It’s better if you don’t look right now. Avoid the urge to stop and turn to see what’s bustling in the hedgerow. It’s OK to peek, but the focus should be ahead on the things you can control.
That’s the blunt message for hotel owners, operators and developers (and everyone else affiliated with the hotel industry for that matter) I’ve taken away from the numerous hotel conferences and meetings I’ve been able to attend thus far in 2011.
The difference between this economic recovery and the last two that I’ve been through as part of the hotel industry is that this one thankfully lacks the irrational exuberance that I previously saw the industry experience. If anything, this time around the industry is trying to talk itself into being optimistic.
There are still many problems that need to be cleared up before this can be considered full recovery mode. The capital stacks in the lending world are all mixed up and there’s no reason to believe loans will be flowing freely any time soon. Let’s consider that good on one hand, because it will keep supply growth in check. But it’s also bad because there’s very little debt available for transactions and much-needed property improvements.
Everywhere you go, the words “stagnant economy” and “unemployment” are what you hear. At last week’s Midwest Lodging Investors Summit in Chicago, I asked four general-session panelists if their business was up and if they are hiring. The feedback was encouraging:
Hans Detlefsen, HVS: “Yes, on both of those issues. Business is definitely up a lot. For our office here in the Midwest I think it’s up 64% versus last year, and we’re in the final phases of hiring as well.”
Sanjeev Misra, Paramount Lodging Advisors: “For transaction activity we went from zero to a significant rebound. For us as a company now, we have 12 offices. In the last six months, we’ve picked up 49 listings. We have proposals out—I just checked yesterday—we have proposals out on 195 different assets right now. We’re asset-managing 12 hotels. I disagree a little bit in terms of the timing of transaction volume. I think people are going to be very aggressive this year because they see the (revenue-per-available-room growths) next year and they want to be first to the roost. So I think we’re going to see surprisingly more volume in 2011 than expected. … We are hiring interns, we’ve doubled our staff in the last year and we’re really optimistic. “
Paul Kirwin, Northcott Hospitality: “Our business is up modestly. The hotel business is better than the restaurant business. The restaurant business we sort of get a sense of the consumer more clearly because it’s a very personal discretionary income business. We find consumers are very fragile and they’re very frugal. … On the hiring front, that factors into our view. The only sort of tweak to that is if we continue to hire more what I call e-marketing talent because that’s really where the action is today, in both our restaurant and our hotel businesses. We see there’s just a little bit of a mismatch in the economy because there are lots of people that are unemployed, but when I go try to find somebody who’s a search engine optimization specialist, it’s not easy to find them.”
John Jameson, Jameson and Company: “Considering I started my own company in January, yes, I’m hiring. But I’m about done hiring. I’ve been working the last six months on getting my whole support staff. … Transaction volume is definitely climbing. I think there will be some nice pops at the end of ’11, but more and more banks are asking for revaluations. I did 147 valuations in 2009 but did two transactions. So that kind of tells you where it’s going—instead of valuation, you’re actually coming to listings now, and that’s picking up. It’s the end of July, so people are trying to get the projects under contract to get them done by the end of the year.”
John O’Neill, Penn State: “Oh yeah, absolutely things are picking up, and we’re hiring, too. I’ve seen in the last 10 years since I’ve been at Penn State, I’ve seen our enrollment go from a little bit under 500 students to up a little bit over 700. If anybody is interested in getting in academia, we definitely are hiring, particularly if anyone is interested in teaching in finance, real estate and gaming, which continues to be a big growth area in the Mid-Atlantic.”
So there is optimism in the industry. There are things that can cause a hotelier to lose focus: the continued, ridiculous tug-of-war in Washington, the very real threat of terrorism, a local factory closing, the unemployment rate rising, a spike in fuel prices … the list can go on and on.
The bottom line: It’s good to think about the different scenarios and have action plans in place to deal with problems should they occur. However, don’t become preoccupied with the task. Focusing on efficient operations, maximizing revenue-management opportunities and keeping on top of maintenance issues are three key areas that should always be in your cross hairs if you own or manage a hotel.
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