LOS ANGELES—The mood was definitely upbeat among executives attending the annual Americas Lodging Investment Summit (ALIS), held here late last month at the JW Marriott in the L.A. Live complex, mirroring data and opinions that have the industry headed in a positive direction.
Unlike last year’s conference, which seemed intent on forcing a rebound by sheer will and an emphatic theme, the event’s twelfth iteration had Chairman James Burba, president of Burba Hotel Network (BHN), which co-hosts the event with the American Hotel & Lodging Association (AH&LA),
declaring “On with the Show” a more apt approach.
The mood, he indicated, recalled that of 2004-2005, which led up to extremely robust times for the industry. Another barometer was the number of attendees—approximately 2,500—matching 2012’s record as the third largest attendance in ALIS history.
Burba noted in a survey sent out to ALIS attendees, 98% of respondents believe there will be an increase in RevPAR growth in the United States this year. In a similar survey, 65%-70% of those surveyed in Asia-Pacific felt RevPAR growth would increase. A European survey is still under way, but Burba felt it wouldn’t be a surprise if it mimicked the Asia-Pac sentiment.
“I would think it’s safe to say the U.S. lodging market, the U.S. investment community [are]the poster children of good news right now as you deal with major markets around the world,” said Burba.
In addition, 85% of respondents, as opposed to 56% last year, felt there would be more construction dollars this year. “Clearly, the feeling that development’s coming back is what we all have,” said Burba.
That sentiment was easy to appreciate, as scores of attendees eschewed the opening sessions at the Nokia Theater and subsequent panels and programs over the three-day event, opting instead to hob-nob in the lobby of the hotel and its outside public spaces, networking and cutting deals, according to a sampling of industry movers and shakers on the scene.
In the big picture, REITs and opportunity funds are expected to be the major investors in the lodging space in 2013. “That’s a healthy sign for the industry because it means capital from more than one source is going to be chasing deals,” said Burba.
Much of that increased financial confidence could be attributed to the industry’s positive traction. As part of a panel moderated by Robert Steele, president/COO of AH&LA’s Education Institute, which focused on industry performance, Randell Smith, chairman of Smith Travel Research, noted globally the Americas enjoyed “two years, back-to-back of solid RevPAR growth.”
He tagged the RevPAR increase for this year at 5.7%.
Mark Woodworth, president of PKF Hospitality Research, looked out even further, noting having come through the particularly tough times of the past several years, the industry is in a more positive period. “Since ’09 and 2010, we’ve begun to move back up to a period, we think, of a very optimistic time in our industry. Given our current forecast and overall outlook, we think this optimistic period is going to persist through 2014, and likely, it’s not until 2017 where the current cycle peaks and we begin the trip on the curve back down,” he said.
Last year, investors played off the improving landscape, with $17.5 billion in hotel transactions realized, according to Arthur Adler, managing director/CEO-Americas for Jones Lang LaSalle. He said those deals and the $18.5 billion in transactions forecast for this year are being driven by strong fundamentals and re-emergence of debt. “Debt levels are the highest we’ve seen in six years and that helps drive volume,” said Adler.
He noted five markets accounted for roughly one-third of the transactions in the U.S. last year, led by New York with almost $3 billion in transactions. The others were San Francisco, Chicago, Miami and Washington, DC. Looking ahead, he forecast an approximate 10% increase in transaction volume each year over the next five years; however, “That could change dramatically if we see cheap and plentiful debt again, if we see more M&A activity and we see public to private activity like we saw in 2007,” he said.
Executives and companies responsible for the “most influential” hotel industry deals last year were honored with awards. The nominees were considered for the awards based on “outstanding business performance” in various industry sectors, and determined by ALIS sponsors and delegates. This year’s winners included:
• Development of the Year: The 463-room Conrad New York in Manhattan, which that was developed for an undisclosed amount by Goldman Sachs and is managed by Hilton Hotels and Resorts
• Single Asset Transaction of the Year: Strategic Hotels & Resorts and KSL Capital Partners, LLC’s purchase of the 509-room Essex House in New York City for $362 million, or approximately $711,000 per room from Dubai Investment Group
• Merger and Acquisition of the Year: Blackstone Real Estate Partners VII’s acquisition of the U.S. Economy Hotels division [i.e., Motel 6] of France-based hotel operator Accor SA for $1.9 billion
The Jack A. Shaffer Financial Advisor of the Year 2012 award went to Robert Stiles, principal/managing director, Robert Douglas. In addition, Michael A. Leven, president/CEO, Las Vegas Sands Corp., was honored with ALIS’ Lifetime Achievement Award.
During the awards luncheon, Burba described Leven as “a true legend in our industry” who, “all of his life has built a career around inclusiveness and doing the right thing, even if it meant personal loss—sometimes big personal loss—focusing on the benefit of others and, of course, being a businessman and getting results.”
A 50-year industry veteran, Leven has served on the Las Vegas Sands Corp. board of directors since 2004, attaining his current post in 2009. He is known as the former founder/president/CEO of US Franchise Systems, Inc., which developed and franchised Microtel Inns & Suites and Hawthorn Suites. He was previously the president/COO of Holiday Inn Worldwide, president of Days Inn of America and president of Americana Hotels. He has served on the board of directors of Starwood Hotels and Resorts and Hersha Hospitality Trust, and is currently a trustee of the Marcus Foundation.
In what Burba characterized as one of Leven’s “proudest accomplishments,” he co-founded the Asian American Hotel Owners Association (AAHOA), which started with 12 members in 1989 and now has more than 9,300 members, who, combined, own more than 22,000 hotels nationwide. He is also the former international president of the Hotel Sales & Marketing Association International (HSMAI) and a former chairman of the AH&LA Government Affairs Committee.
In accepting the award, Leven credited his wife, Andrea, and three sons—as well as his parents—for their inspiration and support in keeping him on top of his game, as well as “the continual challenge of making a difference and finding a new way to win; of never giving up in spite of all the adversity of all the lousy hotels I had to fix, and all the great ones I had to fix, too.” He also cited his “love” for those “who make it happen, from the hourly worker to the senior executives” who he has worked with and those he has encountered from around the world.
“We, as an industry, are very lucky to have someone like Mike Leven in our industry: a man who is driven by ethics, extraordinary vision and who looks out for others. He is the embodiment of ‘nice guys finish first,’” said Burba.
And to help other hoteliers get to a successful finish line, many of the ALIS sessions, which were split along three paths—small property investment, ownership issues and opportunities and value-engineering strategies—had as their focus strategies that could produce slow-but-steady progress, as well as profit, in the still-recovering economy.
Among those discussing the outlook for lodging was a panel of executives giving their “View from the Boardroom.” These included Stephen Joyce, president/CEO of Choice Hotels International; Mit Shah, CEO, Noble Investment Group; Jim Donald, CEO, Extended Stay Hotels; and Robert Gaymer-Jones, CEO of Sofitel Luxury Hotels. Scott Berman, principal of PricewaterhouseCoopers, moderated the panel.
For the most part, the panelists believe the industry was seeing traction. Donald said he was “very bullish” on the industry in 2013 and felt there is “opportunity,” in particular for the Extended Stay brand.
Noble Investment’s Shah said looking out to 2013, “We put a lot of stock in the RFP process of getting real rate creep, something that’s been a little bit of a mixed bag. While there are fewer RFPs that have been unsigned as opposed to last year, I still think there’s going to be some give and take with businesses. It’s all market by market in how we’re doing this…we want people in our hotels to take risk [in terms of pricing]because that’s where the momentum is going to come from.”
Joyce said Choice expected to do well in 2012 and “actually did a little better than the industry,” with a lot of leisure customers coming back. With the strength of that, Joyce felt “barring something unforeseen, we should have a pretty good year” in 2013.
Gaymer-Jones suggested some of the ills the lodging industry is experiencing, both in the U.S. and abroad, is “not really a hotel issue, but a government issue.
“The government is a mess and the taxation is changing all the time, creating problems for individuals and issues for businesses,” he said; however, he indicated 2012 was a “great” year for Sofitel, which experienced “its highest single-digit growth in RevPAR around the globe,” with “a lot of it driven by rate…in the majority of our locations around the world our rates are up where they were in 2007. So that’s a positive message.”