The HotelNewsNow.com editorial team has compiled extensive coverage from Day 1 of the 33rd annual New York University International Hospitality Industry Investment Conference. Below you’ll find insight from leading CEOs, investors and data analysts.
First, a select handful of CEOs said industry fundamentals are as good as they’ve ever been, writes Features Editor Patrick Mayock. Hoteliers just need a little time before they start taking advantage.
“When’s the last time we’ve seen the dearth of supply in the U.S. like this?” said Hilton Worldwide’s Chris Nassetta. “… The fundamentals (of supply and demand) are the best I’ve ever seen in my career. … In the end, the laws of economics are alive and well.”
Rates, however, have not been as robust. When asked why their respective hotel companies weren’t keeping pace with historic spikes in demand, the chiefs agreed it’s a simple matter of business cycle dynamics.
“This is a very natural transition in the cycle,” said Frits van Paasschen of Starwood Hotels & Resorts Worldwide. Hotels fill up, occupancy is starting to drive rates, and rates will begin to account for a larger portion of increases in revenue per available room, he added.
Later, Editorial Director Jeff Higley listened to two private-equity icons say the time is right for investment in hotels as the industry is trying to find its footing on the slippery slope coming out of the recession.
“Being an investor … if you wait for the all-clear sign, it’s generally too late,” said Jonathan Gray, senior managing director and co-head of real estate for The Blackstone Group. He added that the fundamental question to ask in acquiring hotels is the cost to purchase a hotel compared with the cost to replace it. If it costs less to buy the property, that’s a good signal to pull the trigger.
Barry Sternlicht, chairman and CEO of Starwood Capital Group, wasn’t as optimistic as Gray.
“I worry about the downside more than I ever have in my career,” said Sternlicht, whose company holds hotel assets that include Groupe Du Louvre, which has more than 1,000 hotels. “I’m playing our (investment) fund with a large amount of safety. I’m just worried about the world.”
And finally, News Editor Stacey Higgins talks data with analysts, who had positive news to report from NYU.
The key indicators for year-end 2010 compared to year-to-date April show the United States is starting to see an average daily rate recovery, said Mark Lomanno, CEO of STR.
“It’s still sluggish compared to other regions, but we see now a third of (revenue per available room) growth is due to ADR growth, and it will continue as a larger percentage of RevPAR growth,” he said.
And demand is back with gusto. In the 12-month period through April, the industry saw more rooms sold than ever before, Lomanno said.
“The industry is much more likely to revert back to the historical demand growth rates, which is positive,” Lomanno said. “That’s going to jettison movement forward.”
In developing a forecast for 2011 and beyond, hoteliers should keep in mind that all metrics appear to be performing incredibly well because we’re comparing it against a terrible year last year, writes HotelNewsNow.com columnist Ric Mandigo. Rather than just track change year over year, Mandigo took a step back and offered a broader perspective by digging as far as he could to show some numbers in context.
His data in this case went back to 1960 for the Chicago Metro Area, which started out with average daily rate at US$13.95 compared with 2010’s US$112.67. The statistics clearly show that while occupancies tend to fluctuate significantly in clearly defined cycles, rates for hotels exhibit a strong upward growth, eventually recovering from recessions stronger than they entered them. Or did they?
• Read “
Room values change little over 4 decades”
Penn National Gaming acquired the M Resort Spa Casino in Las Vegas for US$230.5 million, according to a news release.
M Resort Spa Casino, located at the southeast corner of Las Vegas Boulevard and St Rose Parkway, opened in March 2009. Master plans for the resort include the potential to develop up to 92,903 square meters of retail space and a multi-screen digital cinema complex.
The U.S. Travel Association attributed losses in travel industry employment in May to a continuing economic struggle. Employment in the travel industry was down 3,000 jobs in the month, the first monthly decline in six months. Over the past year, travel jobs increased by 107,200, which accounted for 12.3% of the 870,000 U.S. jobs added overall, the association said.
"With the domestic economy appearing to decelerate in the second quarter, reliance on exports will play an even more critical role in keeping the recovery ongoing and create job opportunities for Americans,” David Huether, senior VP of economics and research at the U.S. Travel Association, said in a statement. “Last year, foreign travel in the U.S. supported 931,000 jobs directly in the U.S. travel industry and another 856,000 jobs in other industries. And through the first quarter of this year, travel exports were up 8.7% from 2010, a good sign that this key job creator is continuing to grow.
"Attracting more foreign visitors to the United States will play an important role in creating job opportunities for U.S. workers across America,” the statement said. “However, the U.S. is in strong competition with other global markets, which is why the U.S. Travel Association recently put forth a plan to create 1.3 million domestic jobs by making the U.S. a more-competitive export market in global travel."
The volume of specially serviced loans in the U.S. continues to decrease, according to a new release from Fitch Ratings. Specially serviced loans reached a peak in the second quarter of 2010, with a declining trend for the next three quarters. Approximately US$85.7 billion loans were being worked out by special servicers as of the first quarter of 2011, compared to the high of US$91.2 billion in Q2 2010, according to Fitch.
“Improving market conditions continue to impact both the velocity of loans transferring into special servicing and the ability of servicers to move loans out of special servicing," said Stephanie Petosa, managing director.
Compiled by Jason Q. Freed.