Lodging Leaders brings together the best and brightest minds of the hotel industry to share their stories, insights and actionable advice. Each week, LodgingMetrics.com founder and entrepreneur Jon Albano interviews inspiring hoteliers and leading industry professionals that have produced amazing results to help you maximize profits, scale your portfolio, protect your investment, and so much more. Let the collective intelligence of the hotel industry lead you to better results.
Paul Darrow is the founder and president of PHD Financial - a boutique investment banking firm specializing in hospitality finance, debt restructure, consulting services, funding acquisition and financial advisory. He's also a former hotel owner with a strong understanding of hotel operations. Paul began his career in the hotel/consulting/finance world back in 1983, and his early experiences took place in Martha’s Vineyard in Massachusetts and St. Johns in the Virgin Islands. Paul has also been part of the debt restructure process since 2008, and he has found helping hoteliers to save their properties and/or be more profitable to be a very rewarding experience for him. Paul’s Transition to Hotel Owner and Finance Expert Paul’s transition occurred while he was working in an unrelated field. At the time, he owned a court reporting agency and supplied that personnel to governmental agencies and law firms. While vacationing on Martha’s Vineyard, he met the owners of a hotel property and learned they wanted to retire. He admits he wasn’t enthusiastic about it at first, but eventually decided to purchase the property. They had about 20 buildings- all of which needed renovations. There was also a restaurant in it which was very popular. Paul decided to get a hotel restaurant management’s degree as well. He owned this for about 20 years and it provided him a very rich experience. It also lead him to meet a key individual from the finance world. All these elements allowed for an easy transition to go from operations to finance. A common line you hear from hoteliers all the time is that they are: “Asset rich and cash poor.” How can hoteliers increase their cash flow? Paul says all hoteliers should make sure they do the following 3 things before going into business: Legally set yourself up to protect assets. Most hoteliers set up an LLC, but fail to do the annual things that need to be done, such as organizational minutes and having their annual stock hold meetings. Failing to do these things puts you in a position of potentially losing the protection of your LLC. Ensure everything is up to date. Not quarterly- or yearly. Keep proper books and records! This is the biggest flaw hoteliers have. A daily cash report needs to be made so every dollar is accounted for. Numbers never lie. Neglecting this can lead to devaluing your property. Keeping up with your books gives you a clear representation of the value of your property, which allows you to then maximize its value. Excellent Management: requires an excellent business plan! This directs you on a day to day basis on how to go about directing your business. Also, hiring the right staff is imperative! Who are your front desk employees? Remember that the people at the front desk are the first line of “defense.” Find yourself a good accountant and lawyer and run your business. Not doing so is simply foolish! You can’t own a property for free. You borrowed money to get it and it’s the bank’s expectation that you will pay back what you borrowed. This is also important so that you have support in understanding the legalities stated in documentation. The text in these documents is not easily understood - it's critical to have someone that can represent you and who can decode these things. Keep in mind that banks can see your financial progress. They have a plan that can potentially leave you impotent if you don’t have the right things in place. I.e- a good lawyer and a good accountant, keeping a daily report of records, and great management. As the banks track your progress, they can detect how you are doing and if it comes down to foreclosure, there is no one who can defend you. This is how hoteliers lose their properties. Don’t wait until the last minute to take action! Stay on your game and be prepared. Paul finds entrepreneurs to be amazing people. What separates them from the rest is they recover from failure quickly,