LOS ANGELES—Everyone seemed to be a pundit or a prognosticator at the recent Americas Lodging Investment Summit (ALIS) held here. And thanks to the First Amendment, everyone had a chance to have their say, from keynote speaker and mega-entrepreneur Donald J. Trump to the bellman at the front door of the JW Marriott who thought the crush of 2,400 hoteliers in the host hotel was an “awesome” indicator for the industry.
With ALIS chair James Burba painting a picture of “Rebound!” as the theme of the event’s 11th annual gathering, many of the panels and sessions held during the summit wrestled with whether the industry could actually lay claim to that optimistic portrayal in terms of recovery.
Among those discussing the outlook for lodging was a panel of executives that included Hubert Joly, president/CEO of Carlson; Stephen Joyce, president/CEO of Choice Hotels International; Michael Shannon, managing director, KSL Capital Partners; and Richard Solomons, CEO of IHG.
Scott Berman, principal of PricewaterhouseCoopers, moderated the panel.
For the most part, the lively discussion found the panelists believing the industry was seeing traction, although “uncertainty” clouded any promise of full-blown robustness, at least for this year.
For his part, Solomons felt the so-called rebound already had occurred and “momentum” was the key word to keep in mind for the months ahead. “I think you look at what demand looks like and what’s driving that demand and look at the supply picture, and I think you can be reasonably positive at the top line, although there’ll still be some cost pressures to think about,” he said.
KSL’s Shannon opted for recovery in place of rebound when assessing the current situation. “I think it’s an uneven recovery, but a recovery nonetheless,” he said, suggesting such recovery could depend on perspective. For example, he cited the luxury segment, an area in which the equity firm invests and has such properties as the Hotel del Coronado in California and The Homestead in Virginia.
“This year, you saw the luxury segment coming back and it came back much quicker. But it came back because it had fallen much farther; it still has a way to come back,” he said.
Joyce drew chuckles from the audience in saying, “We had voted for rehab—because there’s still a lot of folks that need to work through the system. You’ve still got a number of hotels that are left in whatever the favorite phrase is: extend/pretend or a rolling loan gathers no loss. That’s going to come to bear a lot this year.”
Joyce added there still would be “struggles” to get development dollars as well.
“I don’t think the financing markets are going to improve any time this year,” he said, indicating that likely would push back the arrival of more supply perhaps out to 2014 or 2015, keeping the supply/demand balance on the positive side. “So for our existing owners I think we’re going to have a really good run, almost regardless of the economy. If we get some help from the economy, I think we’re going to have a really great run,” said Joyce.
In being proactive against “uncertainty,” Joly pointed to Carlson’s in-progress strategic platform, dubbed Ambition 2015, which is rolling across its global enterprise. The program is designed to enhance the chain for the future via a variety of tactics, not the least of which is growing its hotel portfolio by a minimum of 50% by 2015.
“What’s going to happen this year is very uncertain, but what we can control that’s what we’re working on now,” said Joly. Toward that, he noted that last month Carlson and The Rezidor Hotel Group established The Carlson Rezidor Hotel Group “to leverage the strength of the two organizations.”
The strength of consumer confidence as a barometer for discretionary spending is also something that needs to be watched closely, suggested Shannon.
“We’re looking at personal spending habits; are they loosening up their wallets?” he said.
Corporations are opening up their coffers to send business travelers back on the road, said Joly, citing President Barack Obama’s recent support of travel to the United States as a positive, a far cry from 2009 when members of his Administration and some lawmakers put business meetings and events in a negative light, drawing the ire of the American Hotel & Lodging Association, which co-hosts ALIS.
“We seem to have some headwind,” in terms of business travel, said Joly.
Joyce said Choice has seen an approximate 16% increase year-over-year in business travelers.
“We’re seeing a fair amount of new customers that we hadn’t had before, which we think are trading down based on price point,” said Joyce. “It’s customers that were previously staying in more of an upscale and upper-upscale product that are now willing to do a moderate or upper-moderate product. I don’t think that’s a short-term phenomenon; I think that is here to stay for the foreseeable future.”
PwC’s Berman said his own firm was “more bullish” than some of its peers in forecasting for the industry.
“We are seeing and believe that the industry as a whole will grow at about 6.5% over ’11 in terms of U.S. RevPAR across all chain scales. Others [analysts]are below us, and it does give me pause when we’ve generally been the most conservative,” he said, but indicated no intention of stepping back from that assessment.
