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<br>[https://www.youtube.com/watch?v=6kj799Z0lyA Addressing the] gathering, [https://www.youtube.com/watch?v=OBd2Hup8EXo Laurent] said, "Hotel distribution has undergone a radical change over the last few years. For travellers the process of booking a hotel has always included three phases i.e. search, book and stay and it is still the same. The difference today is that this is now increasingly happening online in a mobile world. That is why hoteliers need to start embracing new marketing tactics and technologies, so that they can meet the needs of their potential guests exactly where they are looking for information and win direct bookings from them. Highlighting some key areas of concern in the distribution landscape in the Middle East, Laurent stressed, "Over the last few years we have seen [https://www.youtube.com/watch?v=57oqn9tD-PI disruption] in our [https://www.youtube.com/watch?v=xAaSLrTxwts industry] by a number of [https://www.youtube.com/watch?v=PUpejX_JppQ non-traditional players].<br><br><br>[https://www.youtube.com/watch?v=vdejE6oE8kw Competition] is [https://www.youtube.com/watch?v=GivoHAeZ0rY increasing] from OTAs, new [https://www.youtube.com/watch?v=jLII0OZk_ps players] like [https://www.findcohost.com/ Airbnb Management] and larger, more [https://www.youtube.com/watch?v=IlmJ2VoIdkY marketing-savvy hotel] brands.[https://www.youtube.com/watch?v=0mERU-2bW4o youtube.com] Any transformation is virtually impossible without owners having a strong belief in the value of making technological investments. Moreover, the ‘abundance of technology’ available to hotels can be overwhelming. [http://talking-soccer.com/TS4/forumdisplay.php?f=29 Talking] about the [https://www.youtube.com/watch?v=lNlsLlPEyMg evolution] of hotel distribution in the coming years, Laurent said, "Technology will continue to transform the distribution dynamics. We are today in a shared ecosystem defined by collaboration, quality and consumer value. This change requires a new strategic approach from hoteliers that would enable us to succeed in the new environment. Swiss-Belhotel International is present at Arabian Travel Market from 22 to 25 April on stand ‘HC1130’ in Sheikh Saeed Hall in Dubai International Convention and Exhibition Centre. Cambodia, China, Indonesia, Malaysia, Philippines, Vietnam, Bahrain, Egypt, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates, Australia, New Zealand, Bulgaria, Georgia, Italy and Tanzania. Awarded Indonesia’s Leading Global Hotel Chain for six consecutive years, Swiss-Belhotel International is one of the world’s fastest-growing international hotel and hospitality management groups. The Group provides comprehensive and highly professional development and management services in all aspects of hotel, resort and serviced residences. Offices are located in Hong Kong, New Zealand, Australia, China, Europe, Indonesia, United Arab Emirates, and Vietnam.<br><br><br>This is primarily important to give the serviced apartment operator access to the common property and allow entry to each of the accommodation rooms. Usually, it also gives the operator control of the maintenance and upkeep of these common areas, which is vital to the maintenance of brand standards. Control of the accommodation rooms by means of separate lease or management agreement with the owner of each of the accommodation rooms. The usual methods of calculation of payment of rent or a letting fee to the owner is either a fixed amount per year or a proportion of the revenue generated from the letting of the accommodation room.<br><br><br>Control of any non accommodation lots (such as front of house and back of house and any non accommodation room income earning activities such as retail outlets) is usually by purchase of such areas. Control of the common areas by means of some form of lease or letting agreement with the owner's corporation. It is the aggregation of control of each of these aspects of the building, which allows the serviced apartment operator to conduct a serviced apartment hotel business. In this article, we are going to focus on the issues relevant to the potential purchase of a portfolio of serviced apartment businesses usually in different geographic locations.<br><br><br>The portfolio of businesses engages with the public by means of common branding or a stable of brands together with a sophisticated reservation system. We will assume that the sale process is structured on the basis that each prospective purchaser of this portfolio has access to a data room. This enables due diligence to be undertaken on each of the management arrangements which comprise the portfolio. The reader will appreciate that this is a fairly simplistic and generalised explanation. Because of all the components which go to create a serviced apartment hotel business matrix, there can be enormous variety in the way these businesses are constructed.<br><br><br>That said, we consider that this explanation gives the reader enough understanding of the basic building blocks of how a serviced apartment hotel business is put together to understand the issues we will now discuss. For the purposes of this newsletter, we assume that our target serviced apartment hotel business portfolio consists of 10 separate properties each consisting of 200 accommodation rooms. Thus, there will be 2,000 separate arrangements in relation to the accommodation rooms (assuming no multiple owners), 10 owners of 10 privately held lots (which are not accommodation rooms), 10 separate owners' corporations and other bits and pieces. We will now discuss key issues relevant to determining the true value of each of the serviced apartment hotel businesses, which comprise the portfolio that the incumbent operator is offering for sale.<br><br><br>1. This is generally not a real property transaction. The acquisition of a serviced apartment hotel business portfolio is generally not considered to be a real property play. The essence of the value of the business is tied up in the fees or return generated principally from the letting of accommodation rooms (and any other ancillary income earning aspects of the building such as retail outlets). For this reason, entities which invest in bricks and mortar hotel assets tend not to be attracted to this form of investment. On the other hand, some traditional operators approach it as an extension of their existing hotel management operations. 1. No two hotels are usually structured the same way. Because these are fundamentally contract based arrangements, it is more likely than not that contract documents will not be uniform with respect to each of the hotel businesses.<br><br><br>This means that a threshold decision needs to be made as to the nature and extent of the due diligence that needs to be undertaken on each of the hotel businesses. Normally, it can be very expensive to undertake a fully detailed analysis of the documents for each of the hotel businesses. There is usually a need to prioritise the hotel businesses ideally creating a list starting with the business, which generates the best return and grading all the businesses through to the business that generates the least return. This is usually done on the basis of discounted present value of the fees or return generated by the incumbent operator for each of the businesses for the balance of the term of the respective management arrangements.<br><br><br>This sounds simple enough, but can be tricky in practice. There are many variables at play which factor into the assumptions to be used to undertake the discounted present value calculation. As lawyers, we try to take advantage of our experience with respect to such assignments to focus upon those aspects of the documents that are of particular importance to the value equation. This includes termination provisions, operator obligations to make payments to contractual counter-parties and any significant restrictions on the ability to grow the operator's income. The determination of the correct assumptions is critical to the determination of an appropriate price for the portfolio.<br><br><br>1. Security of tenure. At the heart of the due diligence exercise is a desire to come to a view on the true value of each of the hotel businesses which comprise the portfolio. The first step is to decide which of the contractual terms, for each of the contracts that comprise the management arrangements, would give the counter-party the right to prematurely terminate the contract. The most common of these would be an ability to prevent an assignment of the contract as a consequence of the sale process. However, there can be others buried in the fine print of each of the contracts or otherwise available under relevant statute.<br><br><br>Once any of these impediments to assignment is identified, it becomes critical to form a view as to the likelihood that the counter-party will actually seek to exercise this contractual right. In other words, although the counter-party has a contractual right to block the assignment, is there a realistic risk that this right will be exercised? 1. Statutory factors that can affect tenure. In Australia, these types of arrangements are generally regulated as quasi-securities. The consequence is that there are a number of statutory provisions that need to be considered when determining what extraneous factors can impact upon the value of each of the management arrangements.<br><br><br>For example, certain statutory provisions give a right to the private owner to terminate its contractual arrangements with the serviced apartment operator by giving a specified notice period irrespective of the terms of the contractual arrangements themselves. Other provisions allow a majority of the owners to band together and vote for the entire management arrangement with respect to a particular property to be terminated. Yet other arrangements carry a further obligation for the serviced apartment operator, in such an event, to divest itself of any property that would be required by a subsequent operator to effectively take over management. For instance, if the front of house and/or the back of house is held by the operator on a separate lot.<br><br><br>These statutory provisions can be highly complex and apply in different ways to different aspects across the portfolio. Hence, these provisions need to be understood in great detail as they can have a material impact on the analysis that goes in to determining the value of each of the management arrangements. Separately, Australia has licensing requirements that apply to these kinds of management arrangements, which do not necessarily apply to the operation of traditional hotels. These licensing requirements need to be understood comprehensively as failure to comply can have criminal as well as civil consequences. There are a number of other jurisdictions outside Australia that have in place statutory provisions similar to the kind referred to here. These would need to be understood and factored in to the value assessment process for similar reasons.<br><br><br>1. The likelihood that management arrangements can be extended. This topic tends to occupy a lot of time when assessing how much value to place on each hotel business. The incumbent operator may be unwilling or unable to answer this question. Ultimately, it is a question of the predisposition of each private owner and the owners' corporation to extend the term of the management arrangements. Because of the sheer number of people involved, it can be very difficult to make contact with enough of these people to gauge which way they will decide when the question is ultimately put to them.<br><br><br>Therefore, various strategies need to be put in place in an effort to arrive at a rational view as to what assumptions can be made when determining the value of each business. Usually, these assumptions cannot be applied universally for all the businesses, which can introduce a further complication into the mix. In the absence of significant under-performance or other dispute between the owners and the incumbent operator, the tendency seems to be that the owners will be inclined to extend the management arrangements. From their perspective, the prospect of finding a new operator can be difficult. This tends to result in the ability for a prospective purchaser to assume that the management arrangements should be able to be extended for a reasonable period, thus positively impacting upon the value of existing management arrangements.<br><br><br>1. Determining how many hotels need to be acquired before the purchaser is required to proceed with the deal. This can also be a vexing issue. 1. Scope to change brand. In some situations, the aim of the prospective purchaser is to change the branding of each of the management arrangements. The incumbent operator will usually be very resistant to entertaining this potentiality prior to completion. 1. The prospect of mixed use. Mixed use occurs with respect to a particular building, where some of the private owners agree to enter into contractual arrangements with the operator and some do not. This can create a variety of issues which need to be worked through.<br><br><br>At a practical level, it can create friction within the owners' corporation as the owners who do not have contractual arrangements with the operator usually have significantly divergent views as to how the building should be operated. 1. The manager usually employs the employees. In this respect, the operation of serviced apartment businesses is different from traditional hotels. With traditional hotels, generally almost all the employees are employed by the owner and not the operator. With serviced apartment businesses, the employees engaged in the business are usually employed by the operator. Hence, a significant aspect of the due diligence process would relate to matters relevant to these employees. This can be somewhat of a culture shock to traditional hotel operators who lack experience in being the employer of large numbers of operational employees. The potential legal risks and responsibilities that this entails usually requires detailed consideration. 1. One and one can sometimes make three.<br><br><br>6 million debt and equity funding deal with Australian technology venture capital firm OneVentures. 100 million OneVentures Fund, launched less than 12 months ago. The fund is a partnership between OneVentures and Viola, the technology-focused Israeli venture credit fund. It’s also one of the first major venture debt deals to land in Australia. While common in the US and Europe, venture debt is new to the local startup market. 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Offiong: There was a lot of competition with online travel agents, and we weren’t bringing in customers the way we thought we could. Our digital platforms were antiquated, check-in/check-out process wasn’t as seamless as it could be, it wasn’t very mobile friendly.<br><br><br>We didn’t have those capabilities available, and in today’s economy in order to attract customers we had to be more digital friendly. Walls: What weren’t you doing that AppDynamics is getting up to speed? Offiong: Going to the cloud, especially with the type of workloads we were looking at, is often a very complicated and complex adventure. We wanted to get out of the business of managing infrastructure, and that’s where AppDynamics came in. We needed something to allow us to see end-to-end where we started from, and when we migrate to the cloud, have that same level of visibility. Dendi: When leaders like Emmanuel talk about digital transformation, they’re not talking about IT transformation; they’re not talking about servers going away, infrastructure.<br><br><br>It’s really refreshing to see customers talk about business model changes. Their team has done a great job focusing on business model needs and getting that end-user experience from the time they log-in. This is hard stuff, to make it simple for the end-user passes the complexity down to the systems, and that’s what the team at Wyndham was able to do. We’re lucky to be part of that journey that monitors the end-to-end performance of the end-user and then correlate that to business outcomes. Knight: How has the business changed? Offiong: We migrated 8,400 hotels across 18 brands onto this new platform.<br><br><br>We’re up 75 percent in mobile bookings as a result of these changes. Our customers have given us feedback that the experience is much more seamless. Our franchisees have given us feedback that it’s easier to use our services. Dendi: Every business function is getting melded into that one end-user experience so security becomes, not an afterthought, but actually is part of the design construct. Walls: Obviously, this is a multi-year process. I assume you have much more work to do. What haven’t you done? Dendi: Ecosystem around application stack has gotten so transparent, so customers like Wyndham are able to purchase best-of-breed solutions like AppDynamics on AWS Marketplace, click of a button. They’re generating trillions of data sets every day across their business. Our goal is to see how can we bubble up the impact of that investment to their line of business. Watch the complete video interview below, and be sure to check out more of SiliconANGLE’s and theCUBE’s coverage of AWS re:Invent. Disclosure: AppDynamics Inc. sponsored this segment of theCUBE. … We’d like to tell you about our mission and how you can help us fulfill it. 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