GlobeSt.com: The bulk of your experience has been in the hotel industry. How does that translate into your new, broader, role?

Arasi: I'm not so much attempting to translate it into other property types because that certainly is my specialization. There are plenty of people here who've developed mega office buildings, retail and residential, so it's more of a complementary situation. Hotels are a lot more complex property type because you've got not only the fundamental real estate components, and parenthetically a much more complicated real estate building, but you also have the operating business. Many real estate professionals do more than one property type. It just tends to work that way. But most people would tell you that it's a lot easier if you've done hotels to do office, retail or residential than the other way around.

GlobeSt.com: What is your take on how hotel overdevelopment has affected us?

Arasi: There was overbuilding in the early 1970s and they got caught up, like every other property type, in the real estate bust of 1973. Then to about 1980 there was hardly any hotel development. At that point a lot of institutions invested in hotels because the returns were extraordinary and they were considered inflation protected. Between 1980 and 1986 there was a huge amount of hotel development funneled by favorable tax laws, and that activity level crashed in 1986 because the laws changed. You did have a downward trend for a few years when the tax laws got changed and then you had the Japanese-led investment bubble that took us through 1992 when there was a fairly high amount of hotel development. In 1992, when that bubble burst and you had the US recession, you had the biggest depression in hotel values that you've had in several generations. From 1996 until Sept. 11 there was a lot of new development, although most of that happened in the limited-service and middle market and not the large, institutional quality buildings. Once Sept. 11 happened, development slowed down overall.

GlobeSt.com: But now that we are well into the recovery, where does the industry stand?Arasi: Hotel development has bounced back yet again; however, it has concentrated mainly in limited service and middle market. So if you really look at the luxury and large full-service categories you have had relatively little new hotel development since the early 1990s.

GlobeSt.com: With some predicting overdevelopment, once again, in another five years is there any fear of another slump?Arasi: There is always an underlying fear of geopolitical risks, but people have begun to move beyond that. Because there has been little development for more than 10 years in the high-end and large scale projects--and a lot of the product is showing its age--you are now starting to see investor interest move toward new development. Also, a lot of these same investors have been buying existing properties and the price has gotten to be almost as high, and in many cases higher, than replacement cost. You have a confluence of trends and market situations that suggests a strong opportunity for development in the high-end and large-scale projects.

GlobeSt.com: Why are a lot of new hotels offering a residential component?

Arasi: It's to make the numbers work, but the numbers won't work unless there's a demand for it. There is a transformation going on with demographics where there are a lot of people who either want a return to urban living or they're empty-nesters and they don't need a big house. It also brings a branding to their residential component and allows residents to tap into the living and hospitality services that can be offered if their residences are serviced by a hotel operation. They may just want a more sophisticated component to their lifestyle.

GlobeSt.com: Who are the investors in these new developments?

Arasi: It's private investment companies, real estate opportunity funds, high-net worth investors, foreign investment companies, real estate investment trusts and actually the brands themselves. Although the brands tend to be partial investors and not the controlling investors.

GlobeSt.com: How does the investment market in the hotel industry compare to office?

Arasi: In a lot of office markets there is still a more-than-adequate supply and in a lot of other markets there has continued to be new building. You have a lot less of that as it relates to hotels. Remember also, hotels probably fell off more than others as a result of Sept. 11. We also had a lot more daylight to rebound, in fairness to the other property sectors. Furthermore, there has been an oversupply of other institutional investors' favorite property types like multifamily. Hotels have had the opposite. I'm not talking about the limited service and middle scale; it's really a tale of two markets. I'm really talking about the high-end and large hospitality projects.