Hotel Madison representatives tell BOE full-service operations and meetings business raise operating costs

Mike Andrews, chief financial officer of DPM Partners (the managing member for Hotel Madison and related entities), told the Board of Equalization that Hotel Madison operates as a full-service, group-oriented hotel and that its operating profile differs from smaller select-service hotels often used as comparisons.

“Hotel Madison is a full service hotel. ... We have 230 rooms,” Andrews said, describing the property’s size, in-house restaurant and more than 20,000 square feet of meeting space. He told the board a significant share of the hotel’s business comes from meetings and conferences, which requires a larger sales staff and increases operating costs relative to select-service properties.

Andrews also explained how those differences affect valuation and cap-rate expectations. He said cap rates reflect both financing costs and the perceived security of a property’s cash flow and described the hotel’s business mix as more complex and therefore potentially higher risk to investors. “Our budget for this year is 19,500 group room nights, and we’re gonna hit that,” he said, outlining a benchmark the operator uses to measure group-business recovery after the pandemic.

The presentation included discussion of branded (flagged) versus independent operation, franchise fees and the cost of joining a national reservation system; Andrews said those decisions can influence what buyers will pay. The board did not announce a decision on the Hotel Madison appeal during the hearing; staff told the presenters they would be notified in writing by mail.

No formal action on Hotel Madison’s assessment was recorded in the transcript during the session.