Imagine you are a shareholder of Ashford Hospitality Prime. You’ve received the proxy filings from both Ashford (the gold papers) and from Sassa Capital (the white papers), and you aren’t sure what to do? Do you stick with current management and its 140 years of combined hospitality experience, or vote in a slate of nominees who have absolutely no meaningful experience in hospitality?
That last sentence alone should answer your question, but let’s take it one step further.
What exactly does experience mean?
Experience translates into performance. Let’s imagine the Marriott Seattle. It’s a solid property in one of America’s finest cities, that has an incredible skyline. Experienced management looks at this fine hotel and realizes there’s more value to be had, because 23 corner rooms have views of the water. They decide to take these regular retail rooms and turn them into premium Corner King rooms, which can sell at $100 above the regular retail price during peak summer season.
That creates a secondary advantage, in that it decreases the number of regular retail rooms. By doing so, it becomes easier to “fence out” – or have a third-party – create special corporate rates during peak periods.
Then there’s a tertiary advantage. Having now created these premium rooms, management pushes to sell these rooms in advance. That reduces available supply over time periods when they’ve been sold, which therefore pushes regular retail rates higher once the premium rooms sell out.
Finally, management can tinker with length-of-stay restrictions on regular rooms, requiring visitors to stay several days to book cheaper rooms – or fewer days to book the more expensive premium rooms.
That is what’s known as management experience.
And what I just described is exactly what Ashford Prime management did with the Marriott Seattle.
Premium rooms at this hotel went for an average of $327 in summer 2012. They increased every year, reaching $450 by summer of 2015 – about a 40% increase. Regular rooms went from $282 to $372, up 32%.
So if you’re thinking of voting in Sessa Capital’s nominees, who have no experience running hotel operations, think again. They would have just let the Marriott Seattle sit, while other hotels took their business, because they didn’t have the experience to wring more revenue out of the property.
More revenue, as Ashford Prime management generated, leads to better performance, and very likely higher stock prices and dividends.
There’s no question here. Vote the GOLD proxy card and keep Ashford Prime management in place.