How to use review analytics when buying a hotel for due diligence and deal negotiation
“In minutes, I have more business intelligence and competitive benchmarking at my fingertips than I could get in a week with a mystery shopping service.” – (A ReviewPro Hotel Analysis Report client)
In my last article, we noted how online guest review data is revolutionizing hotel investment. To the point where, at a recent leading brand conference, the chairman of several REITs said he never approves a hotel transaction before analyzing online guest feedback.
Review analytics provide insight hotel buyers can’t afford to miss, and are becoming a vital part of the due diligence process
David Fenton of RBS declared the outlook for global hotel industry “second to none for next 20 years” at this month’s IHIF conference in Berlin. And with the hotel industry riding all-time highs, transactions are also moving towards record highs with an expectation to grow.
Higher deal volume and higher stakes means today’s hotel investor must be smarter and faster than ever before. There’s increasing need for better business analysis and market intelligence – guidance on how well a hotel has served its guests and how that reputation will affect future financial performance.
The good news? The communication evolution of the past 5 years – where travelers are now leaving 24/7 digital data trails wherever they go – provides more intelligence than ever before. When processed correctly, online review data provides an indispensable addition to the due diligence and underwriting processes when buying a hotel: thousands of guests are giving you candid feedback on what they like and dislike about it.
This gives you, as a buyer, an information advantage.
Review analytics provide fast, reliable business intelligence and competitive benchmarking at your fingertips
Meta-review summaries, like the ones presented in ReviewPro’s Hotel Analysis Reports – provide information that is:
- Fast – “In minutes, I have more business intelligence and competitive benchmarking at my fingertips than I could get in a week with a mystery shopping service,” as one of our clients – a senior private equity executive – told us. Reducing initial reliance on property visits can speed up the deal analysis process.
- Detailed – Without the constraints of traditional feedback collection, guests talk about anything they want – which tends to yield a deep and diverse range of insights about everything from the guest reception process to the hallway carpets to the linens on the bed.
- Reliable – ReviewPro Hotel Analysis Reports synthesize years of guest feedback from hundreds of sources worldwide to provide statistically significant data used daily by thousands of hoteliers worldwide, and referenced in publications such as The Financial Times and The Economist.
Review analytics provide insight into both the service operation and the real estate asset
Sometimes, decisions can be made on which brand to use – or what type of investment will be required to turn a hotel around.
Review analytics help differentiate guest satisfaction with staff service from feedback on the hotel building itself.
We had this issue come up recently, where one of our clients – a large asset manager – was looking at acquiring a number of limited service branded hotels. The underlying real estate was great – but the operation wasn’t spinning off the profits that it could. Turns out, a quick competitive check showed they just needed minor investment into adding some low-cost amenities and changing a few things in the service operation to improve the hotels’ reputation, increase sales demand and financial results – and make this a profitable deal.
Review analytics can provide leverage at the negotiating table
Knowledge is power.
And knowledge to negotiate when tens of millions are on the table is even more powerful.
Review analytics summaries are all about answering crucial questions, such as: What additional information from guest feedback trends will give us negotiating leverage in this transaction? What capital expenditures do we need to budget for to make this property competitive on the market?
Challenge the seller’s assumptions on the hotel’s valuation. Cross-examine claims made about the future profitability and the factors used to calculate future asset value and earnings potential.
Another client example: The investment committee at one of the world’s leading resort brands was in the process of acquiring a group of 5 properties. They used ReviewPro’s analytics to quickly identify issues that required more investigation, and through this process uncovered some significant items that were used in the deal negotiation. “We got a 10x return on Hotel Analysis Reports just on the negotiating points we surfaced.”
It probably doesn’t come as a surprise that they told us after the project, “Frankly, we can’t afford not to perform this type of analysis in the future.”
How are review analytics giving you an information advantage in hotel acquisitions?
Next month, we’ll look at how this type of analysis can be used at the macro level – understanding trends in customer preferences, neighborhood opportunities and more.
To learn how Hotel Analysis Reports could give you the competitive edge, call Josiah Mackenzie, ReviewPro’s director of business development, at +1 415 671 9629 or request samples here.