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HREC's Paul Sexton

'Only a very small fraction of distressed properties have cleared the market.'

By Carl Cronan | Updated on March 12, 2010

Times are still tough for the hotel sector these days, which means more lodging properties are likely to fall into distress in the coming year. The forecast for the remainder of 2010 isn’t much brighter, with hotel occupancy expected to remain flat at 55%, average daily rate decreasing 3.2% to $94.39 and revenue per available room dropping 3.2% to $51.99, according to Smith Travel Research.

Last week’s GlobeSt.com Quick Poll, with approximately 200 votes cast, shows that 60% of readers think things will get crazier for hotel distress, while the other 40% believe we’ve seen the worst. Paul Sexton, vice president with Hospitality Real Estate Counselors in Orlando and a 20-year veteran of hotel real estate, gives his thoughts on the matter.

“On the operations side of the equation, we’ve probably seen the worst of it. Rooms sold actually rose 2.6% in January, occupancies have bottomed out and there is a realistic expectation that revPAR will swing positive by the third or fourth quarter of this year. Because most operators did an excellent job of cutting costs, cash flow will show huge improvements once revenues go positive.

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