Lodging is the most management-intensive segment of the commercial real estate industry. And while location and financial structure are critical, operating performance may be the primary driver of value in a hotel investment. So when a property becomes distressed or goes into default or bankruptcy, it’s crucial that competent, experienced and honest management be able to step in quickly to stabilize the situation.
“Our role is to at least maintain the value of the property,” says Bill Hoffman, president and CEO of Trigild, a San Diego-based specialist in distressed-property management and receivership. “Some companies, particularly newcomers to this business, talk about achieving a turnaround, but that’s very rare. It’s not very often we get involved in a hotel that’s been so horribly mismanaged that we get an opportunity to make dramatic improvements.”
The management company’s role depends, in part, on the nature of the assignment. “In a receivership or deed in lieu of foreclosure, we tend to be babysitters,” says Kirby Payne, president of Rhode Island-based HVS Hotel Management, “but in a distressed property assignment, our additional goals are to drive revenues and to straighten out any financial management problems.”
Morris Lasky, the so-called hotel doctor, has a bolder viewpoint. For Lasky, president of Chicago-based Lodging Unlimited, it’s not worth taking an assignment to be just a caretaker. “If we feel we can’t make an improvement to the property, we don’t want to get involved,” he says. “We always take a proactive approach as though we own the hotel ourselves.”