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Interpretation

Recommendations (which are generated by the spreadsheet, and we'll talk more about) for the acquisition of an existing hotel ('Buy') or the development or construction of a new hotel ('Build') are expressed as a percentage. A positive number is a positive recommendation, a negative number is a negative recommendation.

The higher the number, the stronger the recommendation. A high positive recommendation means, by all means buy a property at that market tier there if you can find one at an affordable price. A high negative recommendation means, if you live to be two hundred years old, buying or building a property in this market at that market tier will be the biggest regret of your life as you lay on your deathbed. A number close to 0% is a neutral recommendation -- if you have reason to want to own a hotel in that market, you won't get rich, but you shouldn't get hurt.

Notations

"No opt" (a notation that appears on our Summary Index) means 'No option' and appears in our 'Buy' columns. There is no existing property in that market at that market tier, so acquiring one is not an option for you.

"800 lb" appears in our 'Build' columns and means that if you build a property in that market at that market tier, it will be the '800-pound gorilla' and you can do whatever you want - you have no competition in that market at that market tier. Of course, you'll still want to think about how roughly comparable properties in that market are doing before you build one there, and in projecting your room rates for your new property. A new Hampton Inn in Pixley might be the 800-lb gorilla in that town and seem like the thing to have, but if the Comfort Suites that does exist isn't doing that well and the 'Buy' recommendation for that Class A2 property is -33%, that should tell you something to which maybe you'd better listen . . .

"No prop" means, simply, 'no property'. There is no property in this market tier in this city, town, market or location.

Bugs

You might have an older version the Index where, for a property in a market tier in a given town, the 'Build' recommendation will be higher than the 'Buy' recommendation. In a few cases we noticed ourselves, a negative 'Buy' recommendation was accompanied by a positive 'Build' recommendation.

This never happens in real life. It's a fluke.

If it's not really a great idea (-8%, as we'd express it as a percentage) to buy an upscale, mid-market property in Chesapeake, Virginia (for just one example), it does not suddenly become a good idea (+17%) to build a new one in that market: you could not count on doing any better with a new one than you'd do if you bought an existing one. There are times when you are indeed better off building a new property than buying an existing one (e.g., existing properties at that tier in that market are overpriced, or are in generally poor physical condition); but these numbers will not and cannot tell you that.

The problem was that our calculations for the 'Build' recommendations were referencing a post-construction index average that does not work very well as an index without taking into the account -- and yielding itself to, as appropriate -- the overall market index.

We gave the problem a temporary fix on July 24. It still doesn't give you as accurate a 'Build' recommendation as we'd like when we have a positive 'Build' recommendation to share with you (if anything, a positive 'Build' recommendation is a little understated); but at least you won't be getting a bad (inaccurate) recommendation that would get you hurt, nor one that obviously makes no sense at all.


Beechmont Hotels Corporation
1474 U. S. Highwy 64 West
Mocksville, North Carolina 27028
(704) 219-5707

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