Things I heard during breakout sessions, networking events and late-night cocktail conversations held in conjunction with last week’s 22nd annual Hunter Hotel Investment Conference in Atlanta.
Bucks for Bunkers
The Hunter Conference drew about 750 attendees and the attendees are everyday people. They often own and/or operate up to 30 or 40 hotels. Their no-nonsense approach to the business is one of the reasons this is among my favorite industry events.
It’s no surprise these people have many opinions, and none of them make any bones about blaming and worrying about the Obama administration’s impact on the hotel industry. Being small business owners, most of them aren’t too thrilled with the direction the commander-in-chief has taken the country. And that direct approach rubs off to other executives in attendance.
So when moderator Biff Hawkey, the senior VP of Hostmark who has been known to have a few opinions of his own, asked panelists during a panel called “A light at the end of the tunnel!” what they think the government can do to help the hotel industry, Greg Hartmann, managing director of STR Analytics, had a creative solution.
Hartmann suggested the government create a hotel-oriented program like Cash for Clunkers whereby the government provides an incentive to demolish all of the 30- to 60-year-old hotels, hold or sell the land and eventually build or buy/renovate a LEED-certified hotel or other building.
“We can call it Bucks for Bunkers,” Hartmann said.
The well-worn phrase that “the hotel industry isn’t oversupplied, it’s under-demolished” is most definitely true, and Hartmann might be on to something. Such a program could get rid of a lot of eyesores in various communities around the country, put demolition companies to work and quite possibly create a new breed of buildings that would dominate a landscape. It would allow owners to get rid of hotels that have outlived their usefulness and ones in markets that are no longer viable.
Given the way the current administration and Congress is throwing around money, what’s a few billion more? Perhaps Roger Dow of the U.S. Travel Association, Joe McInerney of the American Hotel & Lodging Association, or David French of the International Franchise Association (all speakers at the conference) can take it to the President for discussion.
The Tharaldson Express
Gary Tharaldson, an owner who has built more than 430 hotels during his career and has been known to be direct and honest in dispensing his opinions, was honored with the first Hunter Hotel Investment Conference Award for Excellence and Inspiration. It was a perfect fit for this conference.
Presented by longtime Marriott International executive Daryl Nickle, who now is a consultant for Apple REIT Companies, the award will be given to hotel owners who have a strong entrepreneurial spirit, practice innovative thinking, possess excellent executive track records, serve as an inspiration to others and are engaged in their communities.
Tharaldson, who began his professional life as a school teacher before getting into the insurance business, in 1982 bought his first two hotels and began building his first hotel the same year.
And the stat of all stats: In 1992, Tharaldson single handedly accounted for 13 percent of all hotel openings in the U.S.
“Every franchisor wanted their brands on the Gary Tharaldson Express,” Nickle said.
Tharaldson’s comments were seemingly cut short when he got choked up while thanking his wife, Connie. “I’ve learned more from all the other franchisees and the employees,” he said. “I thank my wife and family for giving me a wonderful life.”
Several hotel deals highlighted the late-night conversations.
The announcement that Starwood Capital Group, TPG Capital and Five Mile Capital Partners will invest up to US$905 million in Extended Stay Hotels as part of a recapitalization plan that would allow the hotel chain to emerge from bankruptcy was a popular topic.
Many attendees said they thought that the post-deal value of ESA, expected to by about US$3.9 billion, is too high of a valuation because a number of the hotels are well past 10 years old. A couple of night owls said they thought the only reason Starwood was interested in the extended-stay chain was because it has a US$200-million mezzanine loan to the company, and if another company swooped in to save ESA from bankruptcy, Starwood would be left high and dry on the mezz financing.
LaSalle Hotels’ acquisition of the Sofitel Washington, D.C. Lafayette Square for US$95 million also drew a lot of attention. The 237-room city-center hotel that opened in 2002 went for more than US$400,000 per key—a price many believe is too high. However, because it is located two blocks from the White House and very close to some other high-end hotel assets, only time will tell if the naysayers are right. I believe that in five years, LaSalle executives will be considered geniuses for grabbing the property.
This and that…
A number of sources told me there are numerous banks buying notes at discounted prices from other banks. But the sources reminded me that owners who are expecting to reap some relief from the banks better think twice. Banks are not in business to provide relief for beleaguered borrowers, so it’s unlikely hotel owners will catch any breaks when it comes to the notes changing hands. … It’s clear that presidents and CEOs of mid-sized hotel companies are worried that their senior staffs will be raided by larger companies as an economic recovery starts to take shape. … No one can figure out why the U.S. government is dragging its feet on raising the limit of Small Business Administration loans. Increasing the loans to US$5 million would certainly stimulate the transactions markets and put failing hotels into the hands of stable owners. Making the SBA loans available for refinancing would also be a wise move. … One phrase heard over and over again during the conference: “It’s time to get back to the basics.”