There is no shortage of drama in the hotel industry in the wake of a deep recession and slow recovery. Revenues and occupancies are down while the stress level is up as industry leaders face a raft of issues, perhaps more so than at any time in the past quarter century. What follows are a few sound bites from the ninth annual Americas Lodging Investment Summit taking place here in San Diego at the Hilton San Diego Bayfront hotel. The three-day conference concludes today.
— Edward Walter, president and CEO, Host Hotels & Resorts, commenting on how technology has affected corporate business travel:
“If there was a component of the business that I’d say we’re a little bit worried about — where I do think that there has been some structural change — it would be in the more high-priced corporate area.
"A lot of the data that we’ve looked at seems to suggest that business transient travel just never recovered to the peak levels of the 1990s. It really hasn’t been growing at the rate it used to in the past. As we get to 2014 and 2015, I’m not so certain that we will see the same level of individual business travel that we even experienced in 2006 and 2007.
“I think that the whole change in technology, the way we use technology, the way we do business today is just different enough that when you look at that relationship between lodging demand and GDP, we all know that it has gone down. Our sense is that a lot of that has happened in that business transient traveler [segment]. That’s one of the reasons that we’re positioning our portfolio to compete more on the group side, or on the leisure side where we think the long-term strength will be better.”
— Thomas Baltimore Jr., president of RLJ Development, discussing the political rancor in Washington, D.C. toward big financial institutions and the impact on commercial real estate owners:
“There obviously is a risk of higher taxes, which I think is a high probability where we sit today, and more regulation. The [proposed] Employee Free Choice Act — perhaps that’s a bit muted now based on what happened in Massachusetts last week. There is the AIG effect. Government is certainly being far more overreaching today than any of us would certainly want.
“Candidly what we need — and what I hope will happen based on what happened in Massachusetts last week — is to push the administration back to the center so that we can get more pro-growth policies. At the end of the day, we need job growth. If we can get some job growth and momentum, it’s a cycle of corporate profits beget jobs, jobs increase income, which will generate more spending and create more profits. That should help fuel consumer confidence and get this recovery moving at an accelerated pace.
“Government candidly isn’t doing its part today. I think that it made wise decisions a year ago to take Armageddon off the table, but we really need pro-growth [initiatives]. If we get that and some momentum, I’m hopeful. I really want to believe that we’ll spring back quicker [in the hotel industry] than anyone can anticipate today.”
— Gary Mendell, CEO, HEI Hotels & Resorts, commenting on the velocity of transactions taking place in the marketplace:
“Most hotels are worth less than the debt today. If you are an owner of a hotel and it’s worth less than the mortgage, why are you going to sell? The answer is that you are not, unless you have to. Having said that, we’re moving into the third inning of the game. We believe that more owners are going to have to sell, and we’re starting to see that. There will be more transactions in 2010 than there were in 2009.
“Our goal is to buy about $300 million to $400 million worth of hotels in 2010, and that’s six to eight hotels. If we were able to find two hotels in the fourth quarter of 2008, I feel pretty comfortable that we’ll find four, five, six, seven hotels in 2010 that we can buy on an equity basis from owners that have to sell. The loan is due, some loans are getting extended, but a lot aren’t. In some cases, the loan is coming up for the second time, and the loan isn’t getting extended. I think that we are all probably feeling a little more deal flow than we did six months ago.”