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Hoteliers Enjoying Good Times, Adapting for the Future

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September 24, 2013

Hoteliers Enjoying Good Times, Adapting for the Future

PHOENIX-Some offered rosy forecasts, others were cautiously optimistic while a third camp reported market changes. That?s how one might describe the views and the backdrop for ideas expressed Thursday at the second day of the?Lodging Conference?here.

?I?m absolutely more confident about the economy,? saidBrian Silberman, VP,?CBRE?Hotels. ?It?s like we?re on a train going 60 miles per hour, and even though there are blips out there, I think we?ll motor on to 80 to 100. I think it?s going to be a good ride.?

In fact, he added, ?I think industry growth will continue for four more?years, maybe even five, not?just for the?two or two and a half years that some people are predicting, because?other than in a few select markets like NYC?new supply is still?lagging?demand?in 90% of?the?markets, and?I believe it will continue to lag?for another?few years.?

Some speakers were seizing the moment but also looking in the rear view mirror. ?We?re generally more optimistic this year than last, except that we?re trying to gage the impact of a potential interest rate increase,? reported?David Capps, VP of development,?Aimbridge Hospitality. ?So we are making sure we?re making good buys with good yield to protect us.?

Added?Sumner Baye, president/partner at?International Hotel?Network, ?We have to be careful but enjoy the fact that we?re having fantastic hospitality results,? noted. He was especially enthusiastic about activity in New York City, where there are 12,000 rooms in the pipeline, but he noted, ?what happens there affects the rest of the country.?

Still others say some unique factors in this cycle make the market difficult to gauge.? ?We hear national RevPAR forecasts but it?s very dependent on the location,? said?Rick Frank, CIO of?Pillar Hotels & Resorts. ?If there?s a war in Syria, every hotel in New Yor City will be impacted negatively,? but I don? think you can say the same thing about our hotel in St. Louis. It?s a ?what corner of the intersection are you on? type of market.?

Such specific features of the current market, as well as other aspects of present conditions, are driving interest in new markets and unique deals. ??We?ve seen a big difference from last year; the type of transactions has changed,? said Capps. ?We?ve been looking more to secondary markets, where an asset is number one or two in the market, and we?ve recently closed transactions at good cap rates. For us, an eight cap in Oklahoma City isn?t the same as in Chicago.?

He noted, ?We?re looking at possibly using higher leverage on deals, and looking for that yield on cost that makes sense. The way we?re starting to underwrite is different than five to seven years ago.

Added Frank, ?We look at deals everywhere and have hotels all over. We recently underwrote properties in Texas, Cleveland, the Embassy Suites in Schaumberg, IL and even at an oil shale in TExase, with a 15-18 cap rate, but we had to almost underwrite that at 0 because we?ll exit when the oil shale is gone.?

Meanwhile, hoteliers are pleased with the pace of deal transactions taking place, and with what they foresee in the future. ?Transaction volume is 60% up for us so far this year,? said Silberman. Further, ?We have over 200 listings.?

In select service, ?we?re seeing more transactions than last year; there?s some very good pricing out there,? said?Liam Brown, president, U.S. and Canada, select service and extended stay lodging and owner and franchise services, the Americas,?Marriott International.? ?Next year will be even better.?

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Source GlobeSt, http://www.globest.com/news/12_696/national/hotel/Hoteliers-Enjoying-Good-Times-Adapting-for-the-Future-337818.html

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