As the final quarter of 2007 approaches it has become clear that this is shaping up to be the most critical three months the hotel industry has seen in quite a while. For the first time in several years there may be more questions than answers as hotel executives descend on Phoenix and the annual Lodging Conference, which is usually a good barometer of where things are headed. But unlike in past years, the signature event of the conference, The Deal Corral, could be relatively quiet this year as investors begin to exercise a little more caution. Most prognostications have indicated that the latter half of 2007 was when the performance metrics were going to start leveling off but that’s just the beginning. What about the current debt market and fluctuating interest rates and the potential impact on deals? Are lenders going to examine potential projects far more closely now? Is private equity going to start finding other places to invest if the promise of double-digit returns is no longer there? Then there’s the collapse of the residential housing market and we’ve even heard some talk about a worldwide recession. And those are just the external economic factors potentially affecting the business of hotels. Within the industry, you have the anticipated closing of Blackstone’s acquisition of Hilton Hotels Corp. Of course, many are wondering how that’s going to shake out. For example, there are some obvious overlaps among several midscale brands that are part of each company’s portfolio. Will there be some brand consolidation and, if so, which ones will be leaving the landscape? How about the leadership of Hilton going forward? Co-chairman and chief executive Stephen Bollenbach is set to retire and previous heir-to-the-throne president and COO Matthew Hart has given the impression that he may not stick around to be part of Blackstone. Speaking of leadership, Starwood recently set its new course when it hired Frits van Paasschen as its new CEO. The company is going to the well again with another brand veteran hopeful that he can provide the branding expertise that previous CEO Steven Heyer provided along with the proper leadership that he did not. The company’s stock price and the performance of its brands have done remarkably well despite all the upheaval in the executive ranks during the past year. Then there is the case of U.S. hotel REITs, which seem to be disappearing faster than you can say ‘CNL.’ The REIT ranks will have gone from slightly less than 20 approximately 12 months ago to just a handful after several pending takeover deals are closed. Is this indicative of a shortening of the desired hold period for many ownership entities now or is it just some capitalistic owners realizing they could get top dollar for their portfolios? It may be a little of both. The last major event for the industry was the NYU Conference in June and while there were some doomsayers to be found, the feel of the conference was overwhelmingly positive, particularly if you talked to hotel owners. It will be interesting to see if participants leave the Lodging Conference with that same feeling. However, it’s going to be what happens in the three months after the event that will likely go a long way in determining the direction of the industry.
