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Coming Together

Industry Executives Weigh In On Key Issues During HI Connect® 2016

Monday, March 21, 2016
Dennis Nessler
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Hotel Interactive®, Inc.’s annual HI Connect® concluded this past weekend in Nashville, TN, and brought together an unprecedented four distinct events into one. In addition to the traditional room vignettes, HI Connect® included the BITAC® Experience, Inndependent Lodging Executive Summit and a Diversity Summit as well. In addition, a number of design awards were doled out at the Gala Dinner on Friday night. (For more information, click here.)

As always, HI Connect® included a host of educational sessions featuring a wide array of industry professionals from owner/developers and brand executives to designers and purchasing professionals. The executives discussed a variety of hospitality related topics, including current performance trends, asset values and the status of the sale of Starwood Hotels & Resorts Worldwide.

During the Owner’s Oracle session, several executives weighed in on whether or not they were feeling some of the softness in the market that had been reported by many in the early going of 2016.

Dan Fay, Chairman, Commonwealth Hotels, LLC, commented, “Last year was just a fantastic year. We felt a little slowdown in our portfolio, probably late in the fourth quarter and that’s continued. Everybody is forecasting maybe 5 percent to 6 percent RevPAR growth for this year, fortunately our portfolio is a little bit ahead of that. So we feel good about where we’re going, I don’t see a downturn but I think it is slowing slightly.”

According to Kerry Ranson, President/COO, Expotel Hospitality, “We did [see a slowdown] in January. February has been a little bit of a rebound for us, and March is actually pacing pretty well.”

Meanwhile, Bill DeForrest, President & CEO, Spire Hospitality, noted, “I’m optimistic, I think the first quarter was a little softer than everybody thought. Our portfolio is mostly big-box, full-service hotels and I think the pace of group business we have on the books for the rest of ’16 is going to be great. We just didn’t see much of it in the first quarter so occupancy was a little soft. But I think April through October is going to be really good times for our business.”

Rick Tomljenovic, owner/partner, Tri-Star Hotels, offered, “I think we’re in an 18-24 month cycle of really good operating as far as numbers. But we’re in the longest upcycle we’ve ever been in, we’ve got to plan for what might happen after that.”

Several brand executives weighed in on current conditions as well during “The View From the C-Suite.” Doug Collins, Chairman and CEO, Hospitality Lodging Systems, maintained that having a little perspective is important.

“You have to look at where we came from. By any metric, rate, occupancy or RevPAR, 2015 was the best year ever. From an overall standpoint, the industry is very healthy. Predictions are that we’re going to have another healthy increase in RevPAR this year, maybe 3 percent or 4 percent. You’ve got to realize that we’re coming off three good years of consistent growth. If you compared it to 2013, we’re probably 15 to 20 percent ahead,” he said, acknowledging that some individual markets are having their struggles such as San Antonio, Houston, and New York City.

Brian Wogernese, CEO, Cobblestone Hotels, added of the broader national slowdown, “that hasn’t affected us as much as we’re in a lot of subtertiary markets. Some of the energy things have affected us, so long term I think we’re going to see a little bit of a slowdown in some of our areas. We’re not seeing as much yet, but we are anticipating a little bit of a slowdown.”

Asset values have been notably high in recent years and are generally a good gauge of how the industry is doing. A couple of owners offered their perspective on current values.

“I think sellers’ expectations of asset values are very high. The debt market has gotten much more complicated in the last six months, and the ability to get really aggressive debt that was there a year ago is more difficult. Obviously that affects purchase price and the pool of buyers that are out there. With the REITS kind of sitting on the sidelines and some of the private equity guys not being able to do the things on the debt side that they want, for most owners/operators [here] it’s a pretty good time to be in the market and compete for assets. There will have to be some resetting of expectations on the seller’s part,” said DeForrest.

Fay added, “With asset values we’re really kind of in a strange spot, because hotel performance revenues are going up and NOI’s are improving, which should mean more asset values but then the cap rates are rising in a low interest rate environment. Properties that were trading for a seven cap rate a year ago are trading for an 8, 8¼ or 8½ now. It’s really a strange environment that I don’t really understand.”

Fay also commented on the proposed sale of Starwood Hotels & Resorts Worldwide to Marriott International, which was very much in doubt at the time of the panel following an accepted offer from a consortium led by Chinese firm Anbang Insurance Company. Marriott has since offered a counterproposal and struck a new deal with Starwood.

“We knew what Marriott would mean because we’ve seen them acquire hotels before and we understand the franchise system. We have a lot of Marriott product that is fairly comparable, with a Chinese group coming we don’t know. We just don’t know who they are. The franchise business is different from the hotel business, they might be fantastic and they may not. It’s just an unknown, at least in my mind,” said Fay.

DeForrest agreed. “From an owner of the asset standpoint, I have a lot more comfort being in the Marriott brand family. It could be a great outcome long term with Chinese buyers, but at the same time there’s uncertainty.”
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Dennis Nessler    Dennis Nessler
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