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Hunter Hints At Better Times Ahead

It's all in the attitude and hoteliers are seemingly pretty resolute in trying to see the positive.

Tuesday, March 17, 2009
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The lodging investment community may have been panic stricken during the last six months due to an evaporation of credit and a decrease in hotel room demand. But more signs are emerging that the end of the bad times will come, and smart hoteliers that position themselves properly will be the first ones to cash in on future profitability.

Accentuating the positive seems to finally be gaining traction here at the Hunter Investment Conference, and that attitudinal shift is being seen by many as the critical first steps to a robust industry wide recovery.

It’s a seminal change that as recently as January’s America’s Lodging Investment Conference saw too many sad sack hoteliers paralyzed by fear. Now the panic is starting to subside and it’s the clearest signal yet that the time for inaction is over. Top level executives seem to be mobilizing to prepare for sunnier days ahead.

“We will get through this [downturn],” said Jim Anhut, SVP Chief Development Officer with InterContinental Hotels Group. “This is profitable industry and it is growth industry globally. It will be hard to keep us down.”

Nancy Johnson, EVP, Chief Development Officer with Carlson Hotels Worldwide agreed. “You have to remain optimistic. You have to remain vigilant because there will be a great opportunity presenting itself to you and you have to be ready,” Johnson said to conference attendees yesterday. “You have to in today’s world be proactive and do the research and be on the lookout for the deals coming on board. Optimism and to working to find out where the light at the end of tunnel is.”

One of the most bullish attendees at the event said the good times are approaching. “I believe we are coming into a time of remarkable opportunity,” said Peggy Berg, President of The Highland Group. “We respond viscerally to what other people do and say and yes, we have issues, but the sky is not falling and is unlikely to fall. We have been through times of dramatic change and the hotel business has never gone back to where it was before. When we come out of this it’ll be a different normal. But that’s OK. We will always be adapting to the future with new products, markets and ways to attract and manage customers and business,” said Berg.

Jan Freitag, VP with Smith Travel Research noted that the hotel industry will continue to be profitable over the long term, unlike the airline industry, which he noted has over its lifetime never turned a profit. “This is not an industry in need of a bailout,” Freitag said of the hotel business. “We will still have couple of billion in profits this year more than 2000 when adjusted with inflation.”

Freitag also cautioned against discounting, which he indicated is akin to a dangerous trap that can erode profits for years to come even if it seems like the right decision to goose business in the short term. He noted that the rate cuts the industry put into place in 2001 and 2002 took five years to recover from. “Discounting not only hurts in the moment but hurts for a very long time afterward.”

According to Smith Travel predictions, he said RevPAR will drop about 5.9 percent total for the year, but will then tick up about 2.6 percent in 2010. A percentage of the RevPAR drop is attributed to discounting. “You are all going to nod and walk out and discount,” Freitag opined. “Think about what you are saying to a customer on what a room is worth.”

Rick McCue, VP brand performance and support with Embassy Suites sees things a couple of ways.
“As an industry we have to stop the doom and gloom and throw away our televisions. It’s important to stop listening to how bad it is. Business is still being done and people are still buying stuff,” said McCue.

Finally, David Roedel, Partner, Roedel Companies, said attendees at this year’s Hunter Conference are trying to be positive even if the operating environment is still somewhat murky. “Until we see some clarity, things will still be unclear. But what is clear is that those that can make investments now in properties, it’s a time. Investors have the opportunity to turn assets around and prepare for when the market turns,” said Roedel.
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RE: Hunter Hints At Better Times Ahead article link

It's great to hear the positive note and optimism coming out of the Hunter Conference. I'm sorry I had to miss the event this year.

This news of industry optimism contrasts with what has recently been been one of our bigger collective challenges - hospitality-specific gloom and doom in the press. It feels, at times, that some in the industry are trying to one-up one another on the projected length and depth of the pain hoteliers will feel during this downturn. The question is arguably a challenging one – is this healthy realism or consequentially damaging. While we no more need Pollyannaism than we do Chicken Littleism right now, the effect is for those outside our industry (e.g. bankers) to apply a broad and negative brush.

You and I understand every hotel market is local, certain brands do an outstanding job of vetting franchisees, we’re coming off several years of record profitability, great deals of smart money went into freshening up product quality, guest-centric quality regimes are much more than a slogan at many brands, and the management rigor and sophistication at the ownership and franchise level across the industry is much improved since our last downturn. Our industry is more resilient and less fragile than the all-to-frequently dour reporting would suggest.

Assuming that’s true, does it then make sense to air our dirty laundry within the industry so that those outside that we rely on (e.g. bankers) might generalize and shun us until better times prevail? The debt and equity capital that banks and other lending institutions provide is the grease that allows hoteliers to continue our growth and improvement. Lenders are a cautious breed all too quick to stand on the sidelines when our own language frightens them.

We can openly admit to the challenges and tests we face in the hospitality industry, but I would suggest we do so with the nuanced recognition that many hoteliers are answering these challenges expertly.

Again, the positive and productive story coming out of the Hunter Conference in your article stands in stark contrast to the overly grim recent news cycle. That's terrific to see. I hope the changing attitude becomes infectious within the industry.



Cam Larkin

Managing Director

Larkin Hospitality Finance

Phone (469) 916-8518

Cell (214) 724-5744

Fax (469) 533-8517

Email cameron@larkinhf.com

Web www.larkinhf.com

Office 4407 Belmar Court, Dallas, TX 75287
Posted by: Mr. Cameron J. Larkin - MBA, CCIM, MBB
Email: cameron@larkinhf.com

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