You are on page 1of 36

Global hospitality insights

Top thoughts for 2015

Contents
03

Foreword

04

Appetite for investment: the current capital
climate

08

Active global M&A in the hospitality
industry

10

Outbound investment from Asia

12

Seeking operational excellence: consolidation
of third-party management companies

14

Lifestyle lodging products

16

Critical success factors for new lodging
brands

18

Condominium hotels — lessons learned

20

Emerging submarkets within mature lodging
markets

22

Hotel technology 2.0

24

Investment promotion agencies — catalysts
for tourism investment

26

Mutual learning opportunities: the sharing
economy and the lodging industry

30

Global tax considerations

32

Changes in financial reporting: the new
revenue recognition standard

Foreword
The global hospitality industry entered 2014 on an upward growth
trajectory; a greater sense of optimism was palpable across most
regions, as accelerating capital markets, favorable supply and
demand balances, and strong investor appetites fueled higher
transaction volumes and strengthened lodging fundamentals.

Robust investor interest worldwide was
reflected in the year’s key industry trends:
• More lodging projects broke ground as
traditional lenders eased restrictions on
construction loan originations.
• Accelerating cross-border capital flows
intensified competition among domestic
and international investor groups for
hotel assets.
• In select secondary markets, investors
evaluated higher-yield opportunities
outside of gateway cities, reflecting
renewed interest in the sector.
• Evolving guest preferences propelled
an influx of new hotel brands.
Even amid geopolitical instability, the
emergence of new health concerns and
stagnant economic growth in certain
regions, the global hospitality industry
thrives in a cycle of accelerating growth,
and optimism prevails in most markets.
Over the next 12 months, further gains in
the global hospitality sector are anticipated.
Major industry players are seeking to
strategically deploy and optimize their
capital investments, and strong investor
appetites, coupled with the availability
of flexible and creative capital sources,
will fuel demand for hotel acquisitions.
The consolidation of asset-light, thirdparty management platforms will remain

prominent, as investors continue to seek
the most qualified operators to improve
the performance of recently acquired
hotel assets. Previously dormant lodging
markets are positioned to gain traction, as
increasingly opportunistic investor groups
weigh higher returns in secondary locations
and emerging submarkets. And the focus on
technology will intensify, as both hoteliers
and customers continue to evaluate their
return on investment in a lodging experience
grounded in sophisticated social, data and
mobile applications.
The global lodging industry will continue
to adapt as new accommodation platforms
emerge. Traditional lodging types now exist
in a shared economy with apartment rental
services and other alternative offerings,
including membership clubs, hostels and
avant-garde lifestyle brands. As global
travel increases across leisure, corporate
and group segments, destinations must
effectively implement and invest in their
tourism strategy to differentiate themselves.
Furthermore, the continued increase in
cross-border capital flows will intensify
competition in gateway markets among
traditional financial investors, presenting
new financial and tax implications for both
domestic and foreign investors.
At EY, we believe hospitality plays an
integral role in building a better working
world by connecting global regions across

economic, investment and experiential
platforms. The impact of hospitality
on our global economy is significant;
across the world, the travel and tourism
industry encompasses 266 million jobs,
and contributes 9.5% of gross domestic
product (GDP) globally. With travel and
tourism sector growth forecast to expand
by 3.9% during 2015, the sector will be
increasingly recognized as a key driver
of economic growth at the local, regional
1
and global level.
As we strive to address issues important to
the industry, we are excited to present this
year’s edition of Global hospitality insights:
top thoughts for 2015. The report reveals
key issues and trends we believe will be
the primary areas of focus in the global
hospitality industry in the upcoming year.

Howard Roth

Michael Fishbin

EY Global Real Estate, EY Global Hospitality
Hospitality &
& Leisure Leader
Construction Leader

1. “Economic Impact Analysis,” World Travel & Tourism
Council, 2014.

Top thoughts for 2015
3

13 November 2014.” Reuters. Malaysia. Investors from Canada.6% over the previous year.” Real Capital Analytics. translated into weaker fundamentals in the first half of 2014. June 2014.reuters. Japan. many countries. currently face economic challenges. despite the boost from the 7. third quarter 2014. Specifically in the US. worsening unemployment and currency devaluation. A wave of new hotels will open in 2015.” Hotel Interactive. As a result of strong fundamentals and an increasing array of capital sources. providing a solid foundation for an uptick in transaction volume and overall competition. The low rates are highly influenced by the country’s low interest rates. Greater competition among these investors and subsequently lenders is allowing for more aggressive loan-to-value ratios. with the rates in six major metropolitan markets. coupled with their political instability. 5. “US Capital Trends – Hotels. www. with current capitalization rates close to the previous market lows of 2007. 4. Atlanta. Global hospitality insights 4 Throughout the Americas. and a robust global development pipeline of approximately 1.jll.aspx. “New Hotel Construction Pipeline in Global Shift. Cross-border investment into the US increased approximately 137% from 2013 to 2014.9% in 2013. health 2 and terrorism concerns.” Jones Lang LaSalle. capitalization rates in the US are anticipated to trend lower. with 2014’s totals expected to exceed US$54.3 million 3 guestrooms is in place. third quarter 2014. 6. 17 April 2014. and hotel performance has followed suit amid a rise in business and leisure travel. 3.” Jones Lang LaSalle. Houston and Orlando.hotelinteractive. San Francisco and Boston.” Real Capital Analytics.com/article.com/gmp/market-perspective/hotels. potential speculation about a bubble is countered by the fact that risk has been priced into the deals seen 8 throughout 2014. .5 billion compared to US$52 billion in 2013. In Latin America. averaging 73% through Q3 2014. showing that the industry continues to gain momentum even in the face of accelerating geopolitical instability. Hotel occupancy in Central and South America through July was down approximately 1. such as high inflation rates. accessed November 2014. These issues. Singapore and the Middle East have chosen to deploy a large amount of capital in US 5 hotels. strong performance continued in 2014. Investment in the US hotel sector was expected to continue accelerating throughout the end of 2014. with both the full-service and limited-service sectors demonstrating large pipelines of 6 deals under contract. www.Appetite for investment: the current capital climate Real estate fundamentals continue to improve. with foreign buyers continuing to look beyond traditional gateway markets to secondary markets. www. with real estate transaction volumes in some markets 4 reaching pre-recession peaks. and debt and equity capital are abundant. including Brazil. August 2014. Argentina and Venezuela.5%. compared to 6. including New York City. www. aspx?articleid=32644. averaging 5. such as Phoenix. which are anticipated to 7 rise in 2015. “Hotel Investor Sentiment Survey. 8. Global hospitality and leisure transactions increased 8% year-over-year through Q3 2014. 2.com/hotels/EN-GB/Pages/HISS-June-2014Americas. Nevertheless. “Global Market Perspective Q4 2014: Hotel investment maintains momentum despite downside risks. “Fed’s Dudley: expectations for mid-2015 rate lift-off reasonable.com/article/2014/11/13/ususa-fed-dudley-idUSKCN0IX0ZS20141113. China. compared to 66% in 2013.” Real Capital Analytics.joneslanglasalle. “US Capital Trends – Hotels. economic and employment numbers have grown increasingly positive. Global hotel investment continues to steadily increase. “US Capital Trends – Hotels.

While hotels in primary markets. Lagos’ revenue per available room (RevPAR) declined significantly year-over-year. foreign capital inflows may soon diminish given investor concerns about tourism in the wake of the recent Ebola outbreak and political instability. hospitality investment in Germany rose to US$1. of which 40.” Hotel News Now. The declining operating fundamentals could also be tied to the fact that the region was the only area globally where 9 additions to supply outpaced demand. Germany’s low interest rates and high levels of debt liquidity have 13 fueled high levels of investment. representing a 100% increase in transaction volume as compared to July 2013 figures. 26 September 2014.com/news/story/13221. are given the highest valuations across Germany. www. the development pipeline continues to grow and now includes 637 hotels. Investors have displayed great confidence in the continuing strength of London as the pre-eminent European hospitality center.000 are in Brazil thanks to its surge in corporate and leisure travel.php. with 151. such as Frankfurt and Dusseldorf. “STR Global: MEA pipeline for July. such as Munich. South Africa and Egypt have experienced continued economic growth. Europe has witnessed a rejuvenated hospitality market. By comparison.com/2014/09/26/latinamerican-hotels-have-a-supply-and-demand-problem. all except for Moscow are expected to show 12 strong trading performance over the next six months.” Hotel News Resource. South America now has 400 hotels in the pipeline.worldpropertyjournal. travelers do appear to be exercising caution.9 billion through July 2014. totaling 49. “Global hotel pulse: Middle East/Africa news. skift. an 15 increase of 139 hotels since December 2013.hotelnewsnow.html.205 rooms. development and acquisition activity has been prevalent.com/ Article/13850/Global-hotel-pulse-Middle-EastAfrica-news. 16 July 2014. “Global Capital Trends. “Central And South America Hotel Development Pipeline For December 2013 Increases to 305 Hotels.com/Article/14329/ STR-Global-MEA-pipeline-for-July. midyear review 2014. Casablanca and Munich. While security and health concerns have not yet deterred investment. Despite concerns over slow economic growth.com/latin-america-vacation-news/new-hotels-in-latin-str-global-june-2014str-global-construction-pipeline-report-luxury-hotels-in-brazil-new-hotels-in-mexico-new-hotels-incolombia-8362. Despite rising construction investment and growing occupancy rates among African hotels. Ibid. 11. mirroring the wider commercial real estate market. 16. 12.479 rooms. “Germany still the darling of the hotel investment sector with transaction levels heading for €2bn. www. totaling 65. investor sentiment is high regarding future growth and transaction volumes. 28 August 2014. www.World Cup in Brazil.” World Property Journal. the Middle East and Africa (EMEA). In Nigeria. 15 January 2014.” Real Capital Analytics. 15. investors have looked toward secondary markets. 2 October 2014. 10 June 2014. which through H1 2014 climbed 70% from a year-ago. creating demand from institutional investors as well as major hotel brands that see expansion into the region as a source of future growth. In the Middle East and Africa. “Latin America Hotel Market Has 400 Properties Under Development. Top thoughts for 2015 5 .” Hotel News Now. www.com/article75877. which was declared free of the virus in October 2014.4hoteliers.” 4 Hoteliers. In Europe. Countries such as Nigeria. “Latin American Hotels Have a Supply and Demand Problem. primarily caused by a drop in 16 average daily rate (ADR) from US$279 to US$248 (down 11%). 14 for higher-yielding opportunities. Even so. 13. including Barcelona. Of the 31 major hospitality destinations in the region.hotelnewsnow. which continues to attract large inflows of foreign capital. 14. 9. www. as well as steady increases in its hotel operating 10 metrics.” Skift.054 rooms.hotelnewsresource. the region had 305 hotels in development 11 in December 2013. In addition. 10.

” Real Capital Analytics. Barring any of these shocks to the system. Hotel sales in Japan accounted for 47% of transaction volume across the region. who see potential yields in the 18 booming market. The rising availability of hotel development financing in mature markets will allow for more robust pipelines. which is largely a result of a number of institutional players re-entering the market. However. 17.Investment volume in the Asia-Pacific region decreased from US$6. these upward trends may be deterred if political instability and Ebola outbreaks continue. India’s half-year total of US$1. Capital flows into India climbed. Certain key themes seen globally are anticipated to continue into 2015. with North Asian and Southeast Asian investors completing 58% and 38%. But Asian investors dominated hotel transaction activity in the first six months of 2014.4 billion in the first half of 2013 to US$3. maturity and transparency have led to steady buying activity from Asian investors. accessed November 2014.” CBRE. Global hospitality insights 6 .3 billion in the same 17 period in 2014 amid investor concerns over political unrest in markets such as Hong Kong and Thailand and economic uncertainty about the stability of China. midyear review 2014. private equity funds and REITs are anticipated to remain motivated buyers. with noticeable volume gains recorded in the first two quarters as tourism continues to drive economic growth. Much like India. “Asia Pacific Hotels MarketView (H1 2014). the climate for hospitality capital markets activity should remain favorable. respectively. 18. assets in secondary markets will attract further interest from hotel developers.8 billion represents a 37% increase year-over-year. and Asian investors. Australia’s strong fundamentals. of all deals in Asia. “Global Capital Trends.

Top thoughts for 2015 7 .

. foreign investors made approximately 11% of the US$355 billion in real property deals last year. assessing value and modeling cash flows. and the recent surge of mergers and acquisitions (M&A) activity appears reminiscent of 2007. January 2014. There are additional. 3 March 2014. 19. However. However. real estate investors have become more confident about acquiring real estate operating platforms with the objective of owning the underlying real estate. the parties may encounter discrepancies in pricing expectations — for example. 21. for example. Global hospitality insights 8 M&A activity overall and in the RHC sector is driven by a desire for incremental growth. October 2014. 21 hospitality specifically. Additionally. 20. investors out to make deals should be aware of additional risks and complexity in the markets. The presence of these elements has fueled M&A in recent years. particularly under an increasingly high-speed diligence period. “2013 Year in review. Japan and Singapore fueling transaction volume within 20. Real estate investors may be familiar with underwriting individual hotels. but these kinds of transactions cannot be solely dissected as real estate portfolio acquisitions. and not necessarily for operating the platform as a business. with favorable market conditions encouraging higher confidence and the risk appetite to place capital. including the appropriate level of overhead required to operate the properties. In the US. Within hospitality. Across the world. with prominent investment groups from China.Active global M&A in the hospitality industry For several years. if a seller prices itself as a stand-alone business while a prospective buyer prices the deal as the acquisition of individual properties. “Cross-border capital tracker for United States.” EY. deals have gained traction. as well as potential commitments and off-balancesheet liabilities of the business. Sentiment in the sector remains positive: a recent EY survey of more than 75 hospitality and leisure executives found that 99% of the respondents expect the global M&A market to continue to improve or stay the same in the next 19 12 months.” Real Capital Analytics. The influx of capital has caused fund managers to look for new ways to expand their real estate portfolios in a hypercompetitive environment.” Real Capital Analytics. confidence in the economy and in deal markets has improved. value-impacting factors to weigh when buying an entire platform. “Global Capital Confidence Barometer. the challenge lies in vetting this type of deal. The higher volume of global capital chasing real estate opportunities has also contributed. with flush capital and portfolio optimization remaining key drivers. the strategic merit of transactions and the availability of debt and equity on favorable terms.

are now looking to expand to new platforms. New players are also emerging. seasoned industry players with a track record of success are still driving most activity in the hotel space. new players are mainly competing for trophy assets in select gateway markets. Capital marked for the real estate markets may once again be abundant. in which the real estate is often not a significant component of the transaction. a recent trend of acquiring hotel management platforms has emerged. investors appear to be chasing opportunity and expansion with a newfound discipline. resulting in future earnings growth. However. the real estate portfolio valuation is a critical part of the due diligence process when the real estate is key to the strategic rationale of the transaction. In recent years. These new players are not only diversifying the M&A landscape but are also making it more competitive. certain financial institutions and other alternative investors. The strategic rationale of investors in this space is to acquire a management platform and enlarge it by adding management contracts with minimal capital investment and operating costs. which have been indirect real estate investors. Within hospitality.For company acquisitions. While it is uncertain whether M&A activity in 2015 will outpace the peak observed in 2007. but the way it is channeled continues to reflect the lessons learned since the financial crisis. Yet a top-down business assessment is also crucial to ensure the property valuation is not misguided. Top thoughts for 2015 9 . an operating platform must be carefully evaluated to determine whether the business can sustain earnings growth. However. Within hospitality. taking advantage of their base-level knowledge of real estate from their lending or other investment activities.

Toronto and London last year. Most notably. 3 November 2014.5% during the 12 months ending 29 October 2014. China has been one of most active hotel buyers. Over the prior 12 months.5%). “Trends & Trades: October 2014. Global hospitality insights 10 A number of “push” and “pull” factors drove the year-over-year increase in cross-border activity.6%). Ibid. Representing the largest increase in investment dollars. 28. Australia was a target market for overseas Asian buyers. China’s cross-border hotel investment volume has increased from just US$107. Additionally. Hong Kong (12. representing 48. 24. Asian organizations invested approximately US$844 million in development sites in Los Angeles. some of the most active investors from Asia have been stateowned enterprises (SOEs) and large-scale developers. 26. While these Western countries “pull” international buyers to transparent markets for capital preservation and more stable property yields. In 2014. Singapore (17. Ibid.9% in 22 2011. 29.2% greater than sites in Manhattan and 645.3% greater than sites in San Francisco.7 billion during the 12 months ending October 26 2014.4 million in 2011 to US$2.5% of total Asian hotel investment globally during the 12 months ending 24 October 2014. 23. Downtown Los Angeles has been a target for ground-up hotel mixed-use development. “Cross-Border Capital Tracker: October 2014. many of these international buyers are also encouraged to invest abroad due to the geopolitics in their home countries. 29. who are intent on investing overseas as a way to diversify their portfolio and build their international brand. Over the prior 12 months.2% of 2014’s global hotel investments through October. For these investors. Ibid. versus the year-ago period. Hong Kong. which is 198. followed by Japan (21. 3 November 2014.7% in 2013. investing 27. 25. Japan and Singapore) represented 43. and the flow of money from Asia into the mature markets of North America. 22.5% and development site transactions increasing 180.9%). which began construction on its more than US$1 billion hotel mixeduse development project in Downtown Los Angeles last summer and it acquired additional mixed-use development sites in 28 New York. Europe and Australia is anticipated to keep rising.5%) and Malaysia 25 (9. the top three global hotel markets for Asian investment are Manhattan. Hawaii and London. Currently. 3 November 2014.9% in 2012 and only 25. Japan’s acquisition activity was predominately related to a Japanese company’s US$1. “Trends & Trades: Third Quarter 2014. buyers from Asia are “pushed” toward outbound investments due to their individual government’s cooling interventions for domestic real estate and the easing of government regulations regarding overseas investments. 27. with six properties located throughout Hawaii 27 and San Francisco. One such company is a Shanghai-based state-owned Global Fortune 500 company. During the past year. Ibid.2% of the cross-border hotel transactions during the 12 months ending October 2014. with hotel transactions increasing 8. Asian investors (primarily dominated by China.Outbound investment from Asia Overseas capital accounted for 41.” Real Capital Analytics. largely due to the abundance of large parking lots that are primed for development and the shortage of hotel rooms within walking distance from the Los Angeles Convention Center. “Cross-Border Capital Tracker: October 2014.4% of the total outbound capital from Asia.” Real Capital Analytics.” Real Capital Analytics. in 2014. compared to 34. .” Real Capital Analytics. followed by North American and Middle 23 Eastern investors.4 billion entitylevel buyout of a luxury hotel portfolio. 29 October 2014.

www. accessed 30 October 2014. In addition to acquiring stand-alone properties. 30. Chicago and Australia’s Gold Coast in order to build luxury hotels utilizing the company’s five-star hotel brand. For instance. “Chinese Insurer Buys Waldorf Astoria for a Record $1.com/ EN/aboutus/MediaCentre/2014/Pages/Asian-Insurers-Target-Global-Real-Estate-. it is anticipated that outbound activities will expand beyond the most common type of investment — individual asset acquisitions — to include a greater number of joint venture and platform-level investments. is developing billion-dollar mixeduse projects in London.95B. It is predicted that Asian insurers will become one of the largest investor groups in the coming years. While London and New York have been prominent outbound markets for the past five years. representing the highest price paid for a single hotel property in the US and the largest acquisition 30 of a US property by a Chinese company. Besides investing in US-based hotel management companies. for almost US$2 billion. other key cities are beginning to garner international attention. a number of other companies. 31. as gateway markets become more expensive and investors mature. with an estimated US$75 billion to invest in global 31 real estate by 2018. overseas investments are also expanding upon existing platforms.” Forbes. which is expected to persist. Another example is a Hong Kong-based company. a second wave of investors from Asia is beginning to emerge: insurance companies. this cycle is also witnessing an expansion of Asian-based hotel management companies. which is acquiring four. a luxury hotel with more than 1. Real estate investment restrictions have also been lowered in South Korea and Taiwan over the past couple of years. In addition. with Asian investors at the forefront of the activity. increasing the maximum real estate allocations permitted as well as streamlining the procedures for 33 investing in property abroad. weakening currency versus the Chinese renminbi over the past five years. The China Insurance Regulatory Commission first allowed insurance companies to invest abroad in 2012 and increased the maximum allocation in real estate (both domestic and foreign) from 20% to 32 30% of total assets in February 2014.and five-star hotels to reflag under its luxury hotel brand and three-star hotels to convert to its newly formed lifestyle 34 hotel brand. and cross-border transaction levels are expected to continue to rise. Ibid. as regulatory restrictions continue to ease. “Asian Insurers Target Global Real Estate As Regulatory Restrictions Ease. in industries such as air travel and construction. For example.html. The forecast for the global hospitality market is strong. increasing outbound China tourism is expected to fuel additional Chinese investment in the global hotel market.com/sites/ michaelcole/2014/10/06/chinese-insurer-buys-waldorf-astoria-for-a-record-1-95b. such as Sydney.400 keys in New York City.cbre. 33. in September. are investing and developing hotel properties in order to diversify their income stream. 32. Moreover.” CBRE. “Wanda Acquires ‘Jewel Project’ in Australia’s Gold Coast. limited investment opportunities in their home countries and the perceived stability in Western countries. Asian investors will continue to be major players in global capital markets in 2015 and beyond. Furthermore. 34. www. which is entering its third year in the cycle. Considering the current geopolitical environment in Asia. The developer’s ambitious goal is to build at least 15 luxury hotels in 15 international cities by 2020 and expand its China-based hotel brand.” PR NewsWire.aspx.forbes. accessed 27 October 2014. accessed 30 October 2014. a Chinese insurance company acquired the Waldorf Astoria. While SOEs and developers will continue to acquire and develop significant assets in major gateway cities.Australia is likely to continue to be a target market due to its growing Chinese population and visitation levels. favorable tax regime. www. and higher yields compared to other gateway cities in the US and Europe.prnewswire. one of the largest commercial developers in China. Wanda Group. Top thoughts for 2015 11 . Ibid.com/ news-releases/wanda-acquires-jewel-project-in-australias-gold-coast-271068181.

while marketing the hotel brand through 35 a franchise agreement. “2014 Hotel Management Survey. March 2014. third-party management companies provide daily property and operational management services as well as year-round financial and accounting support for hotel owners. Consolidation in the industry has become an effective way to grow and diversify portfolios by providing opportunities for geographic expansion and to rapidly . the presence of third-party operators is limited and transaction activity is minimal as investors favor the franchise model. Chapters 19 to 21. 36. Transactions in the US have included some of the country’s largest third-party operators. “Third Party Management Companies: Key Trends and Issues. The same trend is making its way throughout the world. foreign buyers and existing management companies are all looking to capitalize on expected industry growth — and they are increasingly investing in these in-demand third-party management companies. Third-party management companies are far more mature in the US. 37. Global hospitality insights 12 By providing a value-add strategy for companies to leverage scale and rapidly achieve growth initiatives. Investment funds. experiencing significant growth in the creation of thirdparty management companies. 35. a country that is a leader in the sector’s M&A activity. Improving hotel fundamentals globally and increased access to capital have led investors to seek out this operational expertise to maximize investment on both newly acquired and existing hotel assets. third-party management platforms have driven M&A within the hospitality industry in recent years. HVS. acquiring proven management companies that can expand is attractive because they can achieve relatively higher returns given the prevailing low cost of capital on a risk-return spectrum.com. 2008. and manage properties themselves.000 rooms. 36 which has surged in the past five years. In the Middle East and Asia.net. but on a smaller scale. however. 18 management companies each operated a portfolio of 50 or more hotels. For investors. As of year-end 2013 in the US. Hotel Investments Handbook.” Hotel Analyst. with the top 15 each managing a portfolio in excess of 37 8. while brands continue to develop and become fully integrated into the market.Seeking operational excellence: consolidation of third-party management companies Prominent in North American lodging markets. 22 January 2014. Europe and Latin America are estimated to be 5 to 10 years behind the US in terms of transaction activity in the sector but are.” hotelmanagement.

accessed 13 October 2014. Investors are finding opportunities to enhance bottom-line performance by gaining expanded market penetration and operational strength. 38. “Third Party Management Continues Consolidation. as well as buying power for various operating systems to better 38 compete in the market. reservations. Investors. gain quicker access across borders. The asset-light strategy allows management companies to enter and exit markets with less risk and more flexibility and to achieve increasing returns with each new contract due to economies of scale. August 2014. which will lead to an active trading environment in the sector in 2015 and likely beyond. oftentimes with local management expertise. 40. which can significantly improve market share and economies of scale. Capital partnerships often provide opportunities to leverage resources that would not otherwise be at the company’s disposal. www. Key drivers in recent transactions have illustrated that investors particularly value operationally sound third-party management companies with established infrastructure. the increasingly competitive environment in the sector has made management companies more inclined to offer key money 39 or sliver equity in order to secure new contracts.” HVS. particularly in emerging markets. In addition. sales and revenue management.penetrate markets that align with strategic initiatives. Third-party management consolidation also continues to support the hospitality industry’s strategy toward an asset-light model. therefore. “Hotel Management Companies and Equity Contributions: Benefits and Risks.hotelmanagement. Management companies are also using outside investment as an alternative means to finance strategic growth initiatives. “Interstate Maintains Strong Growth Here and Abroad.net/operator-owner/interstate-maintains-strong-growth-here-andabroad-29159. 39. which also can provide access to prospective transactions and significantly increase deal flow. procurement. 30 July 2014. which can bring them access to new deals and lucrative operating platforms. investment firms are specifically targeting companies with strong relationships and experience within the real estate and hospitality industries. and other technology systems. Market indicators point to robust transaction activity in the sector through 2015 and onward. the demand for capital partnerships is expected to continue to grow. With equity participation anticipated to continue in coming years.” Hotel Management. The US is expected to remain the leader in M&A activity as the third-party operator model continues to mature throughout other parts of the world. By constructing a hotel business with an asset-light structure. In addition. Consolidation provides opportunities for management companies to form new relationships and create synergies in infrastructure.” Hotel Analyst. Investors and third-party managers have significant opportunities to fuel growth through consolidation. Top thoughts for 2015 13 . it allows the business to separate itself from owning the bricks and mortar of real estate while providing the brand the ability to capitalize on its 40 operating strengths.

in the US. whether traveling for business or leisure. toiletries and highquality in-room coffee machines. free Wi-Fi and iPad usage and pay-as-you-go amenities such as air conditioning. as well as markets such as Detroit. these concepts are becoming increasingly attractive to hoteliers and investors seeking to capitalize on this changing demand base while increasing investment returns. architecture and cultural elements draw greater demand. These new products and concepts often emphasize common areas. where unique atmospheres. Several of these products initially emerged in Europe and Asia. lounges and bars as the focal point of the property and invite guests to spend more time congregating in revenue-generating areas of the hotel. Los Angeles. such as large guestrooms with full furniture sets. It replaced them with more practical alternatives. pools. and they include boutique hotel components that leverage the club’s . Now. calling into question products and offerings that have for decades been industry mainstays. is more cost-conscious and experience-focused than ever before. To meet these changing demand preferences. offering no-frills accommodations and communal spaces that provided cost savings and enhanced social atmospheres. hoteliers are seeking innovative alternatives to traditional lodging products. Substantially aligned with the desires of millennials and millennial-minded travelers. Communal spaces are often intended to be inviting to guests by seamlessly blending with the lobby. the millennial generation has increasingly impacted the lodging industry. full-service restaurants. such as smaller rooms. nightclubs. and spas. daily housekeeping to hotel rooms but not to hostel rooms. as highly fragmented markets. New Orleans. Today’s emerging traveler. Miami. these concepts offer members-only facilities. Global hospitality insights 14 Historically. less stringent lodging standards and cultural preferences fostered innovation in lodging concepts. affordability and a focus on social experiences were maintained. a specialized lodging concept that has gained popularity over the last several years in the US. in turn maximizing revenue per occupied room (RevPOR) spent. grab-and-go food and beverage outlets. lifestyle budget hotel and hostel/hotel combination concepts are now becoming viable in major US and Asian markets.Lifestyle lodging products Over the past several years. Nashville and Portland. free bicycles. room service and daily housekeeping. More similar to a traditional day club than a hotel. these low-cost. these products are able to decrease costs by removing unnecessary and high-cost elements. With a focus on limited service with added conveniences. Singapore and Tokyo. the European alternative lodging industry has largely catered to students and backpackers. amenity-rich hostel. As the demand for experience-based lodging has increased. such as New York. where traditional hotel rates are prohibitively expensive. such as meeting and event spaces. millennials and millennial-minded travelers. As these new products and experiences began to evolve over the last several years. towels. food and beverage outlets. Europe and Asia is lifestyle membership clubs. while their concepts and designs focus on attracting local demand.

including Times Square in New York and South Beach in Miami. fitness. lower operating costs and management terms that are both less expensive and more flexible than traditional chain management agreements. these concepts can have lower development costs than traditional fullservice hotels. such as Berlin. As a result. hoteliers will need to balance satisfying this demand with investments in traditional products. appealing to a broad array of non-member hotel guests. sometimes with locations across various venues throughout a city. these concepts aim to produce a creative and local experience. As demand for new lodging products and experiences continues to grow. similar concepts have emerged in cities with expanding creative scenes. including annuities from membership fees and guest fees. As development costs and land prices in metropolitan cities continue to soar. hoteliers must ensure that soft costs and furniture. through efficient uses of space. With a focus on providing social interaction and workspaces for like-minded individuals. Nashville and Shanghai. academic and wellness elements. many investors and lenders consider alternative lodging products as appealing only to a specialized consumer whose preferences will ultimately change with trends. such as New York and London. With multiple components. lifestyle membership clubs benefit from diversified revenue streams. fixtures and equipment expenses are appropriately managed. Budapest.membership base as a primary demand generator. With shorter development periods. However. Despite their growing popularity. as these products typically emphasize design as a component of the hotel’s experience. and have greater flexibility to use lower-cost. Top thoughts for 2015 15 . many of these alternative lodging products have penetrated some of the most expensive and highly trafficked neighborhoods in the world. arts and cinema. Additionally. often in niche industries such as fashion. Membership clubs often feature programs and events with culinary. alternative lodging concepts have presented developers with unique opportunities to reduce costs while maintaining the ability to generate strong demand. Although these club concepts initially originated in major cities with significant artistic influences. nontraditional spaces. these products can have higher operating margins than traditional full-service properties. smaller rooms and the ability to use nontraditional spaces.

newly launched brands are targeting market opportunities at different chain scales. most are seeking to capture travelers at the middle to upper price tiers. development of new brands has been most prominent in China. Millennial travelers — those born roughly between 1980 and 2000 — and older affluent but young-minded travelers are the primary targets of today’s brand developers. market participants have now been incentivized to introduce brands within lower to middle price tiers and focus on developing lifestyle lodging offerings. however. as Dubai’s government has waived the municipality fee on each room night for three. where they have the opportunity to build long-term brand equity in a market with little existing brand loyalty. amenities and offerings that promote wholesome and healthy lifestyles. Across Asia. Accordingly. enhanced technology throughout properties. The competitive environment for new hotel brands may be better than ever thanks to technology integration within the industry. which has leveled the playing field. New entrants now coexist with long-established global players in an online world of transparent pricing. Global hospitality insights 16 Across the globe. successfully launching and positioning . As more lodging products are launched in today’s competitive global market.Critical success factors for new lodging brands The global lodging industry has experienced strong growth over the past 12 months. Alongside this paradigm shift in technology. These travelers seek experiential products and brands that reflect their personal values. In North America and Europe. laying the groundwork for an emerging trend of launching new hotel brands worldwide.and four-star hotel developments. Luxury brands have traditionally dominated the hotel landscape in Dubai. hoteliers are developing brands that cater to a new set of demographic and psychographic customer profiles. favoring hotels that feature smaller guestrooms emphasizing functional design. and affordable luxury design and service levels. new contenders must understand the most important aspects for developing. You can see a similar trend toward the middle price tier in the Middle East. New brand development is prominent across all price tiers but is slightly more concentrated in the upper level. social media marketing and digital reputations. public spaces designed to stimulate social interaction. new brands from established or newly formed companies are departing from the “home away from home” philosophy of hospitality. the integration of local cultural elements into the guest experience.

Allocating resources to understand and anticipate a target segment’s lifestyle and lodging preferences is crucial. Here are several critical success factors for growing and developing new hotel brands: • Analyze the market for opportunity gaps. A focused brand promise is key to delivering a signature guest experience. Successful brands infuse their values into each aspect of the guest stay to create a product that is perceived and valued as truly unique. You can contrast the W and Waldorf-Astoria brands.themselves for growth. • Plan the long-term execution of the brand appropriately. • Identify whether the best route to address your target customer segment is through developing a new brand or extending an existing brand. New brands are establishing themselves in increasingly niche markets. geography and market positioning. To achieve a successful brand launch in today’s environment. Brands and organizations that have an aspirational and humanistic purpose in place internally and infused in all customer touch points enjoy the benefit of having all stakeholders — from sales representatives and IT staff to C-suite executives — galvanized around the same belief. identify unfulfilled demand needs by chain scale. • Lead with a purpose-driven brand and build a culture based on your purpose. Top thoughts for 2015 17 . • Understand your target customer segments and stay relevant to them. Successful brand developers consider their development business model. including greenfield versus brownfield as well as franchising. JVs or ownership. a company can focus on greenfield to manage quality. It’s also important to identify the innovators and early adopters — your key target segments when launching a new brand or product. management contracts. but brownfield conversions — especially in Europe — will accelerate growth. brand developers need to keep pace with the trends and dynamics of the market. they buy a feeling and want to share your belief. The successful lodging brands of tomorrow will invest to understand key differentiating market and customer insights and move forward with concept and experience development today in order to stay relevant in the long term. For example. which are excellent examples of how both these routes can be used. customer preferences and insights need to be anticipated to evolve a brand ever more rapidly. • Ensure that the foundation of your differentiating concept translates into unique guest experiences. Customers do not buy a “stay”. Leveraging existing brands to address a customer niche can work to accelerate growth but is not always the appropriate choice. With technology disseminating information faster than ever before. When developing a brand.

This issue affected projects targeting both US buyers. With the global economic decline. and international buyers. who. Regardless of the physical appearance or operating structure. particularly in gateway and primary resort destinations.” In brief. particularly in the US. familiar with the concept back home. in other locations the asset resembles a typical transient lodging operation. This kind of condominium hotel features the public space. . (b) emphasis of the investment aspects of the condominium and (c) restrictions on use of the condominium (such as a mandatory rental program). and individual unit owners. many condominium hotels. This latter model became popular during the last real estate upcycle in the 2000s. mostly due to issues surrounding control. In markets where traditional construction lending was limited. In this model. however. share in the revenues and expenses associated with the rental of their units as transient lodging accommodations. condominium hotels are often considered attractive to developers. Lodging operators benefited Global hospitality insights 18 from new inventory under management and potentially earning a licensing fee on the sale of the units. the ownership structure is divided between a hotel lot owner. Condominium hotels vary in structure and operation throughout the globe. has addressed the issue of when the sale of condominium units constitutes the sale of a “security. combined with an updated regulatory framework is causing a resurgence of interest in condominium hotels.Condominium hotels — lessons learned Improvement in the global secondhome and overall lodging markets. amenities and level of finishes consistent with a hotel operated by the affiliated brand. the SEC’s guidance prohibits (a) the pooling of income. in a 1973 release (SEC Release 335347) and in subsequent no-action letters. the presale of units had allowed developers to obtain construction financing. offering large units with kitchen facilities and little public space beyond a reception area. While in most locations they physically resemble a condominium development. At the core of the complexity has been the applicability of securities laws to the offering of condominium hotel units. The US Securities and Exchange Commission (SEC). lodging operators and unit owners alike. Unit owners often purchased units assuming that values would continue to appreciate and that the income generated from their revenue split would cover their costs of ownership. who owns the building’s public spaces and ancillary revenue-generating facilities. income allocation and securities issues. have faced litigation. restructuring or bankruptcy. faced additional complexity and risk. particularly those located in the US. aligning themselves with a hotel operator to gain pricing premiums on unit sales. if participating in an available rental program. a major source of global investment in second-home real estate. who.

disclosed and documented. led some projects to fail. owners frequently rented their units outside the hotel operator’s voluntary program. and a resurgent global economy and real estate market. with the unit guest unable to access the hotel operator’s services and amenities. Buyers. Income and expenses were individually allocated to unit owners whose unit participated in the rental program. They offered optional rental programs. condominium hotels can be mutually beneficial for all parties when interests are aligned and the details are carefully thought through. These new provisions serve to provide more information to the buyer. the Jumpstart Our Business Startups (JOBS) Act contained provisions that are being applied to condominium hotels and serve to bring the structure more closely aligned with other global markets. often overestimated occupancy and rate assumptions. While many questions remain regarding compliance with rules concerning securities sales. or targeted non-US buyers. This. Given the high prices paid for highly amenitized units during this era. the unit purchaser. by splitting revenue. accounting for each unit’s income and expenses separately. mandate participation in a rental pool and provide greater information that may emphasize economic benefits. the new Rule 506(c) allows for greater general solicitation and advertising as long as buyers are accredited investors. If a condominium hotel is under the new rule. who were except from such regulations. the revenue that a given unit could produce often calculated negative returns. not having been provided forward-looking income estimates. Unit owners blamed the hotel brands and the developer for lack of financial returns despite often being in markets in which hotel performance may not have been feasible given the prices paid per unit. in the US. and carefully balancing rotation of units among developer and unit owner inventory. For example. Given that the rental program participation could not be mandated. revenue and expense allocations may have made sense to the operator and developer but often did not sit well with unit owners. also were required to address frequent unit owner calls for explanations. Further.Most developers sought to avoid the costly and impractical registration process and set up procedures to avoid having to register. struggling with managing inventory around owner usage and varying rental program participation. for example). a developer could then pool revenues and expenses. This complexity was further exacerbated by the deal being put together prior to unit owners being involved. The impact of avoiding SEC registration produced relatively uninformed purchase decisions by the primary contributor of capital to the project. These issues. Operators. many globally recognized lodging operators are weighing the pros and cons of managing condominium hotels and/or have developed procedures to control risk (requiring a certain percentage of units to be dedicated hotel inventory. the hotel operation often struggled. avoided sharing or discussing any information related to the economics and separated the rental program and purchasing decisions. combined with a complex set of agreements that often were unclear or inconsistent with the structure. may give new hope to branded condominium hotels. Top thoughts for 2015 19 . who ended up sometimes facing higher than anticipated maintenance fees and capital expenditure requirements with lower than expected revenue. Recently. In the JOBS Act. And the global economic downturn exacerbated the situation. In the right markets.

Global hospitality insights 20 .3 million square feet of 42 office space. with new properties primarily consisting of midscale to upper-upscale and independent properties. art and music scene often attracts visitors seeking a more authentic and unique experience. As of October 2014. In 2004. with 17.378 rooms. to support and encourage the revitalization of Brooklyn. in turn.crainsnewyork. and lower levels of congestion. the Brooklyn pipeline has 27 projects totaling 2.nycedc. These once untouched and undesirable submarkets across the world are now attracting stakeholder attention. as these areas become more established. The expansion of major urban centers has resulted in higher market rents. accessed November 2014. New York. As a result. www. residential and commercial development in the borough.” New York City Economic Development Corporation. this. investors and residents began to seek out more affordable opportunities in nearby Brooklyn. Brooklyn immediately experienced a significant increase in development.6% increase in rooms from the prior year and proving that investor 41. Brooklyn’s hotel inventory has doubled. Tourists are initially attracted to these submarkets by the lower price of lodgings. the thriving food.Emerging submarkets within mature lodging markets In recent years. authentic food. www.com/article/20140715/ REAL_ESTATE/140719927/downtown-bklyn-seen-as-shiningexample. the local government rezoned several neighborhoods and invested US$400 million to promote retail. 15 July 2014. limited development opportunities and more aggressive competition. representing an 11. the number of affordable apartments has increased from zero to 41 over 400 and downtown Brooklyn is now the third-largest office district in New York City. introducing brands that complement the area and create social spaces that welcome both local residents and visitors. as evidenced by the significant public and private investment taking place in these areas. In the early 2000s. “Downtown Brooklyn. residents and developers are being priced out of the urban cores and they have been forced to look for more desirable opportunities in peripheral areas. urban revitalization and population growth in outlying areas surrounding major cities have created a wealth of opportunities outside mature lodging markets.pdf. 42. as real estate prices in Manhattan continued to increase. beverage and retail offerings. Lodging investors and brands have the opportunity to pioneer a neighborhood by entering the market in the early stages of development. has created higher barriers to entry and lower yields for investors. Since 2007. “Downtown B’klyn Seen as ‘Shining Example. the number of apartment units has tripled.’” Crain’s New York Business. Since then. One example of a submarket that has benefited from expansion and urban renewal is Brooklyn. Typical characteristics of these submarkets include easy accessibility to the urban core.com/sites/default/files/filemanager/ Services/Location_Services/Downtown_Brooklyn/CBD_1Q11_ DB. However.

Kreuzberg in Berlin. www. well above the US national average. 45. Oakland’s mayor introduced the “10K Plan.net/investment/brooklyn-lures-hotel-investors-customers-as-alternative-tomanhattan-29057. with just 94 hotels (only 14 of which are branded properties).000 residents. which is about 20 miles away. as Alternative to Manhattan. for additional opportunities.500 units. Oakland has also focused on increasing public areas. Customers. Given its location north of Silicon Valley. Lodging development in Brooklyn offers developers more affordable land prices. as prices in San Francisco continue to rise. Real Estate. professional crowd. this per-capita rate is more than 29 times higher. an increase in newer lodging brands. have exhibited similar qualities to Brooklyn and Oakland. occupancy rates in Oakland are higher than in most other California submarkets due to the extremely limited supply and high demand.org/wp-content/ uploads/2014/02/VO14008_strategic-plan_web.” SFGATE. 4 September 2014. San Francisco. It is now popular with for leisure and business travelers seeking a more authentic and local experience. as well as its authentic restaurant and bar scene. investors are looking to peripheral areas. Similar to Brooklyn. http://socialistworker. The area has only one hotel room for every 589 residents. However. including urban renewal. Oakland experienced significant development over the past decade. Oakland benefits from its proximity to a major urban city. 26 May 2013. the city has been recognized as a highly desirable travel destination by well-known publications 45 throughout the US. In 2013. “Visit Oakland 2014/15 Strategic Plan. http://abc7news. The residential population has shifted to a younger. such as Lathan Square. Oakland attracted more than 2. its status as a major hub for technology and biotech employment and that it is a gateway market to Asia. According to Visit Oakland. Brooklyn. “Oakland primed to seize on demand for hotels. Companies.” VisitOakland. particularly start-ups. 46.org. including East London.000 new residents. with occupancy and an 43 average daily rate (ADR) well above national averages.” SocialistWorker. California.org. in Manhattan. and the emergence of new submarkets across the globe. as well as favorable tax incentives. It is doing this through 15 major housing 44 development projects. has also become a tourist destination in its own right.5 46 million visitors. Brooklyn represents one of the nation’s most underserved metropolitan areas for lodging.pdf. are choosing Oakland due to the value proposition: large and more affordable office space. San Francisco has become one of the world’s most sought after markets for real estate investment. lodging offerings in Oakland are limited. Top thoughts for 2015 21 . “Brooklyn Lures Hotel Investors. 43. Oakland is experiencing revenue per available room (RevPAR) 48 growth of approximately 13%. is anticipated to expand. 2 October 2014. which now attracts millions of visitors annually. Ibid. More recently. development and urban renewal have surged in Oakland. diverse tourist and cultural attractions. the lodging need within these submarkets.com/archive/9116764.org/2014/10/02/projectgentrify-in-oakland. particularly Oakland. to support additional development and enhance the community. showing that Brooklyn needs more hotels to meet demand. Recently.” ABC7 News San Francisco. Despite this. However. over the past decade.” Hotel Management . boutique properties.” which was intended to attract 10. Trastevere in Rome and Revolucni in Prague. In the 1990s. As visitors continue to choose to stay in these peripheral areas. Other neighborhoods in cities across the world. 47. proximity to urban cores and increased public and private investment. 48.confidence in Brooklyn’s lodging market remains high. 2 October 2014. 44.hotelmanagement. As such. totaling more than 7. attributable to Oakland’s cultural diversity. http://visitoakland. accessed November 2014. “Oakland Turning Into Hot Market for Business. while San Francisco has 47 more than 200. it launched the “10K Two Plan” to attract an additional 10. Brooklyn’s hotels exhibit strong operating performance. “Project Gentrify in Oakland.

accessed October 2014. “Starwood Introduces Robotic Butlers At Aloft Hotel In Cupertino. Smartphones & Tablets Now Essential Travel Tools for U. For instance. 54. accessed October 2014. one major brand recently launched a robot butler equipped with a tablet to facilitate interaction between guests and staff. Other mobile innovations include mobile keys. www2. 87% of travelers use a smartphone and 44% use a tablet while traveling.” European Travel Commission.com/hosted/ad2187/Hospitality_ Trends_2013. Travelers.com/ cms/news/database-crm/18296. “The Future Hotel Experience.pdf. which delivers the item 52 directly to the room. “Majority of Consumers Prefer to Purchase and Reserve Hotel Services Using Mobile Devices. Global hospitality insights 22 We’ll begin with today’s traveler. accessed October 2014. and as online distribution channels become more accessible.Hotel technology 2.com/2014/08/13/ starwood-introduces-robotic-butlers-at-aloft-hotel-in-palo-alto. com/company/news-room/press-releases/2014/06/23/majorityof-consumers-prefer-to-purchase-and-reserve-hotel-services-usingmobile-devices.html. a guest may call the front desk to request a forgotten toiletry. plan and book a trip.S. social media and advanced analytics continues to proliferate. accessed October 2014. According to a 2014 US survey by USamp and Smith Micro Software. today’s hotel guest is pushing hotels for improved products and services in their travel experience. accessed October 2014.cfm?releaseid=808058. advances in data analytics are transforming the hospitality industry with the potential to enhance a hotel’s financial performance and offer detailed insight into customer preferences. hotels are rethinking all aspects of the hotel experience. In Silicon Valley. “Conrad Hotels empowers travelers with end-to-end mobile customer experience. with a focus on accommodating these devices in guestrooms. one international hotel brand has taken a more proactive approach by partnering with a leading engineering and technology university to redesign the future hotel experience and find innovative ways of making public areas more exciting. accessed August 2014. hotel reviews that feature video instead of just text will place even more emphasis on hotel reputation and performance. 52. 50. are expected to revolutionize the way customers access the web and contribute personal content. “Mobile/Smartphones.” TripAdvisor.” Smith Micro. Empowered with more knowledge and social media.tripadvisor. As such. http:// etc-digital. Moreover. http://techcrunch.” Smart Brief. hotel companies are turning to products and applications that empower guests to browse inventory.” MIT Mobile Experience Laboratory. the hotel staff then inputs the guest’s room number into the robot’s tablet interface and places the toiletry on the robot.org/digital-trends/mobile-devices/mobile-smartphones/ regional-overview/north-america/. As such. www. check-in kiosks and mobile-enabled property management systems.smithmicro. For example. redefining how they research. “10 Hospitality Technology Trends You Need To Know About. accessed October 2014.mobilemarketer. 49. meeting 50 spaces. . “Social Media. 51.mit.” TechCrunch.” Mobile Marketer. lobbies and front desks. From an ownership standpoint.edu/projects/the-future-hotelexperience. technology has created new opportunities for hotels to drive operating efficiencies and engage with guests. book amenities. According to a 2013 global survey by TripAdvisor. allowing hotel employees to interact more with guests.com/ releasedetail. Userfriendly and powerful smartphones and tablets are changing travelers’ online preferences and habits. from booking to 49 checkout. 53.0 New advances in technology continue to alter the relationship between hotels and guests.smartbrief. complete reservations and purchase a variety of services (such as room service) via mobile devices to drive engagement and increase revenue-generating 54 opportunities. such as smart watches and glasses. http://mobile. recent advances in wearable technology. As the use of mobile devices. user-friendly and relevant to the technology 51 needs of today’s traveler. more than 60% of travelers prefer to purchase and reserve hotel guest services using mobile devices 53 rather than face-to-face with hotel staff. For example. http://ir. www.

com/2013/02/19/business/ hotels-carve-out-work-spaces-rented-hourly. “Internet Travel Hotel Booking Statistics.statisticbrain. as travelers are increasingly looking online to book hotel rooms and customer acquisition costs continue to rise.hotelnewsnow. “Hotel chain utilizes new digital advertising platform to great success. On the other hand. online travel agents (OTAs) are providing additional services to encourage hoteliers to 57 distribute rooms on their sites. com/2014/01/13/hotel-chain-utilises-new-digital-advertising-platform-to-great-success. www. one international hotel company reported an impressive ROAS increase of approximately 2. www. accessed October 2014.From an ownership standpoint.” The New York Times. According to 2014 research by eTrack.hotelschool. Through acquisitions of property management and digital marketing platforms. 56. mobile and analytics to drive business improvements. accessed October 2014. In 2014. http://techcrunch. accessed October 2014. At the same time. 58. 62. amadeus. Leading hotel companies are also leveraging advances in data analytics and artificial intelligence (AI) technologies to increase online reservations.cornell. “Major global study reveals how big data will transform the hospitality industry. hotel brands seek to drive bookings to their own proprietary websites by leveraging the power of loyalty programs and streamlining the booking experience.com/internet-travelhotel-booking-statistics. www.” TechCrunch. by the Hour. 55.100% by deploying a new online advertising platform. enhance hotel guests’ experiences and deliver results. 62 including the hotel’s website activity or weather conditions. while internet travel booking 55 revenue has grown by more than 73% over the past five years.com. AI technologies utilize powerful algorithms to determine the most appropriate media to focus advertising spend. improve the return on advertising spend (ROAS). new technology has also impacted how guests are acquired in the discovery and booking phases. “5 Tech Trends That Will Shape Hospitality.html. accessed October 2014. which combined data 61 analytics with AI technologies. 57.edu/research/chr/pubs/reports/ abstract-13606. www.com/hotels/newsrepository/articles/major-global-study-reveals-how-big-data-will-transformhospitality-industry. “Hospitality Asset Managers Association (HAMA) Study Documents Growing Revenue Acquisition Costs Outpacing Hotel Revenue Growth. accessed October 2014.com/2014/07/09/duetto. Top thoughts for 2015 23 .dotrising. Other big data and AI applications focus on enhancing a hotel’s revenue management system by dynamically changing room rates based on a number of changing variables.org/ news/154000320/4066627. “Evolution in Electronic Distribution: Effects on Hotels and Intermediaries.” HospitalityNet. Other innovative online reservation platforms can also provide hotels with a source of additional revenue by allowing non-hotel guests to book meeting space on an 59 hourly basis.html.” Cornell University School of Hotel Administration.” Hotel News Now.” Statistic Brain. eMarketer and Alexa. 60. accessed October 2014. the competition to gain control of the distribution 56 channel has intensified. In 2014. www.com/ article/14016/5-tech-trends-that-will-shape-hospitality. better understand guest preferences and build stronger 60 customer relationships. a major international hotel company stated that it booked over 50% of its reservations through its direct central reservations system due 58 to its strong rewards program.html.nytimes. “Duetto Raises $21M Led By Accel To Equip Hotels With Big Data Surge Pricing. “Office Space. 59.hospitalitynet. www. A hotelier’s ability to keep up with rapid technology changes and embrace the latest technology tools will differentiate successful hotel organizations going forward. accessed October 2014. 61.Rising. accessed October 2014. 57% of all travel reservations are taking place online. www.” .” Amadeus. Hotels must holistically embrace social.

while creating a competitive and transparent investment process. a more public-private trend has emerged — yielding more nimble organizations that use a business model similar to that of a private business. Effective DMOs often include leadership. or enhanced existing.org/~/media/files/reports/ economic%20impact%20research/regional%20reports/world2014. both supported by teams of analysts. Global hospitality insights 24 Competitive destinations across the globe have recognized the value in tourism and developed new. By reducing uncertainty. often as a division within the tourism or economic development ministry or department. these teams create the foundation for the rest of the DMO to promote and market the destination. traverse bureaucracy.” UN World Tourism Organization. tourism. Whether a hotel development. www. reaching 63 1. accessed November 2014. http://mkt. “Tourism highlights: 2014 edition. For investors unfamiliar with specific destinations. efficiencies and flexibility to dealmaking. This is a strategic shift that aims to drive local and foreign investment into the destination to improve both the product offering and visitor experience.Investment promotion agencies — catalysts for tourism investment Over the last decade.org/publication/unwto-tourismhighlights-2014-edition. Recently. The investment division of the DMO. in addition to identifying potential investment trends and tourism investment opportunities.wttc. has evolved into a key economic driver for many destinations. spurred by foreign direct investment. 63. DMOs and IPAs are generally organized as public entities.3% by 2024. which is producing the most effective results. IPAs effectively reduce due diligence costs. ashx. which broaden the pool of potential investors. there is tremendous future potential: international tourist arrivals worldwide are projected to increase about 70% between 2013 and 2030.5% of the worldwide GDP and is projected to 64 increase to 10. Tourism currently accounts for nearly 9. development and acquisitions. golf course or tourism infrastructure. The most effective IPAs act as an “investment concierge” – entities that help foreign investors navigate local rules and regulations.8 billion. the IPA takes a multi-dimensional view on the best channels for increasing tourism — matching the most suitable investors with tourism needs. however. including in emerging economies. and consequently spurring investment and development. destination management organizations (DMOs) to include investment promotion agencies (IPAs) or divisions. the IPA. 64. Additional responsibilities . promoting income growth and job creation in local economies. where growth has shifted away from goods and products toward services. is responsible for developing and maintaining strong working relationships with current and prospective capital partners. while reducing political whims in the process. with tourism and hospitality accounting for a significant portion. access market data and research and assist with investment opportunity identification. The hospitality and tourism sectors have emerged as key value drivers and differentiators in a competitive economy.unwto. “Travel & Tourism Economic Impact 2014: World. accessed November 2014.” World Travel & Tourism Council. This structure also enhances their ability to attract and retain highly qualified real estate and hospitality professionals with track records in finance. The public-private structure has proven to add technical investment expertise. While global tourism has grown rapidly. such as chief investment officers and investment managers.

coordinating with government entities to increase access to investment opportunities within the destination and developing and implementing the overall investment strategy to increase the attractiveness of the destination from an investment and tourism perspective. Profit repatriation benefits and residence work permits for key investors and development staff are among some of the incentives used. IPAs measure their performance by assessing the changes in three key metrics. much-needed development is taking place on new hotels and mixed-use resort projects in the Caribbean using commercial immigration to attract investors. with responsive IPA staff filling requests for it as needed. room supply pipeline. With the cooperation and support of public offices. it is not enough to just show promise — to capitalize on the global expansion of hospitality and tourism markets and attract investors. are prime examples of aligned public and private interest with positive economic benefit. Currently. The role of government as a partner is critical to the success of an IPA. equity contributions or guarantees — serves as an indication of confidence in local investments and its commitment to the success of the tourism value chain. the US EB-5 program). such as commercial immigration (e.. tourism expenditure and tourism sentiment over time. Key performance indicators are essential for IPA teams tracking the effectiveness and success of the investment plan. including international and domestic visitation. marketing promotions and tourism job creation. Moreover. well-structured IPAs have proven to be crucial.g. Thanks to their transparency and responsiveness. Government involvement — via debt. IPAs can benchmark their progress in other areas by setting strategic goals such as the amount of capital funds raised. This data includes hotel performance metrics by chain segment. Leading IPAs work with governments to draft incentive and concession legislation to induce capital investment. construction costs. The most effective IPAs have the proper systems and people in place to collect qualitative and quantitative data needed for foreign direct investment. The data should be accessible and accurate to provide real added value for investors. zoning and permitting information and an overview of available investment opportunities. Top thoughts for 2015 25 . while reducing investor risk. macroeconomic data. IPAs have recognized that reliable business intelligence and local data are crucial for attracting foreign investors. For a destination. government-sponsored investment programs. IPAs have the ability to incentivize investors through a variety of channels. they have reduced hesitation in the capital markets and shown that tourism is an important economic differentiator.include evaluating risk and return metrics for competing investment opportunities. investor sentiment. Governments with investment arms that can provide transparency and one-stop facilitation and that can deploy public capital have increased confidence among private investors. which in turn leads to economic development and job opportunities.

nytimes. www. http://dealbook. changing consumer preferences. www. which connect passengers with private drivers. creating customer loyalty and managing feedback. 67. The leading companies in this new sharing economy market have initially been focused on the transportation sector. 65 publicly traded companies. price point and facility and amenity package. In a year. lodging platforms under the sharing economy model typically provide non-standardized products. In comparison. Not only are their valuations making headlines. connecting travelers with home or apartment owners and matching part-time cooks with adventurous eaters. Airbnb. accessed 16 October 2014. which. 66. Most established lodging brands are intentionally standardized. have segmented their products based on different consumer preferences into various brands. design. as some have reached valuations on par with well-established. for example. on the other hand. lesstraditional experience. For example.Mutual learning opportunities: the sharing economy and the lodging industry The sharing economy has cast consumers as service providers. each associated with a differentiated product type. “A Disruptive Cab Ride to Riches: The Uber Payoff. Global hospitality insights 26 while increasing overall confidence in the experience. which can vary widely in physical attributes. As shared economy concepts continue to grow their footprint in the hospitality and leisure sector. business travelers seek certainty.html. Hotel companies. Uber. enabling consumers to make their lodging choices faster and with a greater degree of confidence.com/sites/aswathdamodaran/2014/06/10/adisruptive-cab-ride-to-riches-the-uber-payoff. reliability and ease when making lodging decisions. already controls about 17% of the US$100 billion global taxi/limousine 66 market. they have also made inroads into the hospitality space by. but their growth is as well.forbes.” Bloomberg TV. 23 October 2014. from a consumer’s perspective. While the numerous types of accommodations in a sharing company can be an advantage for travelers seeking a unique. “Airbnb: The Hotel Disruptor Unconstrained by Real Estate.bloomberg. this requires more initial research by the customer before making a buying decision. both the traditional lodging industry and the new-age sharing economy companies can learn from one another.” The New York Times Dealbook. The rise of many of these businesses has been impressive. added more listings to its existing inventory than the largest hotel companies introduced as 67 new units combined over the same period. attracting other specific segments of the market can be a challenge.com/video/ airbnb-the-hotel-disruptor-unconstrained-by-real-estateg34TH4zdTiiQgq1z~WLt~A. “Airbnb Weighs Employee Stock Sale at $13 Billion Valuation. accessed 18 August 2014. In addition. Some examples include segmenting customers. .” Forbes. This enhanced trust in both the product and brand enables a faster selection process for the customer. to name a few. including well-known ridesharing companies Uber and Lyft. com/2014/04/21/morning-agenda-airbnbs-10-billion-valuation. enabling underutilized assets to be operated for financial gain. quality and level of service. only in its sixth year of operation. helps set expectations for the product and services 65. a company that enables people to rent out lodging.

Top thoughts for 2015 27 . Part of the appeal of the shared economy concepts has been their ability to cater to those specific needs. it’s imperative for them to take this shift in guests’ preferences into account. it still allows the host to ultimately set the final price. The predictive pricing algorithm provides hosts with a recommended price for their listing depending on many factors. The lodging and travel sector. Given the diversity of unit locations in any particular market that companies like Airbnb offer. These programs are an especially important contributor to business-travel demand. has spent significant effort on developing a pricing model following feedback from users who faced difficulties setting the right price point for their listings. for example. The introduction of reward programs appears to be a logical next step for many of the business models in the sharing economy in order to foster and strengthen loyalty among their users.Segmentation in the shared economy is possible. UberBLACK and uberXL. Customers are increasingly seeking unique. Given the success of these programs for established hospitality companies. hotel and airline demand. www. which offer home-cooked tasting menus that could change daily in the intimate setting of the chef’s home. Traditional lodging companies control their inventory not only in terms of supply but also in terms of pricing and execution of the service. authentic experiences anchored in the destination they are visiting. This is due to the decentralized nature of most of the sharing economy models. which has adopted the use of brand categories with the introduction of uberX. accessed 7 November 2014. customers are able to have a differentiated experience by.forbes. The traditional lodging industry has taken note. Other examples include Feastly or EatWith. as we are seeing a shift toward adding lifestyle brands. While some companies in the sharing economy have started to adopt similar strategies. location.com/sites/ rameetchawla/2014/11/07/fueled-fix-how-airbnb-should-unleash-market-pricing. but it also allows the consumer to make a quicker buying decision. as they enable travelers to earn points on business trips that can then be redeemed for personal travel. including room style. the only major company in the sharing economy that has launched its own loyalty program is Uber. and even temperature changes at the destination. these programs will likely be somewhat different from the existing hotel companies’ programs based on how customers can redeem points and how the ultimate service provider gets compensated. These differentiated categories not only help segment the customers based on different product types and needs. allowing customization and incorporating authentic local offerings. as seen by Uber. pricing of other listings. Pricing may prove particularly challenging for hosts who lack the necessary experience to effectively assess the 68 market value of the service they are providing. Airbnb. number of reviews. capacity. However. staying in local neighborhoods that do not feature traditional hotel accommodations and but offer unique amenities. Hotel companies pride themselves on the strength of their reward programs to create brand affinity and loyalty and ultimately to generate revenue. 68. which originally had left pricing at the discretion of its hosts. However. a lot can be learned from them. have long seen pricing as a key success factor and developed sophisticated pricing models and revenue management tools. One of the key challenges in the sharing economy is the lack of control over inventory. “Fueled Fix: How Airbnb Should Unleash Market Pricing. seasonality. For new and existing lodging projects to succeed. most programs are still in their infancy. Loyalty programs are one significant driver of bookings for traditional hotels. property type.” Forbes. Currently. Business models in the sharing economy are commonly based on a third-party host setting the price and providing the service. particularly airlines.

” Companies in the sharing economy. However. have found an arguably better solution. which would also bring the process in-house. typically only by posting responses to the individual feedback submitted. various consumer segments and loyalty programs. provides full transparency to both users and hosts and better ensures the authenticity of the feedback. as the reviews are submitted on external sites. By hosting reviews on their own websites. companies have limited control over managing and influencing the actual content. they are able to better oversee and control content. This concept could offer traditional companies in the hospitality industry an alternative solution to the current approach of relying on thirdparty websites for publicly available customer feedback. In addition. Global hospitality insights 28 . the hospitality and leisure industry has become significantly focused on monitoring and managing reviews posted by travelers on third-party sites. both emerging and traditional hospitality platforms must adapt to changing customer preferences. which will all drive future growth. The reliance of consumers on third-party sites as part of their buying decision process appears to be continuously increasing. their process. the authenticity of the posted reviews is often put into question due to the use of “professional reviewers. In addition. Research has shown the correlation between the relative quality of reviews and the demand for a particular property or establishment. which in most cases allows only one review per service experience. Looking ahead. on the other hand.These days. Companies in both groups have the opportunity to learn from each other by studying each other’s best practices and strategies to enhance their own business models.

Top thoughts for 2015 29 .

whether through publicly held REITs traded on exchanges or through private REITs. will remain top of mind for industry participants looking to invest in the hospitality sector globally. certain tax issues must be carefully evaluated as an integral part of a company’s overall investment strategy. This year. As countries are regularly revising Global hospitality insights 30 and updating applicable tax laws to remain competitive in the global marketplace. with more than 30 countries having now enacted some version of REITlike structures. which incorporate multijurisdictional tax analysis. they must also properly manage cross-border tax implications that could adversely affect profitability.Global tax considerations As lodging players look to 2015. whether it be owning lodging facilities. As observed over the past year. The strategic use of REIT structures to hold lodging assets across the globe will continue to gain investor attention in 2015. tax advisors can no longer focus on one tax regime when structuring hospitality investments and operations. Another prominent trend that will remain important in the lodging sector in 2015 is the separation of operations and property ownership. operating them or maximizing the values of brands and other . significant cross-border capital flows will continue to draw focus from a tax standpoint. several key tax considerations. Global REITs will gain even more traction. including the continued growth and sophistication of cross-border hospitality investments. are ongoing management tools that allow “what if” scenarios at any point in the investment cycle. where the investment vehicle is located and where the capital is deployed. Instead. the wave of countries adopting REIT structures keeps growing. As new markets gain momentum. In response. The deployment of capital by sovereign wealth funds and other global institutional investors will require careful consideration of tax regimes and withholding requirements in traditional markets. commonly known as Opco/ Propco structures. These models. fueling cross-border capital flows. the acceleration of the use of Opco/Propco structures and spin-offs. Given the heightened tax scrutiny that investor groups are now subject to. Opco/Propco structures involve the separation of the real estate into one company and operating assets into another company. sometimes referred to as baby REITs. as well as emerging ones. tax advisors must continually review the investment structures being utilized. tax advisors are now called on to develop robust tax models that project capital flows and the related tax consequences throughout the life of the investment. with new alliances and joint ventures formed. The structure allows for organizations to identify and focus on one core business. which may own only a single property. escalating tax enforcement initiatives and an increasing number of indirect taxes. During 2015. as structures that may have been optimal in the recent past may no longer be the most tax-efficient structure. advisors must carefully consider the tax consequences of where the capital originates.

many lodging companies have increased their focus on transfer pricing. The lease structure of the Opco often includes both a fixed base component as well as a contingent or participating rent component based on the gross revenues of the Opco. going forward indirect taxes will present a meaningful cost for the lodging sector. as well as cost allocations. advisors must evaluate if the spun-off entity qualifies for tax-free treatment. lodging REITs may still consider taxable spin-offs in an effort to segregate their property types and gain efficiencies. such as transfer taxes. Tax advisors have sometimes found that even intercompany transactions may generate unexpected tax liabilities. For instance. If properly structured. are at “arm’s length” and compliant with the relevant tax regimes. will be increasing burdens for hospitality companies. and in turn. For example.intellectual properties. Thus. or whether the creation of the Opco/Propco structure qualifies as a taxable transaction for the company. indirect taxes. full-service properties. as well as analysis of indirect taxes. the Propco will then lease the property to the Opco. but to also proactively manage them. A thorough analysis of potential taxable gains. Having gained considerable recognition in recent years. in 2015. such as transfer and property taxes. Over time. investors will want to review applicable indirect tax implications before initiating new structures or activities. both globally and domestically. which operates the lodging asset. as the Opcos and Propcos attract dedicated investors into one company or the other. initially creating “brother-sister” companies. However. it may be possible to execute a tax-free spin-off to separate the property classes. lodging companies are now using spin-offs to strategically segregate their portfolios. even if a tax-free spin-off is not a viable option. the lodging sector will continue to witness spin-offs among major industry players. as governments across the globe carry on with introducing and expanding indirect tax obligations to raise revenue. Before creating the Opco/Propco structure. causing hospitality companies to prioritize the tracking and monitoring of global tax compliance issues and related tax controversy matters. Finally. Companies must ensure that the “transfer pricing” of their intercompany transactions. Global tax enforcement will go on evolving and expanding in 2015. Many Opco/Propco structures utilize REITs to serve as the Propco. property taxes and value-added taxes (VAT). While indirect taxes may not have been as much of a material burden for companies in the past. The creation of an Opco/Propco structure is often accomplished through a spin-off of one company to the shareholders of the previously combined enterprise. similar to the Opco/Propco separation. the shareholders. a leading practice among successful hospitality companies is to maintain a realtime dashboard that monitors global tax filings and alerts them to upcoming filing deadlines and other critical tax milestones. Many companies are turning to electronic platforms to not only identify and monitor global tax risks. In addition. some hospitality players have segregated their limitedservice properties into a separate entity from their portfolio of larger. and new indirect “change of control” transfer taxes — triggered when subtle ownership changes are made at the parent company level — can be a burden. is necessary to make an decision about whether to convert to an Opco/Propco structure. the overlapping ownership subsides. Top thoughts for 2015 31 . This segregation can be accomplished via a spin-off. In addition to Opco/Propco separations.

the management agreement must be analyzed to determine if the stipulations represent performance obligations. 70. Global hospitality insights 32 The standard uses a five-step model to outline the principles an entity must apply to measure and recognize revenue and related cash flows from contracts with customers. The standard will supersede nearly all revenue recognition guidance in US generally accepted accounting principles (GAAP) and IFRS. For example. Contracts with Customers. Under the new revenue recognition rule. a percentage of hotel revenues) or incentives that are earned when certain performance thresholds are met.. Contracts with Customers. Specific contractual obligations may include arranging services for hotel guests. When applying this model. or when bundled with other promises in the arrangement. Areas needing increased judgment may include identifying the performance obligations (i. Substantial judgment will be necessary to determine which of these stipulations individually. The model’s core principle is that an entity will recognize revenue at an amount that reflects the consideration to which it expects to be entitled in exchange for transferring goods or services to a customer. providing revenue management and accounting services. hospitality companies around the globe will need to re-evaluate their policies and practices for recognizing revenue for arrangements associated with owned. Variable consideration may include amounts that are earned based on the underlying performance of the property (e. making estimates of the amount of variable consideration to include in the transaction price and determining how the transaction price should be allocated to each performance obligation. The IASB standard uses “highly probable. the transaction price is determined. a hotel management company offers services to hoteliers governed by the stipulations of a hotel management contract. The FASB issued the new revenue standard in Accounting Standards Update 2014-09. the Boards). Revenue from Contracts with Customers. as a result.e. granting the right to use intellectual property and trademarks and performing marketing activities. The transaction price includes an entity’s estimates of variable consideration that it may be entitled to 70 from the arrangement when it is probable that a significant reversal of revenue will not occur in a future period.g. hospitality companies must use greater judgment and make more estimates than they currently do under today’s guidance. which allows for revenue recognition only when amounts are fixed and determinable. promises to transfer distinct goods or services to a customer) in the contract. The IASB issued the new revenue standard in IFRS 15..” This differs from current guidance. 69.” which has the same meaning as “probable” in US GAAP. employing hotel personnel. The guidance will be codified in Accounting Standards Codification 606. After performance obligations are identified in an arrangement. .Changes in financial reporting: the new revenue recognition standard The way that hospitality companies recognize revenue will soon change after the long-awaited revenue recognition standard is issued by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) 69 (collectively. represent performance obligations. The standard refers to this threshold as a “constraint. managed and franchised properties.

variable consideration may be allocated to a distinct service in a series of distinct services (e. Top thoughts for 2015 33 . companies must allocate the transaction price to each performance obligation. when real estate is sold and a management or franchise agreement is retained.. however. the management services performed in the second month of a oneyear contract).Once the performance obligations are identified and the transaction price is determined.. meaning it is applied only to the most current period presented in the financial statements. Revenue for each performance obligation is then recognized when the performance obligation has been satisfied. and the accounting for customer loyalty points programs. whether reimbursements received for payroll and other costs incurred should be presented on a gross or net basis. or “modified retrospective” adoption. use of brand names and trademarks) that differs from the general model described above. Other considerations that hospitality entities will need to evaluate include how to recognize amounts paid to real estate owners to secure management or franchise contracts. and that revenue (i. while nonpublic companies applying US GAAP may elect to adopt the standard at the same time as public companies. Under the new standard. which is when the good or service has been transferred to the customer. Early adoption is allowed under IFRS. Accounting Standards Codification 360-20. The standard generally requires that entities allocate the transaction price to the performance obligations in proportion to their stand-alone selling prices. including real estate properties. Real Estate Sales. the restrictive recognition criteria that must be applied to real estate sale transactions often delays the recognition of a sale and/or results in a deferral of the associated gain on sale. it is more likely that the transaction will qualify for sale recognition. Under this specific guidance. Most public entities will adopt the standard in 2017. hospitality companies would not be required to include in the transaction price amounts expected to be received in exchange for distinct licenses of intellectual property until the subsequent sales occur.g. while most private entities will adopt it the following year. in certain circumstances. The new revenue recognition standard also provides specific guidance for recognizing revenue from sales-based royalties earned in exchange for granting distinct licenses of intellectual property (e. public companies that report under US GAAP are not permitted to early adopt. In comparison.. 71. under current 71 guidance. but other disclosures are required. royalties from such arrangements are not recognized as revenue before the subsequent sales occur. However. As a result. meaning it is applied to all periods presented in the financial statements. also may change in certain circumstances. gain on sale) will be recognized sooner than it is under today’s accounting. The standard allows for either “full retrospective” adoption.e. The accounting for gains and losses on the sale of certain nonfinancial assets.g.

Companies with more work in front of them will need to move at a faster pace and may need to consider adding resources. In addition to their internal preparations.g. it may appear that there is ample time to prepare for adoption of the new guidance. audit committees. In addition. While some companies may be able to implement the standard with limited effort. But companies should begin working with auditors and other advisors to evaluate their existing revenue arrangements and address interpretation and application issues. many companies will find implementation to be a significant undertaking. hospitality companies should monitor the discussions of the hospitality industry task force that was formed by the American Institute of Certified Public Accountants (AICPA) to discuss the standard’s application to common industry transactions..With over two years until the effective date. They also may want to monitor the discussions of the Joint Transition Resource Group for Revenue Recognition (TRG) established by the Boards to help them determine whether additional guidance or clarification is needed. consideration should be given to whether any changes are needed in internal control over financial reporting. Early communication with key stakeholders (e. investors) will be important if a company anticipates significant changes in the timing and presentation of revenues. An early assessment is vital to managing implementation. Global hospitality insights 34 .

Top thoughts for 2015 35 .

com.com Michael Fishbin Global Hospitality & Leisure Leader New York + 1 212 773 4906 michael. Ultimately it enables us to help you meet your goals and compete more effectively.com/hospitality .com Africa Ebrahim Dhorat Johannesburg + 27 11 772 3518 ebrahim. Hospitality & Construction Leader New York + 1 212 773 4910 howard. Hospitality & Construction (RHC) Center brings together a worldwide team of professionals to help you succeed — a team with deep technical experience in providing assurance. EY refers to the global organization.or. In so doing. The Center works to anticipate market trends.com Mark Lunt US Southeast. transaction and advisory services.vrooman@ca.ey. Please refer to your advisors for specific advice. tax.shewring@au. identify the implications and develop points of view on relevant sector issues.ey.ey.ey.com Harvey Coe Lead Advisory/M&A Hong Kong + 852 2846 9833 harvey.burstedt@es.dhorat@za. each of which is a separate legal entity.ey. EYG no.tress@ey.com Helena Burstedt Madrid + 34 91 572 50 26 helena. a UK company limited by guarantee.com Christian Mole London + 44 207 951 3034 cmole@uk. All Rights Reserved. Hospitality & Construction Tokyo + 81 3 3503 1885 sinkuler-rchrd@shinnihon.com Mark Vrooman Toronto + 1 416 943 3954 mark. tax.jp Europe Cameron Cartmell European Hospitality Leader London + 44 207 951 5942 ccartmell@uk.com Asia Jeff Green Hong Kong + 852 2849 9431 jeffrey. DF0196 CSG/GSC2014/1510181 ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting. Hospitality & Construction Center Today’s real estate sector must adopt new approaches to address regulatory requirements and financial risks. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over.karnik@in. of the member firms of Ernst & Young Global Limited.ey. or other professional advice.ey.ey. Ernst & Young Global Limited.wahbah@ae.ey.com Americas Troy Jones US West Transaction Real Estate Sector Leader Los Angeles + 1 213 977 3338 troy. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. does not provide services to clients.arkhangelskaya@ru. ey. transaction and advisory services. please visit ey.green@hk.coe@hk.com Nam Quach Lead Advisory Leisure Leader London + 44 20 7760 9264 nquach@uk.ey.com Middle East Yousef Wahbah Dubai + 971 4 312 9113 yousef.ey. while meeting the challenges of expanding globally and achieving sustainable growth. Latin America and Caribbean Hospitality Leader Miami + 1 305 415 1673 mark.com Russia and CIS Olga Arkhangelskaya Moscow + 7 495 755 9854 olga. © 2015 EYGM Limited. About EY’s Global Real Estate. tax.com Brian Tress US Northeast and Mid-Atlantic Hospitality Leader New York + 1 212 773 8359 brian.roth@ey.jones@ey.Contacts EY | Assurance | Tax | Transactions | Advisory Global India Howard Roth Global Real Estate. Real Estate. EY’s Global Real Estate.lunt@ey.com Oceania David Shewring Melbourne + 61 3 8650 7696 david.com Gaurav Karnik Gurgaon + 91 124 671 4032 gaurav. we play a critical role in building a better working world for our people. for our clients and for our communities.com About EY EY is a global leader in assurance.com Rick Sinkuler Japan Markets Leader. and may refer to one or more.ey. For more information about our organization.fishbin@ey.