Thursday, November 30, 2006
One of the more challenging parts of developing a business plan you want others to invest in is coming up with a realistic appraisal of what kind of revenues the competition is generating (which investors use as both a yardstick and an indicator of future ROI). Going up against a publicly traded company (whose revenues must be broken down in detail, per SEC regulations) is one thing; going up against a private company, large or small, is another. Company information is a big business, and I should know: I worked at Hoovers.com for several years, and company information is their raison d'etre. In stark contrast to other dot-coms of the era, Hoover's had a realistic, multitiered revenue model from day one, all of it centered around a database of information on tens of thousands of companies, both private and public. They were also profitable prior to going public in 1999 and stayed profitable every quarter thereafter. Not the sexiest company in the world, sure, but they were ultimately bought by Dun & Bradstreet for $120 million, making more than a few people rich in the process.
Anyway, my time at Hoover's taught me the value of competitive intelligence, and for months now I've been racking my brain on how to get it on Austin-area hotels. Then, suddenly, I stumbled onto this little treasure trove during my research the other day. All Texas hotel/motel guests have to pay a 6% hotel occupancy tax on top of the usual sales tax. (One of the prices we pay -- or, more specifically, our guests pay -- for not having a state income tax.) The taxes each hotel collects and submits are a matter of public record, as are the hotels' reported revenues. The Texas Comptroller's office was nice enough to set up a database of all these revenues, searchable by city and time period. In other words, it takes about five seconds to determine precisely how much every hotel, motel and B&B in the state reports in monthly and quarterly revenue. You can also use it to determine what months of the year are busiest for each hotel.
Therefore, I now know that my presumed main competitor, the Hotel San Jose, reported $2.5 million in gross revenue for the past year; that revenues are pretty much equal March through October, which implies that they're basically 100% sold out those months; and that December & January are their only slow months. If you assume a 3-to-1 rooms-to-staff ratio (roughly the average for small hotels without banquet facilities or on-site dining), the San Jose has maybe 12-15 employees to its 40 rooms & suites. If you assume an average employee salary of $30K/year (averaging out low service-worker wages with higher manager ones), that's an annual payroll of under $500K. As for debt service, Liz Lambert bought the property for next to nothing, and the full reno job (including the construction of a two-story addition) was only $1.4 million.
All that can be translated as follows: Liz Lambert is making BUCKETS of money off of that place, and a competitor that could be similarly desirable to guests and efficiently run would present an amazing value proposition to a potential investor.
Thanks for the info, Comptroller Strayhorn!
Anyway, my time at Hoover's taught me the value of competitive intelligence, and for months now I've been racking my brain on how to get it on Austin-area hotels. Then, suddenly, I stumbled onto this little treasure trove during my research the other day. All Texas hotel/motel guests have to pay a 6% hotel occupancy tax on top of the usual sales tax. (One of the prices we pay -- or, more specifically, our guests pay -- for not having a state income tax.) The taxes each hotel collects and submits are a matter of public record, as are the hotels' reported revenues. The Texas Comptroller's office was nice enough to set up a database of all these revenues, searchable by city and time period. In other words, it takes about five seconds to determine precisely how much every hotel, motel and B&B in the state reports in monthly and quarterly revenue. You can also use it to determine what months of the year are busiest for each hotel.
Therefore, I now know that my presumed main competitor, the Hotel San Jose, reported $2.5 million in gross revenue for the past year; that revenues are pretty much equal March through October, which implies that they're basically 100% sold out those months; and that December & January are their only slow months. If you assume a 3-to-1 rooms-to-staff ratio (roughly the average for small hotels without banquet facilities or on-site dining), the San Jose has maybe 12-15 employees to its 40 rooms & suites. If you assume an average employee salary of $30K/year (averaging out low service-worker wages with higher manager ones), that's an annual payroll of under $500K. As for debt service, Liz Lambert bought the property for next to nothing, and the full reno job (including the construction of a two-story addition) was only $1.4 million.
All that can be translated as follows: Liz Lambert is making BUCKETS of money off of that place, and a competitor that could be similarly desirable to guests and efficiently run would present an amazing value proposition to a potential investor.
Thanks for the info, Comptroller Strayhorn!
Thursday, November 23, 2006
Happy Turkey Day. Mom and I had two dinners today, one with my grandpa and the other with my friend Nikki and two dozen of her friends and extended family members, so I'm a tad stuffed at present. One of the things I'm thankful for this year is the Democrats reclaiming Congress, and at Nikki's dinner I had the pleasure of being seated next to her stepdad Ronnie, the Travis County DA who was pretty much singlehandedly responsible for the ousting of Tom DeLay (which quite possibly helped the Dems win a number of races), so that was a nicely appropriate coda to the recent election victory.
I'm mostly moved in to my house now, though it's gonna take me a while to fill it up. My TV nook is the only room mostly done at this stage ... well, except for the TV itself, which arrived on Monday and doesn't work (the latest in a lengthy series of technological snafus I've experienced as of late, the worst being the PDA phone that deleted 18 months' worth of e-mail).
Getting back to hotels: one of the several ideas I've had on that front is buying an existing B&B and converting it into a small, modern-design luxury inn. There's one called Carrington's Bluff currently on the market: eight rooms in the West Campus area of Austin, about a mile north of downtown. I figure a place like that would be a good "starter hotel," something I could use to learn the ins and outs of the business that wouldn't require constructing a property from scratch or converting an existing downtown office building into a hotel (two other ideas I'm considering, both of which I'll expand on in future posts). While I find Carrington's Bluff's current decor repulsive, it wouldn't require a massive investment to clean out its explosion of chintz and kit it out with modern decor. Its bedrooms already have en suite bathrooms, so only a surface reno job would be needed.
The bad news is that Carrington's Bluff isn't a viable option: my friend and realtor Robert found out yesterday that the seller is insisting on a five-year leaseback. Apparently she likes running a B&B but wants to cash out while the market is strong. Thus, the search continues.
I'm tempted to make an offer on Green Pastures, an old-school restaurant housed in an incredible Victorian house on five acres. It was briefly on the market a couple of years ago, but the owners apparently decided to hold onto it. Very conveniently, it's a block south of my new house; also, the price would hopefully be non-outrageous since the property would be of limited value to developers. It's a National Historic Landmark and can't be torn down or significantly altered on the exterior. While it's situated on five acres, there's no bloody way the City Council would approve a zoning change to add condos onto its, well, green pasture-like lawn, so the price would be far lower than what five acres in my neighborhood would normally go for (even half-acre lots are running about $500K).
I'm mostly moved in to my house now, though it's gonna take me a while to fill it up. My TV nook is the only room mostly done at this stage ... well, except for the TV itself, which arrived on Monday and doesn't work (the latest in a lengthy series of technological snafus I've experienced as of late, the worst being the PDA phone that deleted 18 months' worth of e-mail).
Getting back to hotels: one of the several ideas I've had on that front is buying an existing B&B and converting it into a small, modern-design luxury inn. There's one called Carrington's Bluff currently on the market: eight rooms in the West Campus area of Austin, about a mile north of downtown. I figure a place like that would be a good "starter hotel," something I could use to learn the ins and outs of the business that wouldn't require constructing a property from scratch or converting an existing downtown office building into a hotel (two other ideas I'm considering, both of which I'll expand on in future posts). While I find Carrington's Bluff's current decor repulsive, it wouldn't require a massive investment to clean out its explosion of chintz and kit it out with modern decor. Its bedrooms already have en suite bathrooms, so only a surface reno job would be needed.
The bad news is that Carrington's Bluff isn't a viable option: my friend and realtor Robert found out yesterday that the seller is insisting on a five-year leaseback. Apparently she likes running a B&B but wants to cash out while the market is strong. Thus, the search continues.
I'm tempted to make an offer on Green Pastures, an old-school restaurant housed in an incredible Victorian house on five acres. It was briefly on the market a couple of years ago, but the owners apparently decided to hold onto it. Very conveniently, it's a block south of my new house; also, the price would hopefully be non-outrageous since the property would be of limited value to developers. It's a National Historic Landmark and can't be torn down or significantly altered on the exterior. While it's situated on five acres, there's no bloody way the City Council would approve a zoning change to add condos onto its, well, green pasture-like lawn, so the price would be far lower than what five acres in my neighborhood would normally go for (even half-acre lots are running about $500K).
Friday, November 10, 2006
New city. New house. New car. New government. (Impeach Bush!) New life. Seems like the perfect time to introduce a new version of my blog, too.
You may have noticed that the blog archives are gone. That is intentional. Version 2.0 covered my misadventures in New York City; this new one's all about Austin. I'm not dwelling on the past, and neither is my blog. (Yes, the archive has been deleted from Blogger. No, it's not cached on Google. Yes, I saved a copy. No, you can't read it.)
I'm also revamping my blog's focus: less travelogues and ruminating about my love life, and much more about what I'm up to workwise. I'll get into all of that in detail in the coming weeks -- right now I'm still busy getting moved in to my house -- but to sum it up briefly: I'm trying to build a hotel. Well, maybe more than one. A few of my devoted readers have commented that I've done a poor job of posting follow-ups on work-related matters. Guilty as charged, and this new blog will be a form of amends.
Why do I want to build a hotel? For starters, there's only one modern, independent boutique hotel in Austin -- the San Jose -- and it's long overdue for some competition. Yes, Austin is getting a W, as well as its new aloft spinoff (the first one of which will be located in decidedly unhip Wells Branch, a suburb in North Austin). Yes, we're also getting a Kimpton, and there's an independent boutique hotel planned for the old Seaholm Power Plant as well. What Austin's not getting are any new three- or five-star hotels, and it's in those markets where I think opportunity exists.
More later.
You may have noticed that the blog archives are gone. That is intentional. Version 2.0 covered my misadventures in New York City; this new one's all about Austin. I'm not dwelling on the past, and neither is my blog. (Yes, the archive has been deleted from Blogger. No, it's not cached on Google. Yes, I saved a copy. No, you can't read it.)
I'm also revamping my blog's focus: less travelogues and ruminating about my love life, and much more about what I'm up to workwise. I'll get into all of that in detail in the coming weeks -- right now I'm still busy getting moved in to my house -- but to sum it up briefly: I'm trying to build a hotel. Well, maybe more than one. A few of my devoted readers have commented that I've done a poor job of posting follow-ups on work-related matters. Guilty as charged, and this new blog will be a form of amends.
Why do I want to build a hotel? For starters, there's only one modern, independent boutique hotel in Austin -- the San Jose -- and it's long overdue for some competition. Yes, Austin is getting a W, as well as its new aloft spinoff (the first one of which will be located in decidedly unhip Wells Branch, a suburb in North Austin). Yes, we're also getting a Kimpton, and there's an independent boutique hotel planned for the old Seaholm Power Plant as well. What Austin's not getting are any new three- or five-star hotels, and it's in those markets where I think opportunity exists.
More later.