WASHINGTON, D.C.— Analysts speaking at the HAMA Fall Meeting here Nov. 2 seemed to agree that the lodging industry, as well as the economy, should begin to recover mid- to late-2002. According to experts on the “Industry Outlook Panel Discussion,” 2001 was shaping up to be a soft year pre-Sept. 11, and the lodging industry was coming out of the economic bubble that was 2000. Post-Sept. 11, the flagging economy was propelled into a recession, and Dr. Marc Louargand, managing director, Cornerstone Real Estate Advisers, predicted the recession “could conceivably be a four- or six-quarter recession; however, the economy should begin to recover in the second or third quarter of 2002.” He also noted that, “If the economy ramps up, there will be more people in the workforce, and, thus, therell be more demand for business travel. If it doesnt, labor force growth will be racked back. Room demand will grow, but it depends on the return of job growth.” Arthur Margon, principal, Rosen Consulting Group, agreed that employment growth is important to watch for signs of recovery, but also said among the long-term effects of Sept. 11, there will be an increased cost in security for all corporations, as well as lower levels of immigration, which could definitely affect the labor pools for the hospitality industry. Margon outlined two recession scenarios for attendees. The baseline scenario, he predicted, would last about nine months, with a slow recession and quick recovery. The other, bleaker scenario shows a recession lasting two years before recovery begins. Margon said, however, his firm has confidence that the economic stimulus the government is planning will help improve the economy. But he warned economic recovery could take two years to occur, “if were not careful,” depending on the amount of stimulus poured into the economy and whether or not there are any more attacks. Margon also predicted, “In two years when were back strong, there will be subtle changes… that will directly affect the property types you manage.” Meanwhile, Jack Corgel, managing director, Hospitality Research Group of PKF Consulting, said the firm “found a little over 20% of hotels will not be able to cover their interest payments; but many can be cured, and many can make payments while in delinquency or default, depending on their relationships with their lenders.” Art Buser, evp, Jones Lang LaSalle Hotels, predicted that for the hotel debt capital markets, “major banks will hit the pause button to focus on existing properties… and there will be an extension of loans.” He also said on the hotel equity capital market side, the vultures are already circling, forming “vulture funds” determined not to miss out on opportunities. However, Buser said, “To date, there are not a lot of sellers.” Michelle Russo, vp, Deutsche Banc Alex. Brown, noted that among analysts on Wall Street, “rate deterioration is a concern.” Another concern, she said, was that if the recession goes longer than mid-year 2002, a lot of the drastic cost-cutting measures made by hotel companies cant work in the long-term, and “that will negatively impact earnings.” “But,” she said, “when we get a better feel of the impact of war on travel, when we feel better about cash-flow projections, as soon as there is clarity in what will happen, [lodging]stocks will pop. Right now, though, theres no confidence in the numbers on Wall Street, so theres not a lot of reason for stocks to pop, and not as much reason for lenders to give money.” Overall, analysts lauded the lodging industry for the healthier state it is in now as compared to 10 years ago, and said that will, and has, helped them weather the current uncertain recession. They also said now is a good time to renegotiate with lenders.
Arthur Margon