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Alice Gao, Senior VP of ICBC USA, speaks with Bob Braun, senior member of JMBM’s Global Hospitality Group® at JMBM’s 2016 Meet the Money® – the national hotel finance and investment conference. Alice explains the structure of ICBC USA, discusses interest rates, and Chinese immigrant investment in U.S. gateway cities.

A transcript follows the video. See other videos in this series on the Jeffer Mangels YouTube channel.

Bob Braun: I’m here with Alice Gao, who’s a Senior Vice President of ICBC USA. Alice, thank you very much for coming and spending a little time with us today.

Alice Gao: Thank you very much.

Bob Braun: Alice, I’d like to ask a few questions which I think you’re very suited to in your position with ICBC. One question I’d like to ask is, what kind of projects are the bank most interested in lending to these days? Are there things that attract you more than others, or are more interested in than others these days?

Alice Gao: Well, let me just start with a brief introduction of our bank. I’m very excited that as of December 2015, the bank continues to be ranked as the number one largest bank in the world by total assets of $3.6 trillion, and also as number one on tier one capital, about $215 billion. We are also ranked number one by net profit of $44 million. So, with that, in the U.S., we have four financial institutions. So, the four together provide a full array of products and services. The first financial institution is ICBC Financial Services: it’s a broker dealer of security services. And we also have ICBC Standard Bank, which is a financial market and commodity bank based in New York. We also have ICBC New York Branch, which is a wholesale bank of ICBC Group. And lastly we have ICBC USA, a Federal Charter full licensed bank, FDIC insured.

So, ICBC USA has thirteen branches and one service center. We have three branches in New York, ten branches in California, one service center in Seattle. Together with these four financial institutions, physical locations and e-banking platform, we offer not only traditional deposits and loan services, we also offer a variety of products such as cash management, trade finance, treasury and also foreign exchange. Our strongest point to distinguish us from others is we do offer variety of services of onshore and offshore renminbi products.

Bob Braun: So most of the lending that you would do on hotels is through ICBC?

Alice Gao: Most of the lending for hotels is through ICBC New York Branch and ICBC USA.

Bob Braun: And in terms of the type of lending you’re doing, does ICBC have any current priorities or any current trends that it sees? CONTINUE READING →

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Alan Reay, President of Atlas Hospitality Group, speaks with Robert Braun, senior member of JMBM’s Global Hospitality Group® at JMBM’s 2016 Meet the Money® – the national hotel finance and investment conference. They discuss the California hotel market including sales and purchases, pricing, RevPAR, financing, and the impact of the Marriott/Starwood merger and Airbnb.

A transcript follows the video. See other videos in this series on the Jeffer Mangels YouTube channel.

Bob Braun: I’m with Alan Reay of Atlas Hospitality. He’s the foremost hotel broker in California, I’d say. At least that’s what I tell my clients, and I’ve always been proved right. Alan, thanks very much for coming and talking to us today. I think you have your pulse on the market, certainly here in California, more than possibly anyone else. What do you see in the hotel market today? What kind of trends do you see?

Alan Reay: During the first quarter we’ve definitely seen a big drop off in sales in California. In the U.S., down 52%; in California, down 35%; that really has nothing to do with the economic fundamentals, because RevPARs are still increasing, profits are up and a lot of the numbers are positive throughout California. It has been a fundamental shift from a buyer’s sentiment in terms of how they’re looking at deals and how they’re pricing them. We had a lot of turmoil in the public markets, as you know, in the first few months of 2016, and a lot of REITs have pulled out of the market, and a lot of lenders have pulled out of the market. So that’s created a disconnect between what buyers and sellers expectations are on pricing, which in turn has created a big drop in hotel sales volume.

Bob Braun: Now do you think this creates an opportunity for people? Or is the lack of lending and the lack of interest something that’s just going to continue through the rest of the year? CONTINUE READING →

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Bill Blackham, President and CEO of Condor Hospitality Trust, speaks to Bob Braun, senior member of JMBM’s Global Hospitality Group® at JMBM’s 2016 Meet the Money® – the national hotel finance and investment conference. They discuss Condor’s transition from economy chain scale into select service, extended stay and limited service hotels,  RevPAR, and opportunities in the select service sector.

A transcript follows the video. See other videos in this series on the Jeffer Mangels YouTube channel.

Bob Braun: I’m with Bill Blackham of Condor Hospitality Trust. Bill, thanks very much for taking out the time to talk to us today. What are you currently working on? What’s Condor focused on these days?

Bill Blackham: Condor has been involved over the last year in a lot of different initiatives that involve the transition of the company from once being an economy chain scale-focused entity into a select service, extended stay and limited service hotel company, with a platform that is growing in that new investment strategy at the same time that we are divesting the old investment strategy hotels. Therefore, you have multiple things going on at the same time. Combined with a recent private placement of equity into the company with a new investor, it’s been a very busy time.

Bob Braun: So, what drove this shift from the economy (sector), up the ladder a little bit to the limited and select service?

Bill Blackham: I think that the potential for stock growth was far greater in the space that we’re now pursuing. One of the problems with the sector that the company had previously been in is that the average size hotel was very small. And in order to get to a very meaningful scale to justify being a public company, one would have to own four-, five-, six-hundred of those hotels, which is unwieldy from the standpoint of managing that platform.

I think that the platform that we’re going into also affords us the opportunity to have greater investor interest because it is a sector that continues to have above-industry growth in terms of demand, while at the same time is a space that has much higher margins than we are, as a company, traditionally in. So the higher margins combined with sort of a void in the space, the public company space of people that we’re going specifically after, the geographic markets that we’re pursuing, and the type of products that we’re pursuing really left an opportunity open to get highly accretive acquisitions.

Bob Braun: So this is an open space for you. Do you see yourself moving further? Do you see yourself ever developing into the full service area? CONTINUE READING →

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13 June 2016

To maintain the confidentiality of hotel data, STR imposes certain restrictions on the hotels for which it will provide competitive set data. The Marriott-Starwood merger is shaking up the world of competitive sets with the result that many owners will need to revise the competitive sets specified in their hotel management agreements.

As Bob Braun explains in the article below, considering the need to identify appropriate hotels for new competitive sets, and negotiation of amendments to hotel management agreements, it would probably be wise to start now on this process.

STR Adopts New Competitive Set Guidelines – Impact on Owners
by
Bob Braun, Hotel Lawyer and Data Security Advisor
The importance of the competitive set

Many hotel management agreements contain performance test standards allowing an owner to terminate a management agreement if the hotel fails to meet specified guidelines, and most of those tests incorporate a “RevPAR Test” – whether the hotel’s revenue per available room is comparable with a set of competitive hotels, its “competitive set.” The RevPAR test typically allows an owner to terminate a management agreement if the hotel’s RevPAR fails to meet a specified percentage, or index, of the competitive set’s RevPAR. Competitive sets can also be used to determine incentive pay or for other measures of performance, as well as projections of potential performance.

The competitive set data is typically provided by a single source: STR, Inc. STR has established itself as a unique provider of supply, demand, and overall performance data for the hotel industry by collecting financial performance and other information from a vast number of hotels in the United States, and using that information to create anonymized measures of performance. CONTINUE READING →

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10 May 2016
Click here for the latest articles on Data Technology, Privacy & Security

One of the great breakout sessions at our recent Meet the Money® hotel conference in Los Angeles was organized by my partner Bob Braun and moderated by Jeff Higley of HotelNewsNow. I was particularly impressed by the panel’s evidence of how costly cybersecurity breaches can be, how much can be done to prevent or limit exposure, and how reasonable the cost can be for a pro-active approach.

Here is Bob Braun’s summary of this panel last week in Los Angeles. This is a compelling call for an ounce of prevention. . .

5 Cybersecurity takeaways from Meet the Money®
by
Bob Braun, Hotel Lawyer and Data Security Advisor
Meet the Money® changes with the times, and the 2016 conference showcased the first panel on Cybersecurity in the hospitality industry – “Who’s Knocking at Your Digital Door,” featuring Bob Braun, from JMBM’s Global Hospitality Group and Co-Chair of the Firm’s Cybersecurity and Privacy Group; Bob Justus, of Optiv Security; Brad Maryman, from Maryman & Associates; Christian Ryan, from MARSH; and Kevin Shamoun, from Zeamster.  Jeff Higley, of STR/HotelNewsNow.com moderated the panel.

The panelists, representing technical, legal law, law enforcement, insurance and payment systems, identified key cybersecurity challenges for the hospitality industry.  Five key takeaways were:

  • Compliance does not equal security. Each of the panelists agreed that while meeting legal and business requirements is essential, compliance does not necessarily achieve real cybersecurity — completing checkboxes on a task list or questionnaire is only a first step. The panelists noted that each of the major hotel breaches in the last year, which involved every major hotel chain, implicated point of service credit card systems that complied with industry standards.  Hotels and hotel companies need to look beyond complying with standardized requirements and has to evaluate their own risk profile and apply meaningful security plans.
  • Informed response is better than instant response. Too many organizations make the mistake of reacting before they think, especially when reporting a breach. Data breaches can be complicated matters, and it is essential to understand the scope of the breach, the data and individuals involved, and how a firm can remediate the source of the problem before disclosure. There is no question that speed is important, but some breaches do not require notification, while acting without ascertaining the facts can require multiple notifications, which is damaging to reputation and sends the wrong message.
  • Credit cards are not the only risk. While much focus is placed on the theft of credit card numbers, hotels must consider other risks. Hotels and hotel companies hold massive amounts of sensitive personal information that can be used to steal a guest’s identity.  Moreover, hotels need to consider more than data; the interconnection of systems means that breaking into a financial structure can give a hacker access to door locks, heating and air conditioning systems, electrical, plumbing and other key structural and physical parts of the hotel.  What would happen if a hacker flooded a hotel, or opened the doors?  This damage can far exceed the damage from lost credit cards, and cause untold damage to the hotel, its brand and owners.

CONTINUE READING →

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11 January 2016

Click here for the latest articles on Data Technology, Privacy & Security.

What part do hotel owners play in preventing a cyberattack and the resulting data breach? The hospitality industry relies on its reputation for confidence, and that confidence can be shattered when guests learn that their private information has been compromised. What can hotel owners do and how should they work with brands and management to prevent a cyberattack?

In the article below, my partner, Bob Braun reminds hotel owners that because they are generally required to indemnify brands and managers for costs the managers and brands incur – which could include a costly data breach – it is in the owners’ best interests to have a comprehensive plan in place.  This article first appeared in Hotel Business Review in December 2015, and is reprinted with permission from www.hotelexecutive.com.
Not Just Heads in Beds – Cybersecurity for Hotel Owners

by
Bob Braun, Hotel Lawyer and Data Security Advisor
The basics of the hotel business have traditionally been simple: good location, fair prices, appropriate amenities and good service were the keys to success. While those factors are important today, hotels are no longer simply a “heads in beds” business; hotels are increasingly brand-oriented. Brands focus not only on the services and products they sell, but on developing the perception and recognition of the brand associated with those goods and services. That means that hotels, like all brands, need to focus more and more on understanding their customers and how to reach them, whether through loyalty programs, advertising, social media or otherwise.

The upshot of the focus on branding in the hospitality business is that hotels gather lots of information about their guests, ranging from credit card data to addresses, phone numbers, travel plans and preferences, birthdays, and more – all of which are valuable not just to the hotel brands and operators, but to cyberthieves. While hotel companies have understood this for years, they are, along with other customer-intensive industries, learning that collecting that information comes with responsibilities and, possibly, liability.

Cybercrime is big business. In 2014, there were 42.8 million detected security incidents (and, most likely, many more that were never discovered). Estimates of annual cost of cybercrime to the global economy ranges from $375 billion to as much as $575 billion as companies face increased vulnerability, ranging from greater technology available to cybercriminals and new types of cybercrime, like crypto-ransom. Cybercriminals began targeting hotels years ago. In a 2010, a Forbes magazine article quoted Nicholas Percoco, who said that “The hospitality industry was the flavor of the year for cybercrime. These companies have a lot of data, there are easy ways in and the intrusions can take a very long time to detect.” The lesson for hotel owners is that they cannot stand idly by – hotel owners must be proactive by instituting best practices in their own operations, requiring the same from managers, and obtaining insurance coverage to fund the inevitable costs of a breach.

The Wyndham Case

The threat to the hospitality industry became particularly evident in the recent federal court case brought by the Federal Trade Commission (the FTC) against Wyndham Hotels. On August 24, 2015, the Third Circuit United States Court of Appeals issued its ruling in the case FTC v. Wyndham Worldwide Corporation. The case was highly anticipated by the data security community generally for its expected ruling on the authority of the Federal Trade Commission to regulate data security standards, but nowhere was the anticipation more keen than in the hospitality industry. After all, this decision didn’t deal with retailers, banks or dating sites – it addressed a major hotel player and, by implication, all operators, brands and owners in the industry. The decision should be a wake-up call to hotel owners because, as described below, hotel owners may ultimately bear the cost of data breaches involving their hotels. Owners should look at the Wyndham decision as an opportunity to consider whether their brands and managers have taken the steps necessary to protect guests and, ultimately, the hotel owner.

CONTINUE READING →

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23 November 2015

As the biggest merger in the history of the hospitality industry,  the Marriott-Starwood merger, is grabbing headlines worldwide. Most of the recent press has focused on the sheer size of the potential transaction. But in his article below, my partner and hotel lawyer Bob Braun, considers the practical impact of the merger on hotel owners, franchisees and developers. With the loss of the Starwood family of brands as an independent and significant competitive force in the industry, the merger will bring mixed blessings to stakeholders.

The Marriott-Starwood merger – Is bigger really better?
Impact of the merger on hotel owners, franchisees and developers
by
Robert E. Braun | Hotel Lawyer
The proposed merger between Marriott and Starwood will, by all accounts, create a behemoth in the hotel industry. If the merger goes through as planned, the combined company will be the world’s largest hotel company, with more than 5,500 hotels under management or franchise, 1.1 million hotel rooms around the world, 30 hotel brands and up to 75 million hotel loyalty members.

While commentators have speculated as to whether the combined entity will benefit consumers, stockholders or frequent guests, little has been said about how it could impact hotel owners, franchisees and developers currently in either of the brand families or looking to them in the future. No one will really know until after the merger (if it is, in fact consummated, and there are a variety of hurdles to closing such a complex transaction), but the JMBM Global Hospitality Group has negotiated many hundreds of franchise agreements, including agreements with virtually every major hotel brand, and we believe hotel owners should consider a few important factors:

Will Owners Have Fewer Choices? The first, and most obvious, impact on any potential owner is that the field has been reduced by a significant player. Thirty brands (31, if we include the new Grand Sheraton brand) may remain, but in fact they will be operated by a single entity, and that entity will decide on what brands will be available in a given market. Moreover, the differences between particular brands in a given price or quality segment are likely to be reduced. How long, for example, will Sheraton or Le Meridien hotels be markedly different from Marriott or Renaissance properties? Where will they be positioned relative to other brands in the new combined family?

Any hotel owner, franchisee or investor should also recognize that the Marriott-Starwood merger might only be the first of its kind. Many analysts predict that other brands will merge to create the size and influence that will allow them better to compete with the largest hotel branding company in the world. If that happens – and transactions like this seem to occur in bunches – owners will have even fewer choices.

Will Owners Have Reduced Leverage? The immediate corollary to fewer choices is reduced leverage. A hotel owner will no longer be able to create a competition between two of the largest players in the business; Marriott/Starwood is unlikely to bid against itself for management or franchise opportunities.

This challenge is likely to extend beyond just the merger of Marriott and Starwood. Other major brands – Intercontinental Hotel Group, Hilton Hotels, Hyatt Hotels to name a few – will have greater bargaining power when negotiating with owners because there will simply be fewer competing companies.

Will Hotel Companies be Less Flexible? A common concern among hotel owners is the desire for their brands to acknowledge the unique qualities of each property. While some franchised or branded businesses can achieve a high degree of uniformity, hotels are special, and hotel owners need brands to recognize that. As much as brands strive to create a consistent experience at all properties operating under the same name, local differences – whether it be location, common amenities, zoning, legal restrictions, competition or otherwise – have to be addressed. But larger companies have greater reasons to increase efficiency and reduce variations between different properties, and hotel owners may have difficulty ensuring that local needs are met.

Will New Players Step Into the Breach? At the same time, it may be possible for new, smaller and more nimble brands to make inroads in this market. If there is less differentiation between different flags, if the larger players are less flexible, the smaller players may find inroads and opportunities that are closed to them now. It’s even possible that Marriott-Starwood may choose to shed some brands, for antitrust or business reasons, giving rise to new competition.

The JMBM Global Hospitality Group® believes that hotel owners should be mindful of these concerns when considering their branding opportunities, and when negotiating with brands. Our practice focuses on leveling the playing field between brands and owners, and creating a lasting, functional relationship between them. While this merger may lead to a new set of rules for the road, we are ready to help our clients understand the new realities navigate the new landscape.

CONTINUE READING →

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31 August 2015

Click here for the latest articles on Data Technology, Privacy & Security.

Massive data breaches affect hotels and their legal responsibilities. As unauthorized hacking of confidential data explodes in volume and seriousness, minimum expected standards are evolving that hoteliers and others must follow. Interestingly, the latest guidelines are provided in an August 24, 2015 appellate court decision involving Wyndham Worldwide as if to emphasize that these rules (really) apply to the hotel industry. How did this case arise? What are some basic steps that everyone with confidential data is expected to take? What happens if they don’t?

In the article below, my partner Bob Braun, explains the current situation and what it means to our industry.
FTC vs. Wyndham Worldwide – What it Means for Hotel Owners

by
Bob Braun, Hotel Lawyer and Data Security Advisor
Background on the case

On August 24, 2015, the Third Circuit United States Court of Appeals issued its ruling in the case FTC v. Wyndham Worldwide Corporation. The case was highly anticipated by the data security community generally for its expected ruling on the authority of the Federal Trade Commission to regulate data security standards, but nowhere was the anticipation more keen than in the hospitality industry. After all, this decision didn’t deal with retailers, banks or dating sites – it addressed a major hotel player and, by implication, all operators, brands and owners in the industry.

We know that cybercrime is big. In 2014, there were 42.8 million detected security incidents (and, most likely, many more that were never discovered). Estimates of annual cost of cybercrime to the global economy ranges from $375 billion to as much as $575 billion as companies face increased vulnerability, ranging from greater technology available to cybercriminals and new types of cybercrime, like crypto-ransom. CONTINUE READING →

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24 June 2015

Bill Sipple, Executive Managing Director of HVS Capital, speaks in the video below about activity in different markets, limited service properties, and whether rising interest rates will have an effect on transactional activity.

Bill sat down with Bob Braun, a senior partner in the JMBM Global Hospitality Group®, as part of our video interview series on hotel finance and investment opportunities in 2015.

A transcript follows the video.

Bill Sipple discusses hospitality market activity and interest rates - Meet the Money® conference

Bob Braun: Hi, I’m Bob Braun. I am a Partner at Jeffer Mangels Butler & Mitchell. I’m here at Meet the Money® 2015, our 25th anniversary. I’m here with Bill Sipple, who is the Executive Managing Director of HVS Capital. Bill, thanks for coming by and talking with us.

Bill Sipple: It’s good to be here, thanks. CONTINUE READING →

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18 June 2015

Deric Eubanks, Chief Financial Officer of Ashford Hospitality Trust, discusses why now is a great time to buy hotels, which segment provides the best opportunities, and how supply growth will affect the hospitality industry over the next few years.

Deric sat down with Bob Braun, a senior partner in the JMBM Global Hospitality Group®, as part of our video interview series on hotel finance and investment opportunities in 2015.

A transcript follows the video below.

Deric Eubanks talks about the hottest hospitality segments for investors - Meet the Money®

Bob Braun: Hi, I’m Bob Braun. I am a Partner at Jeffer Mangels Butler & Mitchell and I’m a senior member of our Global Hospitality Group, and I’m here with Deric Eubanks, who is the CFO of Ashford Hospitality Trust. We wanted to take a chance to talk about what you see in the market, and importantly, how Ashford is reacting to what you see in the market.

Deric Eubanks: Sure. CONTINUE READING →

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Jim Butler, Chairman
Global Hospitality Group®
Jeffer Mangels Butler & Mitchell LLP
(310) 201-3526 • jbutler@jmbm.com
www.HotelLawyer.com

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