Small is beautiful

Sometimes the noise of large-volume operations and the race to announce the next largest transaction can become a distraction from the fundamental financial objectives that our clients and partners have. 

Only when we take the deliberate decision to focus on those opportunities that 90% of our competitors are not pursuing, we start discovering and seeing things that we were not able to appreciate before. They were there. We just were not paying attention.

Every day, fantastic hotel managers achieve superior returns in the market in properties that are, day in and day out, being ignored by the mass volume approach that most investors are taking to hotel asset analysis. One can also discover excellent project opportunities, in locations where there is no hotel track record, or transactions that at first glance seem impossible to execute.

If it doesn’t fit the cookie-cutter guidelines of a large hotel brand (with heavy overheads that need to be allocated to the deal), a business opportunity could be neglected over and over again. If the deal is too small in room count or in equity size, it is usually discarded right away. Never mind that the property is outperforming a better-located competitive set.

Likewise, if there is no track record in the destination, even if the site is in the very center of the city, maybe it is because that location was never meant to have a hotel in the first place (who can deny the logic of this overwhelming argument?).

If the right price for the asset is below the debt value that the bank is willing to accept, the transaction is not viable and was never meant to happen (this is when the buyer discovers he can buy a hotel and actually get paid in the process).

Aren’t we forgetting what hospitality is about? Superior service, true luxury, exquisite attention to detail, exceeding customer expectations, outperforming larger properties. All these concepts seem completely secondary most of the time. The same seems to happen when we prefer not to take calculated risks or to innovate. Is being second to market interesting at all?

Great to see that, from time to time, a different breed of investors and operators is also looking where the majority of the market is not.