Case Studies

Through years of study, research and practice, cooked with enormous success and occasional failures,  Hawaii Hotel Consultants’ founder and partner, Andre S. Tatibouet, shares his secret formula for hotel turnarounds:

The recipe includes three essential ingredients comprising The MMM (Triple M) Equation:

MAKEOVER – The art and science of focused, careful and creative investment (sometimes small, sometimes large) to improve asset appearance that measurably improves room rate and occupancy.

MANAGEMENT – Understanding the enormous difference the incremental cost of superior management can mean to the bottom line.  Knowing when to rotate out even a great manager to keep the project fresh.  Recognizing even the best managers need close and knowledgeable oversight.

MARKETING – The best hotel and management will not achieve optimum performance if it is not marketing driven.

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CASE STUDIES

The Tatibouets have been involved as owners, managers, or investors of over 70 Hawaiian hospitality properties.  Below is a summary of a few notable projects and how the MMM (Triple M) equation worked its magic.

Hawaii Hotel Consultants - Aqua Park Shore

Hawaii Hotel Consultants – Aqua Park Shore

AQUA PARK SHORE HOTEL, Kalakaua Avenue, Waikiki. 226 Rooms.

In 1994, as CEO of ASTON Hotels and Resorts, Tatibouet leased the property from a Japanese owner for four years.  At the time, the Park Shore Hotel had EBIDTA of $650,000. By 1998 the earnings had improved to in excess of $1.9 million.  Predicated on this very strong performance, the owner was able to make a sale at $21 Million to a West Coast REIT.

MARRIOTT MAUI INTERCONTINENTAL HOTEL, Wailea, Maui.  516 Rooms plus four Food and Beverage operaHawaii Hotel Consultants - Marriott Mauitions and the largest meeting and convention facilities on the Island of Maui.

The hotel owner – Mitsui Bank – had resisted canceling the management contract with a global hotel chain (Intercontinental) and replacing it with a local management company (Aston).  So, Tatibouet and ASTON negotiated a lease of the hotel for a $1,000,000 per year rental.  The property had

average net income of less than $500,000 per year for the prior three years.  Aston subsequently took EBIDTA from $500,000 in 1993 to $5.5 Million in 1999. At the end of Aston’s lease, Mitsui was able to sell the hotel to Outrigger Hotels for approximately $60 Million.

KEAUHOU BEACH HOTEL, Keauhou, Hawaii Island.  311 Rooms.

In 1999, as part of a California Investor Group, Tatibouet purchased and totally renovated the property, including the full service restaurant, meeting facilities, pools and tennis facilities. The complete investment totaled $14.5 Million for acquisition and rebuilding. Initially, Tatibouet brought ASTON in as the operator of the property.  However, following Tatibouet’s sale and

Hawaii Hotel Consultants - Keauhou Beach Resort

Hawaii Hotel Consultants – Keauhou Beach Resort

departure from ASTON, there was a dispute between the General Partner and Aston. Outrigger Hotels became the replacement operator. Despite these difficulties, the California Partnership successfully sold the hotel in 2006 for over $26 Million – a profit of over $10 Million.

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RECENT YEARS – WAIKIKI TURNAROUNDS

Hawaii Hotel Consultants - Aqua Waikiki Wave

The Aqua Waikiki Wave

WAIKIKI WAVE HOTEL, Kuhio Avenue, Waikiki. 241 Rooms.

Formerly named the Coral Reef Hotel, this uninteresting, but solidly-built hotel, constructed in 1968 was, was “tired” and in dire need of a major turnaround. EBIDTA for 2005 was $2.1 Million.

As the first step in the turnaround process, on December 31, 2005 ASTON management was terminated by Tatibouet (who was no longer associated with ASTON) and replaced by AQUA Hotels and Resorts.

In April, 2006, a complete $5.1 Million renovation commenced with HHC’s unique approach of leaving the hotel fully open and functioning during construction. With extraordinary scheduling of all trades, together with our renovation and operating team approach to renovations, only two floors at a time were shutdown for stripping and remodeling down to the basic structure and then renovated with all new furnishing, fixtures and equipment. As a result of this renovation turnaround skill, the total room and lobby renovation was complete by the autumn of 2006.

In October, 2006, another turnaround step was taken with the renaming of the hotel (often very helpful but not essential) to the WAIKIKI WAVE HOTEL (Aqua Waikiki Wave Hotel).

Hawaii Hotel Consultants - Aqua Waikiki Wave

The Aqua Waikiki Wave

As a result, the hotel emerged in 2006 as the Aqua Waikiki Wave, transformed with the new AQUA management team, fully renovated and with a new name, all accomplished in less than one year. The result was a totally enhanced marketing and product placement in the Waikiki hotel industry. This last Turnaround Step, the Marketing of a property is the often overlooked, yet most critical to a successful Turnaround project.

The earnings for the Calendar Year 2006, in spite of the ongoing renovations throughout much of the year, improved to $2,750,000. The following year – 2007 – the first full year since turnaround, saw earnings soar to $4.5 Million.  By 2008, earnings had exceeded $5 Million.

The entire cost of the property renovation was totally amortized in approximately two years.  The property was never closed (no major interruption of cash flow); the asset was rejuvenated; and most importantly, was given a new, prominent position in the Hawaii tourism marketplace.

This Case Study best exemplifies the beneficial impact of a comprehensive Turnaround Project utilizing the MMM (Triple M) equation including MAKEOVER, MANAGEMENT and MARKETING.

Hawaii Hotel Consultants

The Aqua Bamboo Resort & Spa

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THE AQUA BAMBOO HOTEL, Kuhio Avenue, Waikiki. 90 Rooms.

The Aqua Bamboo Hotel was a charming “B” Class hotel, built in 1968.  In 2007 HHC was hired for a partial turnaround with a moderate $1.3 Million renovation budget.  HHC fast tracked this project, using our unique program of closing sequential floors for total renovation, while keeping the hotel open, fully functioning and maintaining cash flow to the owners.

As the Renovation progressed, the MARKETING program was launched, introducing a “new” Product in the Waikiki hotel inventory. This partial Turnaround Project resulted in a 18-month pay back of the Renovation (Makeover).

Hawaii Hotel Consultants - Aqua Waikiki Pearl

Hawaii Hotel Consultants – Aqua Waikiki Pearl

WAIKIKI PEARL HOTEL, Nahua St. (north of Kuhio Ave.) 130 Rooms

Constructed in 1959, this “B” Class hotel was sold in 2008 to new owners.  The previous year EBIDTA, was less than $500,000.

The new General Partners selected a turnaround plan, but due to their location in Manhattan, were slow to “ramp-up” in understanding the Hawaiian tourism industry renovation process, with the considerable decisions that they had to make in this old building with many complicated deficiencies. In the end, the total outlay for the Renovation was in excess of $4 Million and the work was not complete until the 4th Quarter of 2010.

As a part of the turnaround plan, the hotel changed management companies in 2008, brought in a new General Manager and in 2009, changed its name. Simultaneously, a Marketing plan with its new positioning in the Waikiki Marketplace was underway and by year end 2010 was totally renovated.Hawaii Hotel Consultants - Aqua Waikiki Pearl

For 2011, EBIDTA was $1.8 Million. For 2012, earnings in excess of $2.1 Million are anticipated. This turnaround of an old property from $500,000 EBITDA in 2007, to $1.8 Million EBIDTA in 2011, again proves the great advantage of turnaround using the MMM (Triple M) Equation.

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