LOS ANGELES—The rumbles from the jets at the Los Angeles International Airport next door to the Hyatt Regency LAX on Tuesday provided the perfect backdrop for an industry conference that fueled the ongoing notion that the U.S. hotel business is still zooming down the runway.
Speakers at Meet the Money 2018 generally maintained the predominantly bullish outlook that has permeated hotel circles for the past eight years. Suzanne Mellen, senior managing director and practice leader, San Francisco, for HVS, called the current hotel environment “sunny” and said the hotel real-estate community’s outlook for the next year is positive.
Vail Ross, SVP of global business development and marketing at STR, said fundamentals remain strong—particularly demand, which is growing faster than supply. (STR is the parent company of Hotel News Now).
Even those considering potential down sides, such as LW Hospitality Advisors President & CEO Dan Lesser, were able to put a positive spin on things.
“RevPAR growth is slow, but it’s important for everyone to remember it is increasing. Although it is slow growth, it is growing nonetheless,” he said.
The optimism carries over to the lending side of the business—especially when it comes to acquisition and refinance lending, speakers said.
Troy Miller, SVP at Starwood Property Trust, summarized the overall feeling for that type of financing: “If I’m a borrower, you back up the truck and borrow all you can borrow right now.”
The positive vibes don’t mean there isn’t some wariness bouncing around the industry. What is rapidly becoming recognized as the industry’s biggest challenge—the lack of qualified employees—weaved its way through most of the conversations during the day.
While running through the Lodging Industry Investment Council’s annual Top 10 issues list, LIIC co-chairman and HREC CEO Mike Cahill said the availability of quality employees is worrisome to 49% of LIIC members, and 78% believe their hotels have been negatively impacted by issues revolving around low unemployment.
Panelists agreed.
Rob Palleschi, interim CEO for G6 Hospitality, said hoteliers must work hard to keep employees from leaving.
“We’ve got these great new leaders coming into our business; we need to retain them,” he said. “We can’t train them, teach them all the basics and watch them go to another business.”
Bill Blackham, CEO of Condor Hospitality, said the labor issue is affecting his company’s acquisition strategy.
“There are certain markets in the United States where we simply won’t look to buy hospitality products because of the labor conditions,” Blackham said. “The labor issue at the hotel level as well as, frankly, at the corporate level is something we’re all going to continue to struggle with, and it’s creating ever-increasing risks and pressures on that drive to create value.”
Speakers agreed there could be other turbulence.
Peter Connolly of Connolly Hospitality Advisors said he expects the industry to “cross the line” this year and see supply growth become higher than demand growth.
Even Mellen’s sunny outlook has some passing clouds.
“We are a not a hot industry anymore,” she said. “If you go to different conferences and think tanks, they’ll say a lot of capital has left the industry because we’re not a major growth story right now, particularly on the asset side, particularly on the REITs side.”
Photo of the day
Lodging Industry Investment Council co-chairman Mike Cahill counted down LIIC’s Top 10 Industry Issues during Tuesday’s Meet the Money conference. (Photo: Jeff Higley)
Head-scratcher of the day
Seventy-eight percent of respondents to the LIIC Top 10 survey view new supply as the top investment concern; 82% are currently building new lodging assets. Can you say “self-induced stress”?
Slide of the day
Despite the belief that only select-service hotels are being built, there are large meetings-oriented hotels being built. According to STR, nine properties with 50,000 or more square feet of meeting space will open during 2018.
Quotes of the day
“This market is probably a seller’s market driven by the low cost of debt capital. We’ve been able to sift through these deals and find sellers that have reasonable expectations and make deals.”
—Richard Stockton, CEO, Braemar Hotels & Resorts
“Everything is changed in the brand area because of the availability of reliable information to the guest. The fact that the lenders are being more open to doing non-branded hotels is ... because they work.”
—Steve Van, president & CEO, Prism Hotels & Resorts
“Wherever we are in this new cycle, it’s not a continuation of what’s gone on the last nine years. We feel very good where we are now, whatever cycle we’re in.”
—Michael Watson, director & head of U.S. lending-hotel finance group, U.S. Commercial Real Estate at BMO Harris Bank
Memory of the day
Panelists during the “Keys to successful hotel development” session took a few moments to remember Marty Collins, the CEO of Gatehouse Capital who died last week. Collins was instrumental in the early development of the W brand.