The truth about 2012 for hoteliers
 
The truth about 2012 for hoteliers
27 JANUARY 2012 7:25 AM

Optimism is about to crash into reality. Are you ready for impact?

Seen the video of a Smart Car running into a Chevrolet Suburban? Ricochets off like a tennis ball. I just test drove both—the Suburban at the CRE Finance Council in South Beach with all the commercial mortgage-backed security special servicer gurus and the Smart Car at Americas Lodging Investment Summit in Los Angeles.
 
The Smart Car folks in LA are celebrating because the hotel business has recovered.
Revenue per available room was up 8% last year and maybe 4% this year, and there’s no meaningful new supply. Optimism abounds and operators are pushing the accelerator to the floor … RECOVERY! Best time since the collapse of Rome to invest in hotels. And I studiously believe all that is true.

But unnoticed coming towards the one-way bridge is the Surburban described at the CMBS loan conference. Listen to them: “CMBS maturities remain a massive, massive, massive, massive problem.” (Yes he said “massive” four times) ... “This is a long, slow slog, and there is no easy way out of this” ... “The proceeds shortfall this year in commercial real estate loans coming due between face value and likely replacement loans is US$600,000,000,000.00 (I wrote out the zeros to make a point), and the gap in 2016 will be US$1,600,000,000,000.00.” (Stop counting; that's one trillion, six hundred, billion dollars and no cents).

So the truth for hotels in 2012 is that the financial mass (not mess) of the very real hotel recovery just won't be nearly powerful enough to overcome the huge financial mass (and mess) of hundreds of billions of loans coming due without any hope of replacement proceeds.

So if you can buy a hotel, do it! If you can hang on to a hotel loan, do it! But if you are in the Smart Car with heavy loans due, jump!

Steve Van has 33 years of hospitality experience. He is President and CEO of Prism Hotels and Resorts which he founded in 1983. Prism manages all major brands including Marriott, Hilton, Doubletree, Westin, Crowne Plaza, Holiday Inn, Radisson and Preferred Hotels and Resorts. Mr. Van was Hilton Doubletree Developer of the Year and serves on the Doubletree Owner’s Advisory Council. He can be reach at 214.850.0391 (cell) or 214.257.1011 (office).

The opinions expressed in this column do not necessarily reflect the opinions of HotelNewsNow.com or its parent company, Smith Travel Research and its affiliated companies. Columnists published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to comment or contact an editor with any questions or concerns.

No Comments

Comments that include blatant advertisements or links to products or company websites will be removed to avoid instances of spam. Also, comments that include profanity, lewdness, personal attacks, solicitations or advertising, or other similarly inappropriate or offensive comments or material will be removed from the site. You are fully responsible for the content you post. The opinions expressed in comments do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Please report any violations to our editorial staff.