rose steadily through the ‘90s, average
daily rates and RevPAR (revenue per available room)
increased, and the industry, after years of losses,
began to show handsome profits.
Wall Street
rewarded the results.
The sudden downward spiral in the investment
valuation of the hotel companies has to be seen
against the background of their skyrocketing ascent.
It is an oversimplification to say these companies
were overvalued.
The bidding frenzy for ITT
Sheraton raised the storm flags, as Hilton and
Starwood played high-stakes poker for what were
sound, but not spectacular assets. There were two
consequences. First, the possibility that the hoteliers
were vastly overpaying for properties was bruited
about in the business press. Second, Starwood’s
victory caused a backlash against a perceived
advantage held by REITs over other hotel operating
companies. The latter raised the specter of possible
changes in REIT regulations, striking fear of the
unknown in investors’ hearts.
For real estate professionals, this is comforting for
it suggests that the whipsawing of the industry is all
about misjudgment and overreaction on Wall Street.
Unfortunately, the picture is more complicated and
drives deeper into the property side of the business
as well.
The view of hoteliers as growth stocks led to an
expansionary imperative in which buyers paid full
price and more to keep income levels accreting. The
cost of funds argument held that traditional real
estate economics were of limited relevance. If a
company could get low cost capital in the public
markets, and buy at a higher cap rate in the real
estate market, why not? If the cap rate looked
exceptionally aggressive in purely real estate terms,
well, the old order passeth, giving way to the new.
The flaw in this reasoning is duration matching.
Public market capital is the shortest of short-term
sources of funds; real estate, on the other hand, is a
long-lived asset. Borrowing short to invest long is a
classic path to market bubbles and when investors
took advantage of their call provision, by selling their
stock, the operating company was left to make the
acquisition prices work on supply/demand funda-
15
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800-194
mentals. In that light, some of the assets did indeed
look like overpriced real estate.
Also, the supply and demand sides of the
operating equation were weakening simultaneously.
Hotel construction volumes were starting to run
ahead of gains in visitation. How could demand
keep pace with development trends that saw hotel
completions grow 300% between 1994 and 1998?
New competition was inevitably going to put the
brakes on revenue and occupancy growth, and thus
the hoteliers' income potential.
1998 also introduced deeper concerns that the
fundamental drivers of hotel occupancy were
themselves weakening.
Corporate profits from
current production rose $8.4 billion the first quarter
of 1998, then dropped $9.5 billion in the second.
With business travel a key hotel demand factor, any
corporate belt-tightening will bite into hotel profits
quickly. The rapidly worsening world economic
crisis also cast a pall over hotels, especially those tied
to international travel. The national income accounts
show a $300 million drop in foreign travel receipts
since the second quarter of 1997 when the Asian crisis
began. This year with the exception of the luxury
segment, hotel occupancies are down across the
board in the third quarter of 1998, compared with the
year prior. The prospect of slower growth in 1999
puts even more pressure on hoteliers.
Value of Hotel/Motel Construction Put in Place
Billions of 1992 Dollars (SAAR)
Source: U.S. Census Bureau
Astor Park Hotel
Nevertheless, the volatility in the market
capitalization of hotel companies has been entirely
disproportionate to the performance of their assets. It
is time for the investors to re-focus on the properties
themselves. We find the markets to be at a tipping
point, though there are robust conditions in a few
high-profile cities, as we enter 1999. Operational
efficiencies introduced in the ‘90s have dropped hotel
breakeven points under the 60% occupancy level, and
this has created a comfort zone for the industry.
There does not appear to be immediate danger of red
ink unless operators fall into the “amenities creep”
trap of the ‘80s. Domestic travel should increase
modestly, in an environment of rising real incomes,
low interest rates and low unemployment. Once the
public and the business community gain confidence
that a recession is not imminent, concerns about a
sharp reduction in room nights should ease.
But there is an urgent need for stern discipline on
the development front—and right away.
The
majority of hotel markets in Landauer’s Equilibrium
Index and Market Quality Ratings are weakening.
Thirty-four out of 61 had new supply exceeding fresh
demand in 1998. More significantly, 34 of the 61
markets now have as many rooms as they will
require to be in balance, based upon our demand
forecasts through 2003. That means that the majority
of U.S. hotel markets should have zero construction
for the next five years. Probably, that won’t happen,
and so we are projecting a real decline in market
quality. Unless inventory is retired, profitability will
suffer.
Defenders of the hotel faith will argue that there
hardly seems cause for such draconian suggestions.
After all, any reductions in occupancy levels have
been modest and, at a utilization rate of 68%, hotels
are still very full and running in the black. They will
point to markets like New York, Boston, San
Francisco and Washington, D.C. to make the case that
there are just not enough rooms to meet demand,
citing soaring room rates to prove their point.
Similarly, they will look to the tourism markets of
Las Vegas and Orlando, saying that occupancies well
above 70% are not bad at all, given the volume of
recent hotel openings and that these markets are the
epitome of solid long-term demand growth. And all
those claims are quite plausible.
In start contrast to all the other property types, hotel
development
has
displayed
no
discipline—none
whatsoever—in response to improved occupancy rates and
room revenues in this cycle. It is already on its way to a
crash landing. Construction is up 300% since 1995. Only
the luxury facilities in a minority of top business cities will
be spared the pain of a harsh downtown in the next five
years.
16
This document is authorized for use only by James Dennany in Hotel and Resort Market Analysis-1 taught by Larry Yu, HE OTHER from January 2018 to May 2018.
For the exclusive use of J. Dennany, 2018.
Astor Park Hotel
Exhibit 7 (continued)
800-194
Landauer Hotel Market Equilibrium Forecast
Relative Market Strength
Source: 1999 Landauer Real Estate Market Forecast.
While a half-dozen markets show excellent market strength through 2003, many cities already have more hotel inventory than
required to meet demand through our forecast period. The lesson is a simple one: most markets should pull the plug on
development immediately. Capital sources, take note.
17
This document is authorized for use only by James Dennany in Hotel and Resort Market Analysis-1 taught by Larry Yu, HE OTHER from January 2018 to May 2018.
Hotel/Resort Market Analysis
Spring 2018
Case Analysis
The case is selected from the case packet: Astor Park Hotel by William Poorvu &
Arthur Segel, 2001, HBS Case_9-800-194 (the access link to HBP coursepack is
provided under Required Readings in the syllabus on Bb).
This case study discusses the interest of Starwood Hotels in acquiring an
underperforming hotel in the Pacific Northwest. Steve Goldman, Starwood Vice
President for acquisitions and development, is wondering how much to pay for the
property and how to reposition it. This study also provides a good overview of the earlier
development strategies that made this company one of the global leading hotel
organizations today.
Apply the knowledge and methods studied in this course to analyzing this case. The
following is the guideline for this case study:
Your written analysis of a case should generally contain five sections
1.
2.
3.
4.
5.
Executive Summary
Brief overview of key case facts
Identification of the case problem or central issue
Discussion of 2-3 alternative solutions to resolve the problem
Selection of the preferred solution and explanation of how it solves the
problem
The body of your case analysis should be no longer than 4.5 pages, double-spaced.
Allow yourself an average of one page per section (2-5 above) and a half-page for the
executive summary. Part of the learning experience is the distillation of notes, ideas and
opinions into succinct presentations of your thinking on a particular case. Articulately
state your points. You are encouraged to use other resources.
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