Industry Players Try To Hammer Out Dents Caused By Economic Impact

NEW YORK— With the outlook for lodging remaining blurry at the start of 2003, industry players are finding it necessary to think outside the crystal ball proffered by traditional prognosticators. While still a basic numbers game— occupancy, ADR, RevPAR, margins, LTV ratios, equity in and cash flow out— the roster of factors influencing the daily grind continues to morph in new and often unexpected ways. Paradigm shifts often call for fresh views. Toward that, HOTEL BUSINESS® assembled a divers group of hospitality executives and invited each one to peer into the New Year and give their opinions on what he or she sees ahead. The executive group was composed of: Gerald Chase, president/COO, New Castle Hotels LLC; Robert Winchester, president/COO, Waterford Hotel Group; David Shulman, contract hospitality specialist, Project Dynamics; Craig Lambert, senior vp/brand management, Marriott International; Lawrence Wolfe, managing director, Eastdil Realty Co. LLC; Rebecca Jones, founder, RD Jones & Associates (interior architecture, design and procurement); Timothy Haskin, executive vp/managing director, Tishman Hotel Corp.; and Robert Schmidt, senior vp/sales, American Hotel Register Co. During the “futuristic forum,” there was concern among all players as to how the economy would play out in the months ahead and how it would continue to impact each business. Chase noted New Castle had been doing new construction in 2002, with several projects under way and sites still under consideration. “Then it slowed down primarily because the lenders aren’t quite as encouraged by new-builds. So we’re looking at the acquisition side now, trying to find some projects to grow some value. The challenge we see as an owner, as a buyer, probably is the sellers still haven’t priced at quite the buyers’ needs. On the other hand, there appears to be a lot of capital on the sidelines waiting to jump on some of these deals.” Chase does expect opportunities to materialize in 2003 and wants to pick up on some of those properties, but cautioned rates will most likely be flat after often being deep discounted to boost occupancies during the slowdown in travel due to the impact of the Sept. 11 terrorist attacks on the United States. On the management side, Waterford’s Winchester said one of the keys is to position properties so when there is recovery, the portfolio is in a strong position. “We spent over $8 million last year in capital improvements to keep our properties fresh and competitive in the markets they’re in,” he said. Toward that, David Shulman of Project Dynamics noted the purchasing business has changed to meet the current needs of hoteliers and developers who are trying to squeeze business forward through a tight economy. “We’re being brought in a lot earlier than we used to be and we’ve been asked to provide extended services as far as pre-budgeting, even through design and development stages of a project to enable a forecast for our clients so there are no surprises down the road,” he said. Shulman agreed with several panelists that the mood was “cautiously optimistic,” and said where the traditional cycle of refurbishment might be six years, “people are trying to see how they can structure their dollars to go a little bit farther. They’re looking to us to make sure that in a renovation, per se, specific types of goods are used that will give them more life than others.” Hoteliers also are looking to phase-in projects as well, said Shulman, and are asking for cash-flow analyses of five- and seven-year renovation plans. He added large corporate clients are being more selective with their capital projects and where such dollars will be invested rather than simply doing blanket renovations. Although backed by the global lodging chain presence that is Marriott International, Lambert said it is a “mixed blessing in these times” to have a branded portfolio. “You want a brand to work harder for you in some respects. That’s why members are