• Melding statistics from Smith Travel Research and current forecasts for the US economy, PricewaterhouseCoopers LLP predicts an 11.2% drop in RevPAR in 2009, which comes after RevPAR declined only 1.9% in 2008. Behind that double-digit plunge is an anticipated 3.9 percentage point decrease in occupancy to 56.5% due to declining demand. That slump in heads in beds, combined with fewer guests gravitating toward higher-priced hotels, is expected to result in a 5.2% reduction in average daily rate.
• Meanwhile, PwC's former lodging industry practice leader, Bjorn Hanson, now a clinical associate professor at the NYU Tisch Center for Hospitality, Tourism and Sports Management, says after spending a record amount on capital expenditures last year, hotel owners will put on the brakes on sprucing up their properties in '09. He forecasts that the CapEx total for this year will hit $3.75 billion, a plunge of 30% from the $5.5 billion that was spent in 2008.
• If capital expenditures are down this year, it's probably because more hotel owners will encounter problems paying their debt. According to PKF Hospitality Research, the number of full-service hotels in the US with insufficient cash flow to cover their debt is expected to rise by 25% this year. Mining its propriety database of 6,000 financial statements, PKF found that an estimated 15.9% were unable to generate sufficient cash from operations to cover debt service payments in 2008. Based on current RevPAR and NOI predictions, the firm anticipates that number will rise to 19.9% by the end of this year.

Some owners, therefore, may be forced to dip into their own pockets to meet debt obligations, points out Bob Eaton, executive managing director of PKF Capital/Hotel Realty. If there are still shortfalls, workouts or foreclosures may result, he adds.PKF further predicts that property values are on track to decrease another 20.1% in '09 following a 14.1% decline in 2008. Between 2007 and 2001, the firm estimates that full-service hotels will take a 35.4% hit in values due to fluctuating profits and rising cap rates.

• As values dive, so has transaction volume. Jones Lang LaSalle, in its "Investment Outlook 2009" report, calculates that $24 billion worth of lodging assets changed hands in 2008, a precipitous drop the $113 billion recorded worldwide in 2007. The first half of this year will likely mirror late-2008. But volume may pick up in the latter portion of this year as some investors will be forced to sell or undertake a strategic portfolio readjustment and dispose of assets "even while pricing remains weak," says Arthur de Haast, global CEO of JLL Hotels.
• For a majority of owners in the Americas, which includes the US, Canada, Mexico, the Caribbean and South America, the most viable option appears to be to simply hang onto their properties for the next six months. In its most recent Hotel Investor Sentiment Survey in December, JLL Hotels found that 51.1% of respondents said they intended to hold their assets in the near term. That's a jump of 13 percentage points from the previous survey in July. Only 32.3% indicted they plan to buy, while 7.9% foresee development in the near future, and 8.6% want to sell.
• Moody's Investor Service predicts that the falloff in hotel performance will "likely be deeper and longer lasting than the last downturn following 9/11." Consequently, CMBS pools with significant concentrations of hotel loans are expected to experience downward ratings pressure. Specifically, single-borrower, multi-hotel property deals could see multi-notch downgrades.
• But there are always optimists even in a down market. In DLA Piper's 2009 Hospitality Outlook Survey, two out of three respondents contend the current market has created good buying opportunities for well-capitalized investors.