N E W M AR K V AL UAT I O N & A DV I S O R Y
Glossary In this section, we provide additional analysis and discussion of the terms, definitions and methodologies employed in this feasibility study. The sections are configured in the same sequence as this feasibility study.
LODGING PERFORMANCE INDEX (LPI) How is it Calculated? The Lodging Performance Index, or LPI, is the measure of a hotel market's effective overall performance using multiple key performance metrics as inputs. The higher the index, the more resilient the market is and the higher the probability will be for the market to recover from a downturn (such as COVID-19). The index considers all key performance measurements including but not limited to occupancy, guest-paid ADR, contribution to operating profit and expenses (COPE %), average length of stay, average booking costs, loyalty contribution, and both long-term (pre-COVID) and short-term (intraCOVID) fluctuations in these and other important metrics. The index also considers the performance of the market in pre-COVID and intra-COVID environments.
SUPPLY AND DEMAND ANALYSIS Meeting Space Index The metric is a ratio of the estimated number of annual group room nights sold relative to the square footage of meeting and event space (per 1,000 square feet). A higher figure represents a higher portion of group business in relation to the total meeting and event space at each property. A property that offers a significant amount of meeting space may show a lower factor. This is due to larger events requiring more space per attendee. The space required includes pre-function areas in addition to the meeting and event space, if available. The calculation is made as follows: Base year annual group nights accommodated ÷ total meeting space ÷ 365 x 1000 Using an example of 10,000 guests from group-demand and 20,000 square feet of meeting and event space, the MESI equates to 1.4. This metric is beneficial when viewing the overall meeting and event space utilization in addition to the ability of the property to accommodate additional group business, or to create compression within food and beverage as well as meeting and event space revenue line items. The range of MSI factors shows that the Holiday Inn Express & Suites Logan, which features 504 square feet of meeting space, displayed the highest MSI (7.0) during the base year relative to the other competitive properties. This property features the highest concentration of group-oriented guests in relation to the quantity of meeting and event space offered. This property is generally effective in utilizing its meeting space and may have the opportunity to displace group-related demand with commercial demand sources. The commercial demand segment is typically less price sensitive than group-related demand, and with additional commercial-oriented demand sources, this hotel could potentially increase its room rates. While an increase in room rates may cause a slight occupancy decline, room revenue may still grow with a more advantageous RevPAR mix that may also assist in reducing variable operating expenses. The hotel in the competitive set that displayed the lowest MSI during the base year (excluding hotels that do not contain meeting and event space) is Chief Logan Lodge & Conference Center, which features 10,844 square feet of meeting and event space and registering an MSI of 1.1. This hotel has the greatest upside relative to group-related demand, thereby indicating that occupancy may be improved with a more targeted marketing focus towards this segment. It is noted that management of this property would need make certain that higher-rated guests that already frequent the hotel would not be displaced because of the shift in marketing focus. Any such displacement may have an adverse influence on potential rates, and that additional variable operating expenses connected with increased occupancy may offset prospective revenue increases. The MSI for the competitive set was 1.3 during the base year. This figure represents by the total quantity of group-related guests relative to the combined square footage of the meeting and event space within the competitive set. In a market with substantial existing group demand where and there is a shortage of meeting and event space, the collective MSI will be even higher than most of the individual properties. The subject hotel’s MSI is lower than this, and generally operates within the range of the competition. As a result, we recognize that the subject may have some upside in either occupancy or room rates. Should management opt to increase occupancy, it can do so by targeting group-related guests. In implementing
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