The resort, which will continue to operate under its current name, is an indicator of the troubles in the high-end hotel market. The seizure of the St. Regis Monarch Beach, where American International Group Inc. sponsored a luxury retreat just days after accepting a federal bailout, is the most dramatic sign yet of the deep troubles in the market for high-end hotels.
Marriott International Inc.'s (MAR) dour second-quarter earnings suggest a recovery in the embattled lodging industry is still far at hand. The company reported Thursday that its quarterly earnings fell 76% amid weak lodging and timeshares demand. Although the report beat Street estimates, the company said it expects third-quarter revenue per available room to decline 20% to 23% in North America and 22% to 24% elsewhere. Marriott "sets the bar for the outlook to decline," for the industry, said Chris Woronka, an analyst at Deutsche Bank. "Marriott tends to be the bellwether. I can't imagine the other (hoteliers) saying something dramatically different." Woronka also attributed Marriott's earnings beat to some $12 million in adjustments related to residual interest on timeshare notes previously sold that were mark-to-market.
The U.S. hotel industry is likely to report fresh cost cuts this earnings season as sluggish business demand and lower room rates eat into companies' revenues. Analysts expect hotels' key sales metric, revenue per available room (RevPAR), to be sharply lower in the quarter as the continued drop in business travel forces hotels to rely more on price-sensitive consumers, who demand lower rates.
Marriott International Inc.'s second-quarter profit fell 76% amid weak lodging and timeshare demand as the hospitality industry continues to suffer. The hotelier -- which operates and franchises hotels under the Marriott, Ritz-Carlton, Residence Inn and Courtyard declined to give its typical earnings forecasts, citing the uncertain economy, but said it expects third-quarter revenue per available room to decline by 20% to 23% in North America and 22% to 24% abroad. For the full year, it expects revpar declines of 17% to 20% globally. Revpar fell 24% in the second quarter, including a worse-than-expected 21% drop in North America.
GlobeSt.com recently published some quotes from a seminar they held in early June on the hospitality market. The outlook voiced was sobering to say the least. Richard Warnick of the eponymous Warnick + Co., a hospitality advisory company, said "Up until this point in time, most of the defaults have been technical defaults. We're now moving rapidly into significant monetary defaults on loans. The question is whether lenders take those properties back or try to work with borrowers."
The Y-shaped Ilikai hotel that has graced the Waikiki skyline for nearly five decades and hosted everyone from U.S. presidents to Elvis Presley has closed. The new owner ceased hotel operations on the iconic property on Thursday because of mounting operating losses. The 30-story Ilikai was considered Hawaii's first luxury high-rise hotel when it opened in 1964. It gained prominence in the 1970s when it was featured in the opening sequence of the hit TV series "Hawaii Five-0."
The hotel industry has been reeling for the past year amid a steep decline in business and leisure travel. Now it is moving away from one of its former profit centers: time shares. Major time-share developers, led by Wyndham Worldwide Inc., Marriott International Inc., Starwood Hotels & Resorts Inc. and others, are scaling back their time-share business as investors in time-share loans demand higher interest rates, buyers become more scarce and resales of time shares put downward pressure on prices and demand for new units.
A glut of empty rooms and panic pricing are taking a serious toll on hotel and resort owners in the Phoenix area. Foreclosure proceedings were initiated against seven financially squeezed properties, two of them brand new, in the first half of the year. That's just one less than in all of 2008 and more than double the number in 2007, according to Ion Data, a Mesa real-estate research firm.
At the tranquil Four Seasons Resort Aviara north of San Diego, a heated struggle for control of the deluxe hotel's future is playing out in a rare public spat. The increasingly nasty tussle at the Carlsbad resort is indicative of tensions throughout the higher end of the hotel industry, as travelers cut way back on spendingAt issue is the very definition of luxury. The real estate investors who own the hotel say Four Seasons, which manages the property, is spending too much money keeping up appearances. They want to eject the fancy hotelier and bring in an operator they control.
Hotel developer Julian MacQueen spent nine frustrating months crisscrossing the country, searching for two rare commodities: construction capital and a banker with a heart of gold. Despite his impressive portfolio of successful hotels along the Gulf Coast, including the Hilton on Pensacola Beach, MacQueen was turned down by more than 50 banks, including every one in Pensacola. But MacQueen didn't get mad — well, maybe a little — he got creative. He began thinking in unconventional terms, and it paid off, to the tune of $38 million.
On Tuesday morning, time-share salesman Albert Mora was waiting to meet potential buyers of a Tahiti Village time-share for a tour of the Las Vegas property when a fellow employee got a cryptic call from headquarters to turn away all buyers. Staff members scurried down the stairs with bundles of cash to return deposits of those being given tours. Later in the day, Mr. Mora learned that Tahiti Village's owner, Consolidated Resorts Inc., which is owned by a Goldman Sachs Group Inc. real-estate fund, was filing for bankruptcy-court protection.
Red Roof Inns Inc., the hotel company acquired in a Citigroup Inc.-led buyout for $1.3 billion two years ago, defaulted on four loans totaling $361.4 million, credit rating company Realpoint LLC said. The debt, which is 30 days delinquent, includes a $181.75 million loan and others valued at $76.6 million, $67.6 million and $34.4 million, Frank Innaurato, managing director of CMBS analytical services at Realpoint said. The collateral includes 113 Red Roof locations.
Shares of Ashford Hospitality Trust Inc (AHT.N) plunged 22 percent on Tuesday hurt by mounting problems for the company's hotel lending portfolio after U.S. hotel chain Extended Stay Hotels filed Chapter 11. Extended Stay filed for Chapter 11 bankruptcy protection on Monday about two years after Lightstone Group LLC purchased the 680-property hotel chain. Lightstone borrowed $7.4 billion from a number of lenders including Ashford to buy the chain from private-equity firm Blackstone Group LP
The lawsuit, filed in April, alleges that when Nassetta began the recruiting process, Klein requested "large volumes of confidential information from Starwood employees, which he took home, had loaded on a personal laptop computer and/or forwarded to a personal e-mail account, and which he then took to and used at and for Hilton." The lawsuit also contends that Klein signed an employment agreement -- which he faxed to Hilton from Starwood's office -- but waited three days to tell his boss he was leaving, all the while requesting more documents.
Extended Stay Hotels, saddled with a huge debt burden from its $8 billion top-of-the-market buyout, filed for Chapter 11 protection Monday, in one of the largest bankruptcy filings by a commercial real-estate company. The filing, made in U.S. Bankruptcy Court for the Southern District of New York in Manhattan, came as a legal battle accelerated among the creditors who hold debt from the buyout by Lightstone Group LLC. Those lenders include Bank of America and its Merrill Lynch unit and Wells Fargo & Co.'s Wachovia. Since late last year, creditors have been negotiating with Lightstone over a possible restructuring of the debt.
The St. Regis Monarch Beach, infamous as the hotel where American International Group sponsored a luxury retreat just days after accepting a federal bailout, has been scheduled for a foreclosure auction. The companies that own the resort are in default on a $70-million loan from Citigroup Global Markets Realty Group, people knowledgeable about the debt said Tuesday.
After handing the keys back to a lender of one of its distressed hotels, Sunstone Hotel Investors Inc. (SHO) said Monday it's not looking to abandon a lot more properties, but indicated more forfeits could be in store. "We would like to point out that it is not our (intent) to convey a significant number of our hotels back to the lenders," said Ken Cruse, chief financial officer of Sunstone Hotel, during a conference call.
For the hotel company's CFO, it's much more important now to have a stash of cash than to rake in the revenues. These days, a good night's sleep can be hard to come by for a CFO in a precarious industry like the hotel and time-share business. Banks and investors are well aware of the fragility of travel-and-vacation revenues in the current downturn, and capital doesn't come cheap. Some finance chiefs might feel that the expense of stashing away enough cash to ensure their companies' survival if their worst-case scenarios come true is too high right now. Not Vasant Prabhu, CFO for Starwood Hotels & Resorts Worldwide, however.
Meet the Money always provides a wealth of insight into hotel finance. While the “money” part of the 19th annual conference was as elusive as ever, panelists provided guidance on everything ranging from leverage to dealing with receivership. Here are 10 take-home thoughts from the conference.
After the residential real estate market peaked in the summer of 2005 and the commercial market began to cool a year later, hotels enjoyed a brief period in which they were viewed as the hottest commodity in a rapidly shrinking real estate world. Developers of all dimensions announced plans for construction and deep-pocketed investors flew into the region to make big-dollar acquisitions.