WASHINGTON, DC— The lodging industry is a bit more skeptical as to how business will fare in 2001 than it was just a few short months ago. Industry executives who spoke at the Cornell University Hospitality Industry Strategy Conference, held here last month, were painting a different picture of business conditions than their peers at the UCLA Investment Conference in January. Reports of weakening business in February and March were almost unanimous among the lodging CEOs featured on Cornell’s CEO Panel discussion. In essence, they said that business is indeed down from last year, particularly in the months of February and March. However, they also said that the scenario did not blanket the entire country- there are still some markets that are doing well, with business up or equal to last year’s levels. This marks a notable change from a similar panel held at the UCLA conference in Los Angeles at the start of the year, during which executives used phrases like “sail through the year just fine” and “we don’t see conditions being negative.” Now, executives are admitting that they are unable to see the future clearly, and are watching the economy closely to ensure they make the necessary moves to keep business at profitable levels. Jim Abrahamson, president/COO, Baymont Inns & Suites, participated in the CEO panel at Cornell and said: “I feel more like Mr. Magoo than (Alan) Greenspan, trying to see the magic behind our economy. We’ve been hit hard in the Detroit area and a few others… Generally, things have been holding steady but over the last four weeks, rate growth has slipped. More than anything, we are looking to just hold on, remain steady, or keep to a 2% drop-off and we’ll be happy.” Other CEOs featured on the panel sounded off in a similar tone. Stephanie Sonnabend, president of Sonesta International Hotels, said: “We’re seeing a little softness in the resort arena- our Florida property had a slower start to the year, but our Boston property has been strong.” Ed Mace, president/CEO of Fairmont Hotels & Resorts, said that they, too, have opened the year slowly, particularly in New York and San Francisco. “It’s been spotty,” he said. “We see different areas doing better than others. We began the year expecting 5% RevPAR growth… but we are in the process of reforecasting the year to 3% to 4% RevPAR growth.” Executives did point out, however, that while there is certainly a dip in business, it will not be as bad as the slump 10 years ago. “The challenge is how to keep the panic out of the industry,” said Sonnabend. “This is different, we’ve been waiting and ready for this (downturn) for a while,” she said. True, many hotel companies have spent the past year or two reinvesting in their hotels, spending time and money on training and cutting back on development- mostly as a result of the tight lending market, which has made it difficult to do anything else. “We’re so early in this,” said Mace of the industy’s recent slump. “I think we’re in better shape- we don’t have as much overbuilding, as many overleveraged hotels, and demographic trends are favoring us as the baby boomers grow up/” Slowing supply growth has acted as a blessing in disguise for the hotel industry, agreed executives on Cornell’s Creative Financing panel. And even though interest rates keep getting lowered by the Fed, lenders are holding tight to their new guidelines for loans. “Lenders want the developer to put up 50% to 60% of the equity to do a deal today- that’s a big change from years past,” said Bill Stadler of Felcor Lodging Trust. So how will lodging players fare in this truly volatile environment? Several CEOs alluded to further consolidation and strategic alliances as ways in which players will find new growth. “We’ll look at selective new build projects, but it’s not time for major developments,” said Abrahamson regarding the current state of the industry. Consolidation and strategic alliances will be considered by Baym
