Interim Hotel Management Need May Rise Amidst Demand and Uncertainty

The need for interim hotel management could rise again as construction starts are on the upswing in both secondary and smaller travel markets. This is in part due to owners and operators who have curtailed adding to existing upper management ranks while the economy has been uncertain and new development had been put on hold. There are also signs that with hotel industry fundamentals improving, such as lodging industry RevPAR, that lenders and financial institutions may be more inclined to foreclose on non-performing hotel loans given that increased valuations and operating income are more on their side now to recoup any losses. There is combination of caution and uncertainty about the overall domestic economy and whether the USA travel market will add further gains in the coming year among lodging industry executives. However, a recent report in the WSJ about “hotel construction sees a modest comeback” could create short term and interim hotel management needs in lieu of permanent hires. This may also provide management companies and owners more flexibility in their payrolls with a number of senior executives available for work and unemployment at record highs in many states. At the same time as new construction rises, CMBS loan defaults could put added pressure on lenders to seek out more individuals and firms who provide interim hospitality management services on a short term basis to deal with the increased inventory of hotel loan defaults. Recent lodging analysis makes the case that both occupancy and average room rates are above average coming out of the recession. This upward drive in “RevPAR” is one reason why banks and lenders may decide to become short term real estate owners (REO) once again and need the assistance of a temporary hotel manager. However, the real driver in an interim hotel management surge at the senior executive level is the reluctance by hotel investors, owners and operators to enter into any type of fixed payroll or extended employment contract given the inherent long term costs along with caution and concern that still prevails. This uncertainty could easily translate into more use of outsourcing and people who are in the business of temporary operations expertise.