SAN DIEGO-The cavernous conference hall on the Sapphire level of the Hilton San Diego Bayfront played host to the opening ceremony of the 10 Annual American Lodging Investment Summit. After some entry remarks from ALIS chair and BHN president James Burba, as well as president and CEO of the American Hotel & Lodging Association Joseph McInerney, a panel of economists blanketed the room with relevant, and somewhat, positive stats.
“The US is on the road to recovery, not double-dippers, but we’re not getting back to the way things were before,” Warren Jestin, SVP & chief economist, Scotiabank Group, posited to the crowd. He joined a panel of Steve Haggerty, global head, real estat and development, Hyatt Hotels Corp.; Gary Fritz, president, partner services group, Expedia, Inc.; Constantine Korologos, managing director Deloite & Touche; Mark Woodworth, president, Colliers PKF Hospitality Research; and Jan Freitag, director at Smith Travel Research. The name of the session was "Forescasting Has Been Tough The Past Couple of Years, But Is The Crystal Ball Getting Clearer?"
Jestin noted the US led the G7, but that it was not hard to do. China was slowing down in its recovery, but it, along with fellow BRIC’ers Brazil and India, were out-performing the developing world by quite a bit in economic growth, close to 4% or more. The good news, Jestin said, “Inflation is not going anywhere fast,” but it will move a bit in 2012, however the emerging world will have raising inflation so the cost of consumer electronics will rise in the coming years. And not the only economist to mention it on the morning, but Jestin noted two currencies were going up against the dollar: commodities countries and emerging markets.
In general, there was a sense that things were moving forward, albeit slowly with the US markets and particularly in hospitalities indicators. Freitag noted that demand is up on the east coast, which fell faster and is rebounding faster than the rest of the country, which is lagging. But Woodworth also pointed to some numbers from Moody’s which indicated that employment would be up in all 50 major markets over the next few years, sounding good news for the hotel industry as a whole. As for buying, Woodworth noted there was a “perception and reality divide” with 10.0 was the expected cap rate, but 5.7 was the observed cap. “Getting better, but no tailwinds helping,” he explained.
A concern, Korologos noted, will be the fixed rate markets. The 10-year maturity restructures that took place in 2005, 2006 and 2007 will start coming due in 2015 – 2017. Another concern will be new lenders coming onto the market as liquidity becomes more available. The issue would come about if competition breeds lower underwriting standards, as it did in the last crisis.
Fritz added that ADR was just below average, but that leisure customers were bearing the weight of this, as occupancy was still way down. Freitag also pointed to the below 60% mark of occupancy as a major issue with RevPAR nationwide. Fritz positively explained that leisure consumers were outstripping corporate and market groups in terms of recovery, but they were booking in shorter windows. There is a lack of confidence in rates, which forces later decision-making. The numbers point to leisure driving the hospitality market, so Fritz made a point that the key strategy for the future should be to focus on them, not plan on another base market.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
