Finance USA & Canada Opinion Articles

December 3, 2009

Analysis of Hotel Sales | 2000 - October 2009

The median sale price per room of hotels in the United States declined by over 40% between year-to-date October 2008 and year-to-date October 2009. The dramatic decline is a result of the economic recession and the fact that there was a much smaller pool of actual sales. The decline indicates the need for property owners and assessors to continually analyze values of hotels in markets throughout the United States which have probably declined since the last valuation by the assessment authorities.

By David Sangree, MAI, CPA, ISHC, is President of Hotel & Leisure Advisors, Hotel & Leisure Advisors (H&LA)

United States

Opinion Article

November 19, 2009

Health Care Legislation | Which Hotels Might Get Sick?

In 2009, the U.S. lodging industry is projected to experience the greatest annual decline in revenue since 1932. In August 2009, PKF Hospitality Research (PKF-HR) released its quarterly econometric hotel forecast, Hotel Horizons®, and is forecasting that the average property will suffer an 18.5 percent decline in rooms revenue per available room (RevPAR) during the year, which will contribute to an estimated 16.8 percent fall off in total hotel revenues.

By Robert Mandelbaum, Director of Research Information Services, CBRE Hotels

United States

Opinion Article

November 11, 2009

20 predictions for real estate and the economy

Here are some thoughts from a recent major real-estate conference on where the industry and economy are headed: 1. No expert or economist who spoke was willing to make any prediction of where we will be in three years. 2. Development is dead for all real estate for at least three years. 3. Recovery will be slow. GDP in 3Q was over-inflated due to cash for clunkers and other stimulus. The first part of 2010 will be 1 percent to 2 percent GDP growth.

By Joel Ross, President, HotelNewsNow

United States

Opinion Article

November 4, 2009

Distressed hotels become more prevalent

As the wave of distressed hotel assets in the United States moves west, special servicers and other experts speaking at the ninth annual Fishing for Solutions: Servicing Hotel Loans conference believe there is still a long way to go before the situation gets any better. And don’t assume the only distressed hotels are ones that were financed in 2005 or after. Conference speakers said the new trends in special servicing are developing quickly and changing often.

HotelNewsNow

United States

Opinion Article

November 3, 2009

With many acquisition funds formed, will it be enough?

One of the most common threads of conversation at last week’s ninth annual Fishing for Solutions conference in Grapevine, Texas, that focused on special services and distressed assets in the hotel industry was about a subject few people can put their finger on. The general belief among the conference’s 125 attendees is there’s a large number of companies and funds with cash ready to buy hotels if and when they come to market, but the amount of money sitting on the sidelines won’t be nearly enough to take care of the distressed assets that will find their way to market eventually. It’s estimated 25 percent of all hotels in the U.S. are facing some sort of distressed situation—whether it be late mortgage payments, full defaults or bankruptcy.

HotelNewsNow

United States

Opinion Article

November 2, 2009

And the Peripheral New York City Lodging Markets Are Headed……?

A discussion on the existing lodging demand fundamentals and outlook for peripheral New York City hotel markets. The article also discusses why these areas may present good investment opportunities for hotel investors. Long Island City – and for that matter other peripheral markets such as Brooklyn, Queens, North Bergen, et al – have historically served as secondary lodging markets to New York City’s Borough of Manhattan. In the past, these secondary markets have accommodated a large amount of lower-rated overflow demand from Manhattan. These peripheral markets, at their peak, posted occupancy levels in the high 70% to low 80% range. The reason is simple – during the market peak (2006 through the second quarter of 2008) hotels in Manhattan witnessed robust occupancy levels well in excess of 80% coupled with extremely high average rates, causing unaccommodated demand to overflow into these lower-rated secondary markets.

HVS

New York, New York, United States

Opinion Article

October 27, 2009

Update On Adoption Of IFRS For The U.S. Hospitality Industry

International Financial Reporting Standards (IFRS) are now required or permitted for financial reporting by over 100 countries worldwide. They are increasingly becoming accepted as the global accounting language. The European Union made IFRS mandatory for member countries in 2005. The UK, Germany, Italy and France all require companies to publish financials in IFRS currently. Brazil will be adopting IFRS in 2010 & Canada, India and Korea have made IFRS adoption mandatory in 2011. Mexico will adopt in 2012.

Cayuga Hospitality Consultants

United States

Ad #1 Hotel PMS

See why hotels are switching to Mews

Revenue up. Manual work down. Hotels using Mews see 35% higher RevPAR and 45% more upsells. Book a free demo.

Mews

Ad HITEC 2026

Visit HITEC 2026 in San Antonio!

HITEC is the center for the latest conversations on hospitality technology. Come and see the technology shaping the industry.

Hospitality Financial and Technology Professionals (HFTP)

Opinion Article

October 27, 2009

Make Sure the Right Contingency Plans Are in Place

I once met with a hotel owner, not long after taking over management of his group of hotels, to tell him how I planned to reenergize the lackluster and ineffective sales effort I found in place. I told him that I planned to create a new position of Divisional Sales Manager and promote a “sparkplug” I identified at one of the properties. He asked but one question: “What if she gets hit by a truck?”

Cayuga Hospitality Consultants

United States

Opinion Article

October 19, 2009

Hotel Property Tax Appeals: A Life Line in the Perfect Storm

In the spring of 2007, signs were evident of an incoming storm that by the beginning of 2008 had begun to fall heavily upon the world economy. In the United States, rating agencies began tightening their belts, signaling the forthcoming credit crunch. The situation turned calamitous in the spring of 2008 with the collapse of Bear Stearns, and the storm intensified to leave in its wake Lehman Brothers and other cornerstones of the financial superstructure, flooding the market with millions of toxic assets. Over the next several months the world was engulfed in the perfect storm, a confluence of two disastrous economic fronts: the collapse of the banking system and the deterioration of the real estate market.

HVS

United States

Opinion Article

October 8, 2009

The value proposition

If Ed Doherty was picking a kickball team on a schoolyard playground, his first selection might surprise you. The jock that could kick the ball to next Tuesday? Pass. Doherty would more likely choose the unassuming upstart who’s never had his chance off the bench. As president of the Bricton Group, a Chicago-based hotel management and acquisition company, Doherty has spent the past 22 years looking for value where others often pass “Our specialty is finding assets that have been overlooked or are in need of rejuvenation,” he said. “We’ve never had the luxury of taking over a beautiful property with no problems.”

HotelNewsNow

United States

Opinion Article

October 1, 2009

A visit to the Fed reveals eye-opening realities for hotels

I recently attended a conference sponsored by the Federal Reserve Bank of Atlanta that focused on issues confronting commercial real estate. While it gave me an opportunity to speak directly to the banking community about some of the financing problems in the lodging sector, I found the session fascinating for several reasons. While STR focuses primarily on hotels and the economic trends that affect travel, hearing about problems confronting other types of commercial real estate was enlightening. The first number that got everyone’s attention was the $1.5 trillion estimate of debt maturities on CRE during the next 18 to 24 months. The big question is where does the money needed to refinance these maturities come from? If banks aren’t lending much money to CRE at this point, why would they start lending as this debt comes due?

HotelNewsNow

United States

Opinion Article

September 30, 2009

'There’s a whole lotta nothing going on'

You need look no further than the finely manicured lawns of the Arizona Biltmore Resort & Spa to see the condition of the U.S. hotel industry. Below the beautiful surface, there’s a cauldron of nervousness and downright fear that’s close to bubbling over. There were a number of smiley faces put on by hotel executives throughout the conference, but like a delicious Kobe slider from Phoenix institution Durant’s Restaurant, they’re gone in an instant. That’s especially true when it appears to be near closing time for an industry that’s increasingly become more desperate to hear positive news.

HotelNewsNow

United States

Opinion Article

September 23, 2009

You Need to Reset Your Exit Strategy

Last year I posted a blog to remind hotel owners that they needed to have an exit strategy that embraces the circumstances and timetable under which they plan to exit their hotel investment. Since then, major and dramatic – some say seismic - changes have occurred in the domestic and international economy and in the hotel capital markets. It is advisable to revisit the exit strategy and revise it to reflect the current environment and foreseeable circumstances.

Cayuga Hospitality Consultants

United States

Opinion Article

September 21, 2009

Monitoring Hotel Loan Performance to Mitigate Risk

Many lenders funded hotel loans during the peak of the economic boom in 2006 and 2007 — when economic conditions were vastly different than they are today. Whether a hotel loan is currently performing, on a watch list, or in an advanced phase of remedial action (workout), hotel lenders should evaluate data in five general categories to have a sufficient amount of information and current knowledge regarding the outstanding loan ─ in order to assess current, or increasing, risk.

By Mark Lynn, President at HVS Asset Management, HVS

United States

Opinion Article

August 31, 2009

Finding A Way Out

With the drastic downturn in the economy and resulting cutback of all types of travel, hotels are suffering from significant lower demand and rate cutting. Smith travel research has predicted an unprecedented RevPAR decline of more than 17 percent this year. Those properties financed in the last five years are likely struggling to pay their debt service, which means owners must use their own capital to make mortgage payments.

By Stephen Rushmore, Hotel Valuation Expert and Founder of HVS, Hotel Valuation Software

United States

Ad HITEC 2026

Visit HITEC 2026 in San Antonio!

HITEC is the center for the latest conversations on hospitality technology. Come and see the technology shaping the industry.

Hospitality Financial and Technology Professionals (HFTP)

Opinion Article

August 21, 2009

2008 - Good News, Bad Numbers | Fixed Costs A Problem In 2009

The good news is that when faced with lower levels of business in 2008, U.S. hotel managers cut operating costs by 0.3 percent. Unfortunately, total hotel revenues dropped 1.3 percent, resulting in a 3.8 percent decline in net operating income for the average U.S. hotel according to the 2009 edition of Trends® in the Hotel Industry. Given the depth and breadth of the continuing economic downturn, further expense cuts will not be enough to offset the anticipated declines in revenue in 2009.

By Robert Mandelbaum, Director of Research Information Services, CBRE Hotels

United States

Opinion Article

August 2, 2009

Hotel Capitalization Rates on the Rise

With limited sales transactions and investment and refinancing activity, hotel capitalization rates and values are challenging to gauge in today’s marketplace. Yet, the need to know where rates of return and values lie remains an important question for hotel investors, lenders and assessors. This article updates hotel capitalization and discount data that was presented in previous articles on hotel capitalization rates (see: Allure of Hotel Investment Expected to Moderate Rise in Capitalization Rates as Rebound Takes Hold, January 2005, and Hotel Capitalization Rates Bottom Out, January 2007, by Suzanne Mellen, in the Library at www.hvs.com) and provides guidance on hotel capitalization and discount rates used in hotel valuation. Based on current trends discussed in this article, overall capitalization and discount rates have increased roundly 100 to 250 basis points (depending upon ones definition of these terms) from their recent historic lows. Sales data, investor surveys and the cost of capital are investigated in this article to support this conclusion.

By Suzanne Mellen, Senior Managing Director - Practice Leader, San Francisco, HVS

United States

Opinion Article

July 24, 2009

The Outlook For U.S. Hotel Investments

As we now live through the current economic recession and its impact on lodging revenues and expenses, it has become evident that investors anticipate continued declines in operating incomes and resulting loss in property values through the remainder of 2009 and into 2010. That being said, investors also expect the industry to rebound in 2011, and today’s distressed environment will provide exceptional investment opportunities to those buyers with the ability to take advantage.

By Scott Smith

United States

Opinion Article

July 24, 2009

Hospitality Lawyer: National implications from the latest California hotel industry Survey

The hospitality lawyers of JMBM's Global Hospitality Group received an early copy of the July 22, 2009 Atlas Hospitality Group 2009 Mid-Year California Hotel Sales Survey. This new Survey has an entirely different focus than the Atlas Survey released last month on hotel foreclosures that caused such a stir. Maybe the results are intuitive to some, but we found the quantification of distress in hotel markets quite remarkable, and we believe there are profound national implications of these Survey results.

By Jim Butler, Partner & Co-Chair Hospitality Practice, Blank Rome LLP, Blank Rome

California, United States

Opinion Article

July 13, 2009

Update to the HVS Employment-Hotel Growth Index

The market has changed substantially since we first published our research on the relationship between employment levels, office space absorption, and hotel room night demand via the HVS Employment-Hotel Growth Index in August of 2008. Led by the bust in the housing market, performance in the commercial sector took a sharp downturn in the fall of 2008, and the current recession has negatively impacted all sectors of the commercial real estate market. With this update, we set out to see whether the relationships between employment and hotel performance held true through year-end. Specifically, within the greater Washington, D.C. market, did the change in the employment picture have an impact on the health of the office market, and, if so, does the correlation between office market demand and hotel room demand still hold true?

HVS

United States