Better Hotel Ratings Help Court Appointed Receiver Get Early Results

One of the key reasons to have a court appointed receiver take control of a distressed hotel is to maintain and preserve its assets, such as the building, FF&E, cash and revenue streams. However, another primary asset that should not be overlooked is its rating among its guests and patrons, which includes its class and brand standing and customer satisfaction scores. Often times and in order to forego a bankruptcy filing by the debtor, a hotel receivership is petitioned by a lender or investor group due in part to the deteriorating nature of the hotel’s business income and its physical premises. Unable to pay its debt and maintain the premises, a guest who stays in such a hotel facility can have a bad experience. In turn, a guest’s negative experience is often posted on a variety of online reviews, received as customer complaints by the franchisee or word gets back to the travel writers who simultaneously reduce the hotel’s star or diamond rating. When the court appointed receiver finally takes possession of the hotel, room revenues have dropped significantly as a result of these poor guest comments. However and according to this “primer on hotel categories and star ratings” there are different ways to raise the standing and perception of distressed hotels. However, “contrary to what many consumers may think, a one-star or one-diamond hotel, if rated by a reputable source, is not a fleabag. It simply offers fewer amenities and services.” Still, the Internet can be the Receiver’s best friend too, since any improvement to a hotel’s ratings via its guests shows up online very quickly. For example, a customer review on TripAdvisor will often get posted either during a guest’s stay or within a couple weeks of their departure. Receiverships usually last months and sometimes a couple years. In essence, this provides an excellent opportunity for a court appointed receiver to get a short term boost on revenues based on hotel ratings by better efforts at improving guest service, amenities and property upgrades.