SITUATION

The Hilton San Francisco was a RevPAR leader during the peak lodging cycle in the San Francisco market. However, as the cycle turned, the sources of business evolved in the market and resulted in a significant decline in city-wide convention business. As a result, the hotel began experiencing a declining trend in RevPAR and Net Operating Income performance.  Further food and beverage operations were particularly challenged at this hotel, with negative cash flow across majority of the outlets, exacerbating the overall performance of the asset.

PLAN

As the Asset Manager directly responsible for the financial performance of the hotel, the Founder / Principal of 360 Capital Advisors put together a plan to reverse the declining operating performance of the hotel, which included:

• Repositioning the hotel to make it more competitive in the self-contained group segment, thereby enabling capture of a greater share of this growing market
• Converting unutilized and under-utilized space into higher revenue breakout meeting space, enabling the hotel to attract smaller yet more profitable groups
• Consolidating the five unprofitable outlets into one destination lounge and restaurant
• Created a branded coffee concept in the lobby to drive additional revenue
• Generating an overall space re-design and utilization initiative by coordinating with Hotel Operations, Architecture & Construction, Restaurant Consultants and Designers, Cost Consultants, and Project Managers
• Project  leadership and oversight including all facets from conceptualization to underwriting, programming, design, construction and opening.

RESULTS

• Reversing the decline in group RevPAR and achieving higher market share by driving additional and higher rated group business
• The F&B consolidation strategy resulted in an annual cost savings of $1.1 million
• Branded coffee shop concept achieved a project payback within 7 months from opening
• Net Present Value of $16 million and an IRR of 28% from the overall project