ALIS: Industry at peak, no downturn yet
26 JANUARY 2016 8:14 AM
Attendees at the Americas Lodging Investment Summit are riding high on the optimism of 2015 but are realistically planning for the next down cycle.
LOS ANGELES—It’s a story of opposites at the Americas Lodging Investment Summit this year: Industry fundamentals are still riding the waves of last year’s strong numbers, while Wall Street perceptions are not as optimistic, particularly given recent stock market fluctuations.
Still, the nearly 3,000 hotel owners, lenders, investors, operators and more in attendance are optimistic that while the industry might be at its peak, it’s not headed downhill anytime soon.
Photos of the day
|Walter Isenberg (left), president and CEO of Sage Hospitality, and Justin Knight, president and CEO of Apple Hospitality REIT, enjoy the launch event for the Tru by Hilton brand Monday on the opening day of ALIS. (Photo: Jeff Higley)|
|Bharat Patel (left), co-founder, chairman and CEO of Sun Development & Management Corporation, and Dan Hansen, president and CEO of Summit Hotel Properties, discuss industry trends during the launch event for the Tru by Hilton brand Monday on the opening day of ALIS. (Photo: Jeff Higley)|
Quotes of the day
“We do think we are at the peak right now in terms of industry performance. And critically, we think we’re going to stay at the peak.”
--Mark Woodworth, senior managing director of PKF-HR, in response to the question of whether the industry cycle has peaked.
—Steve Kisielica, principal of Lodging Capital Partners, during a roundtable held in conjunction with the Lodging Industry Investment Council meeting.
“The stock market is not the economy, and it certainly isn’t (the same as) lodging industry fundamentals.”
--Arthur Adler, managing director and CEO of the Americas for JLL, on the “Let the numbers speak – Where’s the peak?” panel.
Tweet of the day
Here's what I learned at #ALISConference - when the term "disruption" is no longer widely used - it means that it's accepted as the new norm— Matt Lew (@mattlew82) January 25, 2016
Slide of the day
|Revenue-per-available-room winners in 2015 were centered around San Francisco, while losers sat in oil and natural gas markets, according to data presented by STR’s SVP of lodging insights Jan Freitag during the “Let the numbers speak – Where’s the peak?” panel.|
The prevailing issue on the first day of ALIS 2016 focused on if and when the hotel industry will head into a downturn. Wall Street’s continued struggles that trudged on again Monday, the extended issues with China’s economy and the worldwide oil slump have hotel executives openly wondering about the future.
The general vibe at the JW Marriott at L.A. Live hasn’t reached “alarm” stage, but there are people wondering whether it’s the rappellers descending on the hotel’s exterior to benefit Shatterproof or the footsteps of Old Man Downturn getting closer that they’re hearing. It’s actually a bit of both. (Shatterproof, an organization founded by hotelier Gary Mendell that helps people and families affected by addiction, is front and center at the conference.)
The fact is that a downturn is inevitable at some point. When it occurs is anyone’s guess. Some attendees said business in January was a little slower than projected and wondered if it’s the sign of things to come. Others said there’s no need to worry for the foreseeable future.
The mindset for most attendees is to focus on their business and be patient. There’s recognition that there will eventually be a curveball thrown at the hotel industry but that in some respects hotel executives hold their destiny in their hands. That destiny is directly affected by being prepared for any possible scenarios that cause the downturn. The key is for them to not put themselves into positions where they have to make a deal at the wrong time or run such a loose operation that they can’t streamline when needed.
--Jeff Higley, Editorial Director
Hoteliers from all sides of the industry are seeing both short- and long-term impacts of the recent stock market fluctuations on their business. Over the short term, investors are concerned that with public real estate investment trusts sitting on the sidelines, it could affect the pricing of assets and buyers won’t want to take a hit. But there’s also some long-term concern that these dipping stock prices might lead to a decline in overall corporate profits, which could affect consumer travel spending.
On a related note, many people we spoke with Monday talked about what a great time it is for private equity hotel buyers. Many private investors said they plan to continue buying—and even building here and there—and recognize that operating fundamentals are at great levels. Right now, the overall consensus is that buyers now should look for assets they’d like to hold through the next downturn.
--Stephanie Ricca, Editor-in-Chief
The first day of this year’s ALIS Conference, for me at least, seemed to revolve a bit around the uncertainty the industry faces in 2016 since industry fundamentals are pointing in one direction and Wall Street perceptions point in the opposite direction.
It isn’t a coincidence that the theme of the conference was posed as a question (“Where’s the peak?”), and the fact that a lot of attendees weren’t even certain they’d make it through the weather issues of the East Coast for the first day of the conference added an entirely different level of uncertainty to the proceedings. But overall, the lack of consensus on where the industry is in the current cycle is what cast doubt on how hoteliers should approach their business in 2016.
STR’s SVP of lodging insights Jan Freitag said during the “Let the numbers speak – Where’s the peak?” panel that part of the confusion comes from Wall Street’s fixation on performance in New York City.
“And New York has had a not so good year,” he said.
--Sean McCracken, News Editor