PHOENIX— The Lodging Conference kicked off here yesterday with a record number of attendees, indicating that hoteliers are itching to speak face-to-face with their peers about the hospitality industry’s current tumultuous state and to determine when and how things may comeback. Wednesday’s Deal Corral jump-started the event by discussing a variety of macro factors affecting the financial well being of the industry. The panel, moderated by HOTEL BUSINESS® Publisher Emeritus Jerry Merkin, consisted of industry experts including Dan Abrams of iStar Financial, Joe McInerney of the AH&LA, Michael Medzigian of Lazard Freres Real Estate and Alan Ostroff of Sonesta International. Panelists agreed that while the recession began negatively affecting business early last year, the events of Sept. 11 sped up those affects, causing a strong downward spiral that has only recently begun to subside. “Indeed, the events of Sept. 11 made the recessionary factors greater,” said Abrams. But while some properties continue to struggle, many are reporting strong business, which panelists said is most likely due to their location. “We’ve seen more locational issues after Sept. 11,” said Ostroff. “If you could drive to the destination/hotel, it is doing well. If you have to reach it by air travel it is most likely not performing well,” he said, noting Sonesta’s Key Biscayne property has seen those affects first hand by way of many “snow birds” deciding to forego their southern migration this winter because of a fear of flying. But, instead of dwelling on whether the industry would recover, discussions turned to the more interesting question of how and when business will come back. To that end, panelists agreed that the next six months or so will be tight, but noted that things will pick up the second half of the year, as previously predicted by hotel analysts. For the short-term, however, hoteliers can expect very challenging times, including tight lending and cash flow conditions. “I think we will see some real stress happening in the next three to six months,” said Abrams, who noted that we will see some hotels default on debt payments if conditions continue. “It’s okay now, but if it goes on for another six months, we’re in trouble.” “Major companies are predicting decreases in RevPAR for the first two quarters (year over year) so that tells me that most capital providers will be very conservative for at least the next six months. It was also predicted that M&A activity will pick up after a few months as more and more distressed properties run out of time and money. “There’ll be distressed sellers, but probably not until after the second half of this year,” said Medzigian. The sentiment that the industry has reached the “bottom” of the cycle is expected to trigger the buying and selling of hotels. However, when that “bottom” will be reached was one question left unanswered. As for how the industry will recover, panelists agreed that the cut-off of new supply will help the industry’s position, as will the rise in consumer confidence and in demand— particularly in leisure demand— of which we have already seen the first signs. However, panelists agreed that since the events of Sept. 11, the industry has turned a new corner that includes uncharted territory, as the ingredients for a typical industry cycle do not apply in this case. “There is an “X” factor of uncertainty now,” said Medzigian. At the Crisis Watch luncheon presentation, some industry analysts gave an overview of the current scenario and where they predict the industry is headed. According to Mark Lommano of Smith Travel Research, demand is expected to come back this year (especially in the second half), which will lead to generally higher occupancies. However, that will not correct the ADR woes many properties are facing— at least not immediately. Average daily rate, said Lommano, has experienced four continuous months of declines. “As demand increases and rooms a