“It pours, man, it pours.”
—Albert Hammond
And pour it did. ALIS 2012 moved back to its old hometown this year into its new digs at L.A. LIVE in downtown Los Angeles. Conference organizer Jim Burba kindly requested that anyone in town to attend buy a conference badge lest she/he be shut out of the conference, and in a new twist, out of the hotel venue at the JW Marriott.
Last week uber-lawyer Jim Butler asked his blog audience what they thought of the tightened security. An anonymous poster had envisioned the unwashed massed of badge-less lobby lizards standing outside the JW, christening them with the term “Occupy ALIS.”
As if to hit home the point that you were either with the ALIS crowd or with the Starbucks crowd, the torrential downpour at the start the conference divided the visitors into “Have (official badge)” and “Have Not (official badge and hence have to request asylum at the center table at Starbucks).”
During dress rehearsal for our 150-second industry update, we were afraid that our opening session would see a drastic decline in attendance since there was no dry way to get from the JW over to the Nokia Theatre. But luckily, by the time an enthusiastic troupe of 20-somethings dancers formed the word “ALIS” with their ably trained bodies during the conference introduction, the rain had subsided and for the next two days no one had to fear for their hairdo (... you know who I am talking about).
Jim welcomed the 2,400 attendees who barely filled up the lower bowl of the Nokia Theatre and invited them to “delve into ’12,” in other words, to get on with it. The data that Suzanne Mellen, Mark Woodworth and I presented certainly was optimistic; STR’s RevPAR forecast for 2012 is +4.2%, mostly driven by ADR increases. Interestingly, the projections that our fellow sages at PKF (+5.4%) and PwC (+6.5%) put out were a lot more optimistic. We will debate throughout the year who is more right, but to start out the year with such positive numbers certainly is reason for optimism.
This being an election year, commentary about the Republican candidates and their potential to unseat President Obama abounded, and it seemed that the majority of speakers were politically positioned right (or far right) of-center.
Sam Zell and Donald Trump certainly did not mince words when critiquing the current administration’s track record. The elder statesman of our industry, Mr. Bill Marriott, meanwhile was a bit less vocal about politics and a lot more vocal about his favorite topic: Happy employees make for happy guests and so the industry needs to take care of employees first. And he certainly can be proud of the staff members at the JW and Ritz-Carlton hotels who performed admirably under the scrutiny of the toughest audience out there: fellow hoteliers.
Another icon of the industry, Marilyn Carlson Nelson, was rightfully honored with a lifetime achievement award for her role and influence. She also had a comment about Obama’s travel initiative, which he announced in front of Cinderella’s Castle in Disneyworld: “About time,” she said with a smile, recalling the last few years of concerted efforts to get him to talk favorably about our industry.
Overall, the mood at ALIS seemed a bit like the Monday’s weather. We got hit by a storm, some of us got really wet, and now the sun is back out again. With operating fundamentals regaining strength and ADR increases giving rise to margin improvements, the industry is poised for a couple of years of smooth sailing. The lack of new supply will help to improve occupancies across the board.
So, what is the problem? The crowd at ALIS, while of course concerned with hotel operations, ultimately is a deal crowd. And it seemed the people I talked to were working harder than ever but with less tangible results. The lack of debt financing still hindered the workout of bad assets and the ongoing uncertainly in Europe and in Washington, D.C., still dampened the ability to move ahead with confidence. It will be crucial for debt financing to become readily available again, and 2012 hopefully will show more activity on that front.
I heard that the CMBS loans are running out of runway to “extend and pretend” and that those assets should hit the market in the next 24 months, for better or worse. Of course, the counter cyclical money is not looking for existing hotels but is building new hotels today, given that the pipeline is at an all-time low.
And for those who were looking for the next opportunity, Sam Zell had the two-word answer: “North Dakota!”
As we enter 2012, a lot of macro-level uncertainty is being countered by industry-specific buoyancy. Let’s see which influences we can control and which ones are being thrust upon us. When we meet at NYU in June, some of the big questions will be answered, and hopefully a majority of owners will be able to relate to one of the last lines from that Albert Hammond’s song: “Had offers but didn't know which one to take.” Then again, they may just be humming: “Gimme a break, gimme a break.”
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