Industry Terms – The Letter M

Industry Terms TrevPAR World

Manchised – hotel properties that are managed and franchised by the same company.

Mark to Market – 1. A measure of the fair value of accounts that can change over time, such as assets and liabilities. Mark to market aims to provide a realistic appraisal of a company’s current financial situation. Problems can arise when the market-based measurement doesn’t accurately reflect the underlying asset’s true value. This can occur when a company is forced to calculate the selling price of these assets or liabilities during unfavorable or volatile times, such as a financial crisis. For example, if the liquidity is low or investors are fearful, the current selling price of a bank’s assets could be much lower than the actual value. The result would be a lowered shareholders’ equity.

This issue was seen during the financial crisis of 2008/09 where many securities held on banks’ balance sheets couldn’t be valued efficiently as the markets had disappeared from them. In April of 2009, the Financial Accounting Standards Board voted on and approved new guidelines that would allow for the valuation to be based on a price that would be received in an orderly market rather than a forced liquidation.

  1. The accounting act of recording the price or value of a security, portfolio or account to reflect its current market value rather than its book value. This is done most often in futures accounts to make sure that margin requirements are being met. If the current market value causes the margin account to fall below its required level, the trader will be faced with a margin call.
  2. When the net asset value of a mutual fund is valued based on the most current market valuation. Mutual funds are marked to market daily at the market close so investors have an idea of the fund’s NAV.

Market – In the U.S., a market is defined as a geographic area composed of a Metropolitan Statistical Area (i.e. Atlanta), a group of Metropolitan Statistical Areas (i.e. South Central Pennsylvania) or a group of counties (i.e. Texas North). Outside the U.S., a market can be defined as a city, region or country with at least 30 participating hotels. A market must contain a sufficient number of hotels to permit further subdivision into submarket and price segments.

Market Class – Hotels located in the same market and classified in the same chain-scale segment as the subject hotel are grouped with the subject hotel into one of seven market scale groups: :

  • luxury;
  • upper upscale;
  • upscale;
  • upper midscale;
  • midscale; and
  • economy.

Market Class Collapsed – Hotels located in the same market and classified in the same chain scale segment as the subject hotel. There are two market scale (collapsed) groups:

Upscale (includes luxury, upper upscale, upscale and independent)
Midscale/economy (includes upper midscale, midscale and economy)

Market Price Segments (U.S. Only) – The five categories of a metro STR market which are defined by actual or estimated average room rate. The five price categories are shown below:

  • luxury – top 15% average room rates;
  • upscale – next 15% average room rates;
  • mid-price – middle 30% average room rates;
  • economy – next 20% average room rates; and
  • budget – lowest 20% average room rates.

In rural or non-metro STR markets, the luxury and upscale segments collapse into the upscale and form four price segment categories:

  • upscale – top 30% average room rates;
  • mid-price – next 30% average room rates;
  • economy – next 20% average room rates; and
  • budget – lowest 20% average room rates.

Market Scale – Hotels located in the same market and classified in the same chain scale segment as the subject hotel are grouped with the subject hotel into one of seven market scale groups:

  • luxury;
  • upper upscale;
  • upscale;
  • upper midscale;
  • midscale;
  • economy; and
  • independent.

Market Scale Collapsed – Hotels located in the same market and classified in the same chain scale segment as the subject hotel. There are two market scale (collapsed) groups:

  • upscale (includes luxury, upper upscale, upscale and independent); and
  • midscale/economy (includes upper midscale, midscale and economy).

Mezzanine Debt – A general term describing a situation in which a hybrid debt issue is subordinated to another debt issue from the same issuer. Mezzanine debt has embedded equity instruments (usually warrants) attached, which increase the value of the subordinated debt, and allows for greater flexibility when dealing with bond holders. Mezzanine debt is frequently associated with acquisitions and buyouts where it may be used to prioritize new owners ahead of existing owners in case of bankruptcy. Some examples of embedded options include stock call options, rights and warrants. In practice, mezzanine debt behaves more like stock then debt because the embedded options make the conversion of the debt into stock very attractive.

Under U.S. generally accepted accounting principles, how a hybrid security is classified on the balance sheet depends on how the embedded option is influenced by the debt portion. If the exercising of the embedded option is influenced by the structure of the debt portion in any way, the two parts of the hybrid (debt and the embedded equity option) must be classified in the liability and stockholder’s equity sections of the balance sheet.

Mezzanine Financing – A hybrid of debt and equity financing typically used to finance the expansion of existing companies. Mezzanine financing is debt capital that gives the lender the rights to convert to an ownership or equity interest in the company if the loan isn’t paid back in time and in full. It’s generally subordinated to debt provided by senior lenders such as banks and venture capital companies. Because mezzanine financing usually is provided to the borrower quickly with little due diligence on the part of the lender and little or no collateral on the part of the borrower, this type of financing is aggressively priced with the lender seeking a return in the 20- to 30-% range. Mezzanine financing is advantageous because it’s treated like equity on a company’s balance sheet and may make it easier to obtain standard bank financing. To attract mezzanine financing, a company usually must demonstrate a track record in the industry with an established reputation and product, a history of profitability and a viable expansion plan for the business.

MICE – An acronym standing for the meetings, incentives, conference and exhibitions (or events) segment of the group travel market.

Author: Derek Martin 

Source – Hotel News Now

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