Editors recap the opening day of the Americas Lodging Investment Summit with takeaways, quotables and more highlights from the event.
LOS ANGELES—“You’ve got to know when to hold ’em, and know when to sell ’em,” according to a hotel-centric adaptation of the Kenny Rogers classic performed at the opening plenary session of the Americas Lodging Investment Summit.
The theme of this year’s ALIS is “Dealing with the new normal,” and opening day speakers started that conversation with a look at the big questions facing U.S. hoteliers in this period of unprecedented continued growth.
“The question is, what is the new normal as we head into 2018?” asked Jim Burba, ALIS chairman and co-founder of Burba Hotel Network, during the conference’s opening plenary session on Monday. “More deals or less? Is it time to sell? Time to build? Time to hold?”
Photo of the day
Quotes of the day*
“One of the most attractive aspects of La Quinta’s footprint is how many markets in the United States of America they are not currently in … how many of STR’s tracts they are not currently in. Roughly two-thirds of those tracts are available to put La Quintas into today.”
—Geoff Ballotti, president and CEO of Wyndham Hotel Group, in an interview about the company’s deal to acquire La Quinta Holdings’ franchise and management business.
“Generally speaking, our economy is not overleveraged as a whole, and that makes for a much more solid house being built that will be able to sustain if it gets a little windy.”
—Rob Leven, chief investment officer at The Procaccianti Companies and TPG Hotels & Resorts, at the private Lodging Industry Investment Council meeting held before ALIS, on the topic of why the U.S. economy is favorable for the hotel industry.
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Stat of the day
Members of the Lodging Industry Investment Council voted on two important issues during their meeting Monday afternoon. The first vote was to determine whether: A) the industry remains in a long-term cycle; B) the industry has started a new cycle; or C) cycles don’t matter anymore. The winner? Seventeen members said the cycle rolls on, 12 said it’s a new cycle and one said cycles don’t matter. The second vote was split down the middle: 15 attendees want the Philadelphia Eagles to win Super Bowl LII and 15 want the New England Patriots to win. Does that mean the game will end tied?
No fear. That’s what kept popping into my mind as I talked with ALIS attendees on the conference’s first day. There doesn’t seem to be any fear among hotel owners, operators and developers as the current cycle kicks into overtime.
CEOs, investment experts, marketing gurus, brand managers, hotel owners all seem to understand that the cycle will end eventually, but it’s a waste of time to worry about waiting for the other shoe to drop.
The bravado matches what’s going on in the overall economy. Companies are buoyed by windfall they scored in the tax reform package. The bulls on Wall Street are rampaging as the Dow Jones Industrial Average goes through the roof. The Baird/STR Hotel Stock Index is following suit.
In the hotel space, buyers and sellers are trying to score the deal of the year. Branding companies such as Marriot International, Hilton, InterContinental Hotels Group, Best Western and others are talking about record pipelines and plenty of momentum.
About the only people still being a little timid are lenders. They’re playing things close to the vest. The loan-to-value ratio remains in check. There’s nothing crazy going on. Maybe that’s exactly what’s driving the lack of fear from the other parties—they know lenders are being disciplined.
I don’t recall another year at this conference—or its predecessor, the UCLA Extension Annual Hotel Industry Investment Conference—that had this kind of vibe. It’s wise for hoteliers to have a confident, forward-looking attitude as long as they have a plan to swiftly react when things eventually do go south.
—Jeff Higley, Editorial Director
U.S. tax reform was a recurring topic in a lot of the conversation during Day One of the Americas Lodging Investment Summit here in Los Angeles this week. While hoteliers acknowledge they don’t fully understand all of its implications quite yet, they’re pretty optimistic about its potential effects on the industry. Many speakers talked about the impact large corporations will feel when it comes to a new tax code (including moves to repatriate offshore cash investments), but many also talked about the trickle-down potential the tax code might have on consumer spending on travel.
It’ll be interesting to see what sort of effect this tax code will have on hotel fundamentals. Speakers today talked about benefits in group business volume and also in hotel pricing power. Given today’s theoretically “full” occupancy levels, many forecasters on the stage think rate may be the beneficiary.
“Since hotels are conceptually full, (tax code and more consumer spending) may see some of those dollars find their way to meetings travel and other travel, and we may see a nice surprise on the room rate side,” said Mark Woodworth, senior managing director at CBRE Hotels.
Rachael Rothman, senior analyst for gaming, lodging and leisure at Susquehanna Financial Group, gave a few more examples of how this tax code might have an impact on rate.
“We’ve seen no rate growth; we’ve also had no inflation,” she said. “So if we can move into a pro-inflationary environment—which is good for hotels since they re-price every single day—it’s good for room rates and will temper new construction. You’re going to have a better balance of supply and demand, and better pricing power.”
—Stephanie Ricca, Editor-in-Chief
During the sessions I attended at the ALIS Law Conference, two of the biggest topics addressed were cybersecurity and sexual harassment in hotels. Both have long been an issue for the hotel industry because the industry is so people-centric. Hotels are targets for hackers looking to gain the personal information about guests and employees. Hotel employees, in particular, are vulnerable to sexual harassment and assault because they are in a position in which they worry their claims won’t be believed or simply will be covered up.
In these discussions, however, the attorneys spoke about how to best improve the security of guests’ personal information as well as the safety of hotel employees and guests, and not just because of the legal liabilities surrounding them, but because these are the right and ethical actions to take. The industry is better recognizing the full scope of these problems and is working toward solutions.
In a way, the two could not be more different: One exists in the online world and the other our physical world. However, both have the potential to be incredibly damaging to their victims’ lives.
It’s encouraging to see the hotel industry striving to better understand the problems for what they are and doing what it can to address them.
—Bryan Wroten, Senior Reporter
* Correction, 27 January, 2018: A previous version of this article included an unauthorized quote.