Hospitality Upgrade’s semi-annual Atlanta social kicked off the conference Tuesday night, with several of our readers from both the property and vendor sides in attendance, in addition to some of the conference’s early arrivals. A special thank you goes to Nelson Garrido, VP, technology for Noble Investment Group, LLC, owners of the W Atlanta Midtown, for his generous prizes awarded to two lucky cocktail party attendees – stays at both the W Atlanta Midtown and Callaway Gardens resort.

At other conferences and tradeshows, vendors are focused on selling and promoting products and services. At the Executive Vendor Summit, where much of the time is dedicated to networking, attendees have the chance to form critical relationships and learn more about the other plans and products available in the market. “There is no other venue where you can meet with so many of your peers and actually have time for a substantive discussion,” said Steve Van Tassel, SVP hospitality for SoftBrands. “It is a great chance to get caught up with peers in the industry, hear what is happening in their businesses, and compare notes on how they are addressing some of the opportunities we are facing.”

Mary Gerdts, CEO and president of POST Integrations, Inc., appreciated the exclusivity of the networking portions of the conference and said, “It’s just a great group of high-level executives and we network differently.”

In addition, CEO of Brilliant HotelSoftware Patrick van der Wardt was pleased with the opportunity to build professional relationships with the other companies in attendance. “I can keep my network up to date, and I get to meet people that offer different products that might compliment our product,” he said.

The summit began with a golf tournament at the beautiful Dunwoody Country Club in north Atlanta. The winning foursome included Rich Siegel, publisher of Hospitality Upgrade; Ron Dressin, president of RedRock Software; Bruce Barfield, principal and co-founder of The Rainmaker Group and Bruce Humphrey, director American operations for Miwa Lock Co Ltd.  Since Rich disqualified the winning team for having him in their foursome, which normally would have been handicap enough, Charlie L’Esperance, president, RTP; Tim Kinsella, executive vice president, sales for Merchant Link; Jon Inge, president of Jon Inge & Associates and Shayne Paddock, CIO of ZDirect were declared the winners. Even though the longest drive and closest to the pin awards were earned by Greg Pesik, president and CEO of Passkey International, Inc., he was awarded closest to the pin and shared longest drive honors with Dan Hogan, vice president of Galaxy Hotel Systems. After the tournament, the welcome barbecue held at Altitude, the meeting space on the top floor of the hotel, provided a fantastic setting for the event’s kick-off dinner with its panoramic view of the city.

Managing Director for the McLean Group John Rovani began the sessions with the state of the economy regarding mergers and acquisitions activity in 2008. According to Rovani, the GDP growth rate is declining, the unemployment average is about 4.8 percent, consumer confidence is at a low point and gas prices are higher. The good news is that consumer spending is still present, credit is still being extended and overseas capital is still coming into the United States. Rovani said, “So far, the impact to industry segments is limited. If we are in or headed toward a recession, many experts are talking about a rebound in the latter half of 2008.”

Fred Sturgis, managing director, H.I.G. Ventures, agreed. “It was a robust 2007. There was a lot more stability in the middle market side and VCs have not really slowed down. 2007 VC investments are the highest of any year since 2001 and VC-backed M&A exits were also at a 7-year high,” Sturgis said.

Rovani described what the credit crunch means for M&A and capital formation. Bigger deals (transaction values over $100 million) are fewer, with smaller deals receiving more attention – although these are fewer as well, specialty capital raises are still getting done and increased buyer activity is coming from overseas. Even with the crunch, Rovani still sees a strong hospitality IT market. “Some slowdown has been seen on leisure B2C (business to consumer) IT M&A, but no slowdown has been seen so far in travel or hospitality B2B (business to business) IT M&A,” he said. “Specialty niche markets, or businesses with strong recurring revenue models are of particular interest and government contracting remains hot.”

Sturgis agreed and said, “For all the concern over the credit crunch, M&A and private equity deal volume was at record levels in 2007.”

Rovani noted that the hospitality IT M&A and venture capital (VC) market became very active. Agilysys acquired InfoGenesis in June 2007 and Eatec Corp. in February 2008. Constellation Software acquired more than a dozen companies related to the hospitality industry in one year including Computrition, Gladstone, Orion Wine Software, AEK Computers and Grampion Software. TravelCLICK was sold to a private equity group in December 2007, and Roper Industries acquired CBORD Group in February 2008.

On the acquisition side, the United States continues to be the dominant player. “The U.K. is still quite important, and we are seeing an uptake in China and India,” Rovani said. “We think India is firm, or more reliable for a business owner selling his or her business.”

Sturgis described what to look for when examining possible acquisition: growth and operating leverage. According to Sturgis, the important factors are market leadership position in a growing market, stable revenue base and strong customer relationships, leverageable business models with margin expansion opportunities, competitive advantages that are sustainable over time, a strong management team who wants to partner in future growth, and a wide array of potential exit opportunities and buyers.

Jeffrey McKee, chief financial officer, Jonas Software, offered his company’s insights from both seller and buyer sides. When seeking acquisition targets, he looks for the following characteristics: diversified customer base, mission-critical enterprise software solutions, low customer attrition, leading or increasing market share or share of customer wallet, fragmented competition (rollup opportunity), potential to grow through geographic expansion, product expansion and/or acquisition.

On the seller’s side, he recommended evaluating the buyers. He recommended asking what is driving the buyer’s purchase decision? Is there a way to manage the business better? What does the go-forward plan look like? Plan for existing management/founders? And what is the buyer’s exit plan? “When evaluating the value a buyer brings,” he said, “look to previous experience.” He explained that evaluating other acquisitions made by corporate and strategic buyers, taking market and technology expertise into account, and thinking about whether you can leverage existing sales/distribution channels and infrastructure can all be important.

Bob Post, president and CEO, TravelCLICK, drew from his experience, both buying a company and recapitalizing TravelCLICK last year. “From the hospitality vertical perspective, we were both a strategic acquirer and acquiree in 2007,” he said. “[As a seller], you have to have clarity – and know your mission.  The key question you need to ask from a seller’s perspective is, what are the buyer’s intentions?

“If you try to be all things to all people as you craft a deal, it’s probably not going to work,” he said.   “It is your responsibility to find your niche, identify parties that can work together, and make it happen.”

He explained that price is not the most important purchase factor. “Buyers are always concerned about price. But the real long-term value creator or destroyer for them is effective company integration.  If a buyer cannot explain to themselves and the seller how the new entity will look in 90, 180, 365 days, both parties should probably be concerned.”

Post added how strategy plays a key role in the buying/selling process. “One of the things our buyers looked at was not just the breadth of our clients, but our go-to-market strategy,” he said. “The [most important] things I focused on in 2007, besides running the business, were educating parties on how we do business and managing expectations of all the various entities.”

Most importantly, regardless of where your company sits, Post said, “Have a clear understanding of goals and expectations. Look at industry comparables, understand the market, and your company’s relationship to it, and avoid self-delusion in regards to your value.”

With over 70 percent of restaurants failing in the first three years of operation, that is one thing the company from the second session has, a clear understanding of value, goals and expectations. Restaurant Eugene is a small Atlanta business that has built into a brand with national recognition in a few short years, and has done this by offering not only unique, appealing food and service, but by building an eclectic clientele loyal to the total experience offered. Along the way, owner and executive chef, Linton Hopkins, was chosen to appear on the Food Network’s very popular program, “Iron Chef America,” and has been chosen as a nominee for the 2008 James Beard Award.

Along with his management team, Gina Hopkins, director of operations; Rick Blumberg, general manager and Greg Best, mixologist, he recognized the most important catalysts to his business’ growth, recognition, and most importantly, brand. “Everything is hospitality, hospitality is everything,” Chef Hopkins said. “Food is how we communicate hospitality to you. If you don’t communicate on a human level, you aren’t ever going to get there.”

Hopkins and his team recognized the importance of getting involved in the community. “By welcoming the community into our business, they welcomed us,” Gina Hopkins explained. Agreeing Chef Hopkins said, “We have people who are friends of the restaurant, not just customers. A strong sense of community helps develop what you are.”

Best said, “A brand is wide reaching, but means something different to everyone. A brand can mean something different to 50 or 60 people in the same room, but you can effectively reach everyone on their own terms.” 

From their made-from-scratch ketchup and pickles, to the personal relationships with the local farmers and fishermen that provide their staples, and on to the hand-made bitters and freshly squeezed cranberry juice, the group described the importance of finding your niche and making it work. “When you look at how we best represent ourselves in the marketplace, even though we were taking an inside look at a restaurant, the goals of this group were very similar to many companies here, large or small,” Blumberg said, “The more you focus on hospitality, the more you can build your business.”

Building business was also the focus of the next session, but on a larger scale. When first asked in 2005, 57 percent of the CIOs surveyed said the available information on hospitality industry technology spending is poor. That is how the Hospitality Industry IT Benchmarking Survey was born. CIOs from several of the top hotel, management, resort, timeshare, cruise and casino properties compiled their spend information from 2006 and worked to create a focused survey of U.S. hospitality companies to use as a tool when planning budgets. The results of Hospitality Upgrade’s first Hospitality Industry IT Benchmarking Survey were tabulated in February, and released in April. The next survey, focused on 2007 numbers was also released in April, and responses will be tabulated this summer.

On the vendor side, summit attendees pulled out their automatic response fobs to give their two cents on relevant information from the survey. When asked which has the greatest impact on their business, 65 percent said capital budget fluctuation and 35 percent said operating budget fluctuation. The group was then asked when in their annual planning cycle this data might be used, 43 percent said in marketing and 38 percent said in their sales forecast.

The next event, the gala dinner, included a visit from Dr. Mark Newton, president, Newton’s LAW, and director of the hotel, restaurant and tourism management program at Gwinnett Technical College in Atlanta. With a good bit of humor and enthusiasm, he discussed some ideas to create a learning environment that will encourage employee development. “Teaching is about relationships, developing people to go into the workforce,” he said, pointing out that managers have to motivate individuals. He recommended taking the time to work with individuals and how mutually beneficial the experience can be. “When people have mentors,” he said, “it is amazing what they can do.”

And, just like the attendees at this year’s summit, and even at the student level, Dr. Newton said how important networking is in any industry, “Networking is one letter away from not working.” That being said, many in the audience quickly exchanged business cards.

The last session explored how Bawadi, Dubai’s now $54 billion resort project, is planned to be one of the largest signature hospitality, leisure and entertainment destinations in the world, all located along a 10 km area similar to the Las Vegas strip. The planned project includes the world’s largest hotel, Asia-Asia with 6,500 rooms, the world’s largest shopping area encompassing over 40 million square feet of retail space, and the largest conference center in the Middle East.
 
Girish Ramachandran, vice president, The Friedmutter Group, took attendees on an inside look at doing business in Dubai. “About 10 years back, (Dubai) was nothing more than a fishing village,” he said. Today, the area struggles with modern headaches like traffic. “People ask why the city (with skyscrapers) is being built so close together with all of this desert land around it? Traffic is a mess, it is chaos there, everything is planned around traffic patterns now,” he said. Ramachandran said the country wants everything there to be the biggest, the best, the most unique, and on the grandest scale.

At the launch of the Bawadi project, the budget was $27 billion USD, with 31 themed hotels and 29,000 rooms planned. In 2007, the budget increased to $54 billion, 51 hotels and 60,000 rooms. Over 10 million tourists to the Bawadi property alone are projected by year 2010.

Ramachandran suggested forging relationships with U.S. companies operating in UAE, and depending upon the nature of the business, setting up your office in free zones. He said, “If your business is operator driven, then the first thing is to get to know who are the operators are in Dubai. Know your competition and create a niche.”

Ramachandran explained that 85 percent of workers are from outside Dubai, which can be a problem in the near future. “In Macau, they have not been able to attract the people to work in the hotels,” he said. “Dubai will experience this soon. Most people who work in Dubai (expatriates) cannot afford to live in Dubai.”

And then there are benefits of managing projects in Dubai. According to Ramachandran, there has been a $70 billion investment committed to the UAE tourism industry. “Every day, the news is about hospitality,” he said. “Tourism is the biggest industry there right now.”

Therefore, there is a huge volume of work. Ramachandran cited one example, “You could spend two years in Boston working on a school and the project could get shelved after spending money and time on it. That does not happen in Dubai; everything happens so fast. Even if it didn’t happen, there are hundreds of other building projects behind it.” And, that is what many vendors are counting on as the area continues to expand.

The Dubai session was the last of the conference, with several attendees reflecting on the week’s events. Bruce Bensetler, president, Data Plus Hospitality Systems, “In a setting like this, you are reminded as an owner of what inspired you to take the career path that you did.”

Sudharshan Chary, president and CEO of Datavision Technologies said, “I love the idea of bouncing ideas off my peers, and I certainly like the idea of sitting down with companies that are bigger than me. It gives me a feel of how I should run my company.”

And that is it in a nutshell, solid sessions, networking, the opportunity to talk with others of the same level in the same industry. That is why the Executive Vendor Summit works and why many return each year.