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8 questions facing hoteliers (and 11 answers)
09 FEBRUARY 2015
8:34 AM
During the Lodging Industry Investment Council meeting held in conjunction with the ALIS, members asked each other key questions. Eight of those questions stood out.
LOS ANGELES—Lodging Industry Investment Council chairman Mike Cahill turned the tables on LIIC members during the group’s recent meeting held in conjunction with the Americas Lodging Investment Summit.
Instead of only answering questions, members used part of the meeting as a staging ground to ask key questions to each other. Here are some highlights:
Question 1: “How are economists describing the economy?”
—Mike Cahill, founder and CEO, Hospitality Real Estate Counselors
Answer: “There’s still a lot of uncertainty in the water, but for our sector they’re very bullish for the next two years. There’s a direct correlation between (gross domestic product) and room demand. As a headline, let’s say, ‘You’re fine, call me in 2017.’” (STR is the parent company of Hotel News Now.)
—Jan Freitag, senior VP strategic development, STR
Question 2: “In what markets are you worried about new supply?”
—Doug Dreher, president and CEO, The Hotel Group
Answer: “I’m always worried about new supply. New products are getting better and better. The select-service hotels that are coming out today are fantastic. You used to be able to dust off select service, but it’s good product.”
—Thom Geshay, senior SVP of business development, Davidson Hotels & Resorts
Question 3: “Is the ongoing consolidation among (online travel agencies) any benefit to hotel owners?”
—Tom Naughton, chief investment officer, Clearview Hotel Capital
Answer: “I’m not an expert, but it seems to me the traditional OTA markup is getting skinnier and skinner, and consolidation is one result of that. There’s pressure on the stuff that’s not the new, new thing.”
—David Loeb, senior equity research analyst, Robert W. Baird & Company
Question 4: “Have you seen brands come in and manage hotels for a lesser number than they normally would to compete with third-party management companies?”
—Larry Shupnick, senior VP, development and acquisitions, Interstate Hotels & Resorts
Answer: “Not so much for acquisitions, but we’ve been competing with them time and time again on new-builds. ‘Manchise’ agreements are becoming more popular.”
—Dreher
Answer: “Not on the sell side, but they’re getting competitive for new-builds.”
—Geshay
Question 5: “Over the next few years, what will be the outperforming vs. underperforming markets?”
—Kate Henriksen, senior VP, investment and portfolio analysis, RLJ Lodging Trust
Answer: “I don’t know every market, but I’d say we’ve seen a tremendous amount of supply in oil camp markets. Those are markets I would be hesitant with. The coastal markets will continue to do well. In San Francisco, if you have a piece of land, a hotel is not the best use of that. In Nashville (Tennessee), if you have something today, great; if you open in 2018 it’s going to be tough. The top 25 markets have continued to outperform, so that’s an easy bet.”
—Freitag
Question 6: “Are we going to see more foreign debt market investors and how do they view the transparency rules?”
—Abid Gilani, senior VP, hospitality finance group, Wells Fargo
Answer: “Most Asian buyers tend to be value buyers, so they buy early in the cycle. Mainland Chinese investors have more relaxed rules to do large deals. We’re going to see growth in the big deal investments out of mainland China. They’ll be few and far between but they’ll be headline deals.”
—Robert Stiles, principal and managing director, RobertDouglas
Answer: “There’s a lot of offshore flight capital creeping into the U.S. and maybe seeking smaller deals.”
—Cahill
Question 7: “How do you see construction pricing trending? We’ve heard noise that’s it’s going to start to ease, but we haven’t seen it yet. For example, concrete going to the fracking industry is easing but it’s all noise right now.”
—Charlie Muller, VP acquisitions and development, Omni Hotels & Resorts
Answer: “It’s getting worse; part of it is all of the brand standards.”
—Dreher
Answer: “We just broke ground in Atlanta, where’s there’s virtually no new construction starts but we’re seeing pricing through roof primarily because of labor.”
—Ben Brunt, principal and& executive EVP, acquisitions & development, Noble Investment Group
Question 8: “What’s your opinion on the evolving demand for EB-5 capital in order to increase development and the implications of the acceleration of that?"
—Bill Blackham, managing director & founder, Proximo Advisors & Investments
Answer: “EB-5 has kept us busy. In the last 18 months, we have closed financing for $285 million for our clients. The demand has skyrocketed. Last year was the first time in the U.S. we hit the 10,000 visa limit. The number of visas proves that EB-5 is being used and capital is being raised. … $20 (million) to $25 million is becoming the minimum. It’s great mezzanine financing and can fill 40% of the total capital stack. For mezz money, 5(%)-7% (interest rate) is cheap. It looks like the EB-5 financing could almost double in the next year or two, but it’s becoming much more selective.”
—Jim Butler, LIIC co-chair and partner and chairman of the global hospitality group, Jeffer Mangels Butler & Mitchell
1 Comment
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fantastic submit, very informative. I'm wondering why the opposite specialists of this sector
do not realize this. You must continue your writing. I am sure,
you have a huge readers' base already!Item_1