Opportunity

Navnish identified an opportunity to acquire the 81-room Hampton Inn & Suites and 76-room Holiday Inn Express Hotel & Suites as a portfolio in Park City, Utah. The hotels were in generally good condition and producing cash flow, but Navnish was drawn to the opportunity because it believed that the hotels were not fully leveraging their niche positions within the high-priced Park City market. In particular, guests in the Park City market were provided with a limited number of options that were not in the upscale or luxury segments and the mix of offerings in the market was not likely to change against Navnish’s favor in the near term given that cost and environmental protections that made Park City a high barrier to entry market.

Strategy

Recognizing an immediate opportunity, Navnish set out to increase rates at the hotel to be better positioned below the upscale offerings of Park City. In order to cause minimum disruption and justify rate increases, Navnish developed an organized and specific plan to renovate the hotels, per franchisor guidelines, in a timely manner. Simultaneously, Navnish set out to implement efficiencies by running the two hotels as a single entity and integrating the staffs.

Results

Navnish achieved immediate increases in RevPAR, particularly through increases in ADR, by using its knowledge of rate management and marketing channels. Additionally, by completing the hotel renovations in a timely manner, Navnish further justified its ADR increases to the market with an enhanced value proposition. In addition to the increases in top-line revenue, Navnish also achieved cost savings by integrating the operations of the two hotels. Particular successes included staffing efficiencies achieved by combining the sales, engineering and housekeeping teams, higher yielding pricing structures offered for group sales (and more groups being targeted and executed upon) because of the larger room inventory of the combined hotels and the bargaining of better terms with vendors as a result of combining the purchasing power of the hotels. Under Navnish’s ownership, the hotels’ combined annual revenues improved by approximately 23 percent and combined annual net operating income was improved by approximately 41 percent. Navnish sold the hotels in July 2008 and the investment generated an internal rate of return of approximately 54% and an approximate return on equity of 2.1 times invested equity (inclusive of operating cash flow and net of all fees).