REPORT FROM THE U.S.—It was a question that caused Dan Vosotas, president of Trans Inns Management, to pause.

Reflecting on his firm’s US$7-million plan to turnaround eight struggling hotel properties, Vosotas was asked to identify when any of the hotels previously had undergone a property improvement plan.

Dan Vosotas president Trans Inns Management

PIPs played a big role in Trans Inns’ attempt to revive the properties. Vosotas said the plans not only updated the properties, but also raised the morale of the staffs at the various hotels.

PIP in action

Vosotas’ company was awarded the hotels’ management contracts by Los Angeles-based Latitude Management Real Estate Investors, the lender for the properties which had taken back the keys. Trans Inns took over management of eight properties—including five Holiday Inns, a Crowne Plaza, Ramada Inn and a Comfort Suites—last year. The properties, which comprise 2,000 rooms, are located across a region stretching from Atlanta to Minneapolis, Minnesota. Vosotas said the company has instituted PIPs at half of the properties, and is considering extending the PIPs to the rest of the hotels.

PIPs were undertaken at a Crowne Plaza in Omaha, Nebraska; Holiday Inn in Columbus, Georgia; a Holiday Inn in Atlanta; and a Holiday Inn in Kansas City.

In a release, Trans Inns said it was selected for the work because of its previous record of improving hotel operations and hands-on management approach.

“We had to stop the bleeding for the hotels,” he said. “It was being run from a labor and expense standpoint. … When it starts going downhill, (associates) stop caring, management stops caring, and it’s hard to reverse that.”

But before the PIP could be put into action, he said, the hotels’ debts had to be satisfied.

“The properties had been cash-strapped for such a long time that a lot of vendors had to be paid current,” he said.

Following that, the PIP was essential to protecting the equity the lender had invested in the hotels. “The franchisors were unhappy there had been no PIP,” Vosotas said.

The last of the renovations should be finished this summer “on time, under budget,” Vosotas said.

In addition to the PIP, operating expenses at the hotels have been cut by 25 percent at the hotels, according to a news release. Trans Inns achieved the savings through a combination of labor restructuring, job-sharing, amenity reductions and renegotiating service agreements with vendors.

Mike Damitio VP of acquisitions and development Trans Inns Management

Officials at Latitude Management, a real-estate fund manager that originates, invests in, and manages commercial real-estate loans, securities, and value-add real-estate assets throughout the U.S., did not return a call for comment by press time.

“Trans Inns Management has done a great job stabilizing these assets,” Craig Oram, a principal from Latitude Management, said in a news release about the projects. “Productivity and guest satisfaction scores are both up, a great improvement from when we took the keys back.”

Hotel performance

There was a slight downside to the PIPs, however. Mike Damitio, VP of acquisitions and development for Trans Inns, said the financials of the hotels where the PIP was undertaken take a hit while the projects are ongoing.

“Performance, obviously during the first half and first quarter, will be impacted by the renovations,” he said. “There will be rooms out of service; public areas out of service.”

Damito said the company is optimistic the hotels’ operating environment will turnaround soon. “By mid 2010, we’re hoping the economy starts cooperating with us,” he said.

Vosotas, meanwhile, said he does not see much of a recovery happening in the hotel sector until 2011 and 2012.

“Our impression of what we see,” Vosotas said, “is that 2010 will be a very tough year for the hotel industry.”

Going forward