Network Planner is a comprehensive tool for managing and developing the capital strategy and execution plan for a growing hotel brand. From full market planning to new hotel selection and existing hotel modification, Network Planner assists real estate professionals and planners in assessing individual investment opportunities and managing network growth. Designed to provide analysis and process support for all elements of capital strategy, APT's solution marries individual site level decisions to overall market strategies, factoring in historical experience with each recommendation.
APT Value Creation
Network Planner helps hotel companies answer complex and important questions, such as:
What lessons can be learned from past investments?
Most hotel companies rely on regression, analog modeling, or other similar analytical techniques to measure the expected impact of capital investments. For example, a company can use a regression model to predict an increase of revenues from $8 million per year to $10 million per year if it increased the power rating of its site through a remodel — a gain of 25%. While analytically interesting, this approach fails to factor in past remodel experience. Suppose, for example, the hotel company has already remodeled 15 other hotels and that those sites averaged a 3% sales lift. Then, a 25% gain seems rather unlikely, despite “what my model says.” Hotel companies need to do a better job of analyzing past capital investment results and using this experience to guide future expectations instead of relying on static models.
How can capital decisions be tailored to drive maximum capital returns, market share, cash flow, and net income?
Shareholder value creation for any hotel company hinges on an effective strategy that enables hotel companies to optimize their investments and make the most of both their own resources and those of their franchisees by knowing the answers to such questions as:
- Will a proposed new hotel be financially successful? What is its predicted RevPAR and predicted profitability?
- What is the best hotel configuration to build at this location?
- What will the impact of a new hotel be on our surrounding hotels’ performance? What would be the impact if a competitor takes the deal instead of us?
- Will a potential hotel still be profitable if a competing hotel chain opens a location down the street?
How do new site decisions connect to overall capital strategy?
While rarely intentional, operational challenges drive hotel companies to make site-by-site decisions on capital investments without considering overall strategy for a given market. Investments in a site that meets key payback hurdles may appear attractive in isolation, yet may be financially detrimental to the portfolio if cannibalization impact is not accurately quantified. Using APT's Network Planner, executives are able to understand individual site economics in conjunction with broader market effects for any proposed new hotel location.