WASHINGTON, D.C.— A bleak near-term outlook peppered with uncertainty about a recovery was offered to attendees this week at the Hospitality Asset Managers Association (HAMA) Fall Meeting by keynote speaker Laurence Geller, CEO, Strategic Hotel Capital. However, it was noted, these are the times when hoteliers can examine spending, marketing efforts and practices for logical places to cut and rework their organizations. This should done immediately, said Geller, as long as hotel chains are prudent, and shed/revamp only those programs that have caused them and the rest of the industry to become what he termed “complacent, lazy and bloated” during earlier times of “ever-rising demand and relatively constrained supply.” Geller offered his predictions for year’s end, year-end 2002 and year-end 2005 to a rather large turn-out of attendees for the rescheduled HAMA meeting, being held at the Hyatt Regency Nov. 1 and 2. He said even before Sept. 11, the industry “was sliding into a recession and was hard-pressed to keep to levels of 1999, and we were trying to get the chains to put contingency plans in place.” He said many were doing so, but the post-attack travel slump and shattered consumer confidence gave chains an excuse to “make massive cuts,” and in some cases make them “whether they (chains) were affected or not.” And though hotel chains have “grown so big, so fast due to oversupply and overleveraging,” and will continue to do what it takes now to survive the down times, Geller said they need to be careful. As asset managers, working together as a collective voice, this would be the best time to challenge hotel chains on issues like property taxes and consistency, as “the myth of their corporate infallibility has been shattered,” said Geller. Geller said that in the near-term, into the first eight months of 2002, he expects to see fewer deals getting done due to uncertain hotel values; bank debts moving perilously close to default; fresh capital having to be poured into properties for maintenance; insurance costs doubling; and property taxes and security costs soaring. “Balance sheets will be weaker, particularly in the full-service arena,” he said. On the upside, by the fourth quarter of 2002, Geller predicted things getting back to “normal.” “Distressed properties will be snatched up and lesser brands will disappear, leading to safer, more well-capitalized chains” emerging and eventually evolving into mega-chains. Lenders will then start lending more money toward the end of 2002, he added. Ultimately, Geller predicted that 2003 through 2005 will offer a growing and healthy economy, and the lodging industry will see occupancy rates soar, or “at least return to the frothy levels of 2000.” But again, he warned, as lodging finally emerges smarter and stronger, chains need to be wary of complacency and reverting back to old practices, such as “building RevPAR at any cost” and letting “costly brand standards creep back in.” “The doors are wide open for change [now],” Geller said.
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