Maria Wood is senior editor of Real Estate Forum magazine.
NEW ORLEANS—Despite a sluggish opening month to 2004, a panel of hotel operators and owners expressed optimism that the rest of the year will show stronger results at their properties. The panelists took part in a franchisee roundtable held during Hilton Hotels Corp.'s Focused Service Conference, held here for owners and operators of the company's limited-service brands, such as Hampton Inns, Hilton Garden Inns and Homewood Suites. More than 3,000 people attended the event, which ended Thursday evening.
Ron Kendall, president of Buffalo Lodging Associates, in Stoughton, MA, said that although indications were that 2004 would get off to a good start, January was "disappointing," with 18 of the firm's 24 hotels performing "less than I had hoped." He added that there is still a great deal of pressure on rates. However, he stated that the fourth quarter of 2003 was good, an indication that the rest of 2004 would not follow January's lead.
Karen Stelmak, vice president of operations for Duluth, MN-based Zenith Management Corp., agreed that January was a slow month at many of the company's 37 hotels. Yet she noted that future bookings "look good" and group reservations were up. As for the all-important question of overbuilding, Stelmak conceded that there is "saturation" in most of the markets her company operates in. "We'll still waiting for demand to catch up," she said.
These still-soft fundamentals have not deterred capital sources, who appear willing to dip their dollars in the industry. Tom Arnot, head of Beechwood Development LLC in DeForest, WI, said that getting money was "very tough" in 2003, but that prospects were looking better this year. "We have five projects in pre-development, and we will fund most of those," he said. "The smart people should come in now at the cusp of the next cycle." Jeff Good, president of Good Hospitality Services in Valparaiso, IN, added in the past couple of months, "banks have started calling us."
Jay H. Shah, president and COO of Philadelphia-based Hersha Hospitality Trust, said that public lodging stocks have seen a more than 20% run up in prices. "People are getting in expecting to participate (in the recovery) over the next few years," Shah said.
The panel discussion, which was moderated by Jerry Daly, president of Daly Gray Public Relations, was held a day after Hilton introduced its new model for the Hampton Inn brand. Albeit a small sample, those around the table spoke mostly favorably of the new model, which will incorporated in all existing and new Hamptons. The changes touch on everything from the breakfast bar to new beds and the installation of high-speed Internet access in all Hampton properties. William B. Murray, partner, president and CEO of Integral Hospitality Solutions in Birmingham, AL, said that the cost to add these new features would average a total of $25,000 for a typical 100-room hotel. He said that there would be some unhappy owners, but that 90% were on board with the changes. "The good operators are embracing the program," Murray said.
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