MeriStar’s Whetsell Goes To Bat For Hotel REITs’ Fate And Fortunes

NEW YORK— Paul Whetsell, chairman/CEO of MeriStar Hospitality Corp., once again proved himself to be a stand-up kind of guy when he “stood up” for the hotel industry in the face of some tough questioning at this week’s NYU Real Estate Institute symposium here focusing on REIT Strategies In The Post-9/11 Economy. In the course of fielding questions about the possibility of publicly traded REITs and REOCs being “dinosaurs” in this post-Sept. 11 era, Whetsell maintained that— rather than facing extinction— hotel REITs are actually “early in their evolutionary life-cycle, and are only now just getting their [collective]legs.” With respect to the impact and lingering effect of last fall’s terrorist attacks on the industry, Whetsell admitted the tragic events of Sept. 11 turned out to be “the biggest shock to the hotel system in its history.” However, he similarly pointed to a perhaps all-too-often overlooked plus side to the situation; “not one public company in the lodging industry experienced a major [i.e. insurmountable] problem” because of the ramifications of that fateful day. On the other hand, the MeriStar executive said just because “a large percentage of institutional-quality real estate is now held by public companies,” that doesn’t mean there are no drawbacks and/or bumps in the road facing the hotel REIT universe. Topping that list, he pointed out “hotel REITs— by law— are still not allowed to actually operate their hotels.” Another observation offered up by Whetsell centered around a belief there will be “further consolidation in the hotel REIT ranks, with the larger companies invariably getting bigger and stronger.” In line with this plethora of avowed advantages and disadvantages, Whetsell broke ranks with the rest of his early-afternoon panelists to tell HOTEL BUSINESS® just why he feels hotel REITs— as a viable investment vehicle— are among “the most attractive” at this particular time. “I think we can all agree that the industry got battered pretty good, but there’s no doubt it will recover— solidly— and dividends will come back. “Moreover,” he contended, “stock pricing is also returning…and, in fact, should ultimately surpass pre-Sept. 11 levels.” In Whetsell’s estimation, this should play nicely into “opportunities open to MeriStar to go out and buy hotels again.” While not necessarily taking hotel REITs’ side over all others, Whetsell did note it seems the other REIT sectors are just now starting to show some ill effects in the wake of the double whammy of the recession and the events of Sept. 11. Conversely, he claimed: “People are now calling us right and left. There’s little doubt there’s a real interest in hotel REIT stocks right now.” Is this purported show of interest well-founded? Whetsell thinks it is, suggesting that the lodging sector’s improvement should certainly continue through the rest of the year and beyond (barring any unforeseen, calamitous developments). In his words: “Our day is ahead.”