Participating in a planning meeting for next year’s Hunter Hotel Investment Conference (17-19 March 2010) on Thursday provided a good opportunity to catch up on interesting industry tidbits.

• There’s more belief the economic recovery will take the shape of a W, and the industry has to endure another downward slope before heading into full recovery mode.
• The savings-and-loan crisis in 1988 was a doozy but pales in comparison to the current situation.
• The focus at the property level is market share and margins.
• The anticipated buying spree for distressed hotel assets that was expected to occur beginning in the second quarter of 2009 looks like it’s not going to happen until late this year or early next year.
• All hotel owners should consider renegotiating contracts they previously didn’t think were renegotiable.
• There’s been a glimmer of activity in the transaction market in April and May. When the stock market bottomed out a couple of months ago, no one had any interest in buying a hotel—but that has changed. As the market turned, confidence has been built, and potential buyers are starting to kick the tires—at least on assets worth as much as US$15 million. Hotels with price tags more than that? Forget about it. The lack of debt and the inability to find the right formula to value a hotel has kept that market stalled.
• Determining a hotel’s value is like catching a falling knife in this type of economy.
• Loans from the Small Business Administration are the flavor of the day. With many changes in SBA loans, it’s wise to consult an expert, but there are plenty of opportunities to use this vehicle to buy a hotel.
• Hotel-school graduates are faced with a grim job market, but they’re encouraged to be as flexible as possible to get a foot in the door.
• Meeting planners know they have the hammer and are pounding every hotel director of sales with it.
• The only development going on is in the limited-service sector. The only action in the full-service sector is conversion activity.
• Everybody and their brother are looking into forming equity funds for when distressed hotels come to market. At least 60 such funds have been formed already.
• The Manhattan hotel market won’t recover until markets such as Newark, JFK Airport, Poughkeepsie and Connecticut have enough compression to allow hotels in Manhattan to drive rate.
• Development costs in Manhattan have decreased from US$450 per square foot a couple of years ago to about US$180-US$200 per square foot today.
• Large companies with big hotel portfolios appear to be the biggest rate discounters during this recession.
• The “R” word now means “recovery” rather than “recession.” Everybody still is afraid to say it.
• The peak of the hotel equity markets occurred in early 2007 when announcements were made that Equity Inns and Hilton were going private. Meanwhile, the bellwether deal for overexhuberance came at the same time when Lighthouse Group bought Extended Stay Hotels for US$8 billion despite putting only US$100 million of Lighthouse CEO David Lichtenstein’s money into the deal.
• The next five years will be the greatest transfer of wealth in real-estate history. The winners during this time will be advisory services because there are many people on both sides of the equity equation that don’t understand the current environment. The losers will be overleveraged opportunity funds.
• Two-thirds of all CMBS deals will be under water through 2013.
• Ten percent of all hotel debt will be delinquent before the recession ends. Currently, the percentage of delinquent loans is less than 2 percent.
• Three-quarters of all CMBS loans are nonrefinancable in this economy.
• Many hotel companies expect corporate travel planners to ask for at least a 20-percent cut in rates when negotiating season opens this fall.
• Recent activity shows the decline of weekend business is stabilizing. During the last three recessions, the ensuing recovery was started with leisure business, so this could be a sign things are turning for the better.
• And finally, there was a big transaction this week: Sunstone Hotel Investors sold the 274-room Marriott in Napa, California, for gross sale proceeds of US$36 million. The buyer wasn’t disclosed. Word is it was an all-cash deal because there are no lenders dispensing debt at the moment. And according to the press release, the deal equates to a 10.5 times 2009 EBITDA multiple.