I'm done with cautious optimism. I won't write those two words together, again, and you can quote me on that. We, the media covering theindustry, and many working in the industry, have been quick to try to characterize the state of lodging and compare it to the peak years of 2005-07. We all keep waiting, watching and hoping for a return to those glory days, when debt was available for almost anyone and any project, when occupancy, rates, profits, values and supply kept growing.
What I learned at the New York University International Hospitality Industry Investment Conference is those days aren't coming back, and those who keep waiting are going to get left behind. The world has changed, and the sooner we realize that and move on, the better. Thirty years ago, a financial crisis in Greece barely drew mention on CNN, a fledgling 24-hourchannel most hadn't heard of. Now, we have around-the-clock coverage of the Eurozone debt crisis on multiple channels. If it's not Greece and Spain, it will be another country on another continent that's affecting the now-global economy. That's not even mentioning the inevitable natural catastrophes, wars and terrorism.
Even if the U.S. falls off a fiscal cliff at the end of this year, my money is on us landing on our feet. The upcoming election is another hot-button issue, but you know what? After it's over, there will be another election.
My point isn't that the world is a scary place, but that times really aren't that bad. In fact, they're pretty darn good, just not the way they used to be. Host Hotels & Resorts CEO Ed Walter said during an NYU panel the scariest part of the day is the first 15 minutes spent reading the paper. There's a lot of bad news out there, yet hotel occupancy and rates keep going up.
Randy Smith, the founder and guru behind STR, said revenue per available room would reach peak levels in 18 months. Steve Rushmore, the founder and guru behind HVS, said hotel values will climb another 17% this year and next.
Sure, debt isn't available like it was a few years ago, but those days aren't coming back. Just ask Arne Sorenson, Marriott CEO, who told the press the availability of high levels of very cheap debt are likely gone forever. “A fundamental change,” he said.
But you know what comes with that? “We'll see investors in the lodging industry and real estate side a bit better capitalized and a bit longer-term focused than in those peak years,” Sorenson said of a result that can't be too bad for the industry.
As two other major hotel company CEOs told me casually, times are really pretty darn good. Both were quite optimistic about how their companies would fare this year. Now maybe they were two who didn't have to answer to public shareholders and analysts, but I think they're right. There will be bumps and scares along the way, but those who understand that and can adapt and persevere will be just fine.
“Challenges are out there, but it's nothing new,” said Dan Hansen, CEO of Summit Hotel Properties, during the same panel with Walter at the NYU event. “We've been here before.”
So let's act like it, and throw caution to the wind.