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Ernst & Young hospitality offers advice to hotel owners.

Signs of an economic downturn are everywhere. Falling GDP forecasts, decreases in consumer confidence, and corporate layoffs are daily headlines, each attempting to characterize and quantify the current economic slowdown. For the lodging industry, this slowdown has immediate implications and requires immediate action, according to Chase Burritt, national director of Ernst & Young's Hospitality Services Group.

"The best opportunities to improve the industry's cash flow position remain an intense focus on internal operations," said Burritt. "Most pressing, high energy prices have squarely impacted hotels, with some forced to pass along supplemental energy surcharges directly to guests. And the crucial need to reassess energy usage and policies at property and corporate levels support the broader need for comprehensive asset management strategies that protect asset value through formalized planning and supervision."

As corporations face economic uncertainty, budgets tighten and spending becomes more frugal. Business travelers are no longer booking rooms at a moment's notice, with no regard for price. According to a study conducted by the National Business Travel Association, 66% of corporations are contemplating reducing their travel allowances for lodging in the future, and 43% reported that they have already taken measures to reduce travel budgets since the beginning of the year.

According to another study by BTLogic and Equation Research, the average company is cutting its travel budget by 14 to 19%.

Companies having concerns over issues such as operational enhancement, cost containment, divestiture of assets, and tax minimization. The following overview is provided by Ernst & Young's Hospitality Services Group as opportunities to enhance enterprise value:

An owner's business objectives can often be met by assessing the current state of property-level operations, the alignment between property-level critical processes, systems, and an owner's overall strategy. The value added by effectively assessing, diagnosing, and implementing a solution is decreased costs, increased revenues, increased operating efficiencies, improved productivity, and increased asset value.

Energy Management: Lodging companies have benefited by developing and implementing energy management programs to help reduce commodity costs, lower energy demand and consumption, improve efficiencies, reduce operation, and maintenance costs, and provide for the monitoring and verification of energy savings. These programs can be implemented at the outset of a new development or during the ongoing operation of an existing hotel.

Fixed Asset Reviews: Companies leave significant dollars on the table every year, simply because of incorrect depreciation/recovery treatment of their capital expenditures.
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Publication:Real Estate Weekly
Article Type:Brief Article
Geographic Code:1USA
Date:Jun 27, 2001
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