NASHVILLE— Does the fact that the hotel business has consistently made money during the past two decades mean it will continue to make money in the months and years to come? According to reports of industry analysts, such an on-going scenario looks not only logical, but likely. As suggested by Cendant Hotel Division Chairman/CEO Eric Pfeffer during the President’s Leadership Luncheon at the recently concluded 2000 Travelodge/Thriftlodge Annual Conference, here, “operators who consistently provide good service and quality facilities can be assured that there is money to be made in the hotel business.” In essence, Pfeffer supported his positive prognosis with evidence depicting a steadily climbing RevPAR over the past 20 years— despite fluctuations in room supply and demand and essentially static occupancy. Pfeffer went on to note that concerns about oversupply may well be largely groundless, considering that the sharp supply growth spike in 1997 followed by peak new-supply years 1998 and 1999 can now be expected to decline through 2002. In Pfeffer’s estimation, “a business with no growth has no chance” in today’s ultra-competitive marketplace. Accordingly, he maintained that Smith Travel Research findings that economy-segment rooms in the construction pipeline are growing at just 11% (the second-lowest rate of all segments tracked), and that extended-stay performance still outshines that of all other categories, do bode well for Travelodge/Thriftlodge— and Villager— franchisees. Along these lines, Pfeffer focused directly on the development of more hotels, stressing that notions raised by the banking community, which claim tougher loan-underwriting standards, are helping to “weed out weaker projects.” Dispelling this as mere “bank talk,” he pointed out that Cendant is committed to helping its franchisees grow their portfolios of high-quality, well-positioned new construction and conversion hotels. To this end, it was noted Cendant has committed $50 million specifically targeted for mezzanine loans and development incentives. Additionally, it might be that, by helping franchisees grow their holdings, Cendant is similarly helping to boost its own corporate standing in the eyes of industry analysts. In particular, a pair of equity research reports recently circulated by Morgan Stanley Dean Witter (MSDW) gave Cendant generally glowing marks in terms of earnings, as well as overall allure of its stock pricing. However, one of the reports, nonetheless, focused on the observation that “unit growth in [Cendant’s] lodging business has slowed, and this is affecting the growth rate of [its]overall travel division.” On the other hand, all things considered, MSDW did offer that “it’s a good time to buy [Cendant] stock,” noting that “the stock looks cheap to us [even though]growth remains disappointing.” As such, it may well be Pfeffer was playing as much to Wall Street as he was to the luncheon audience of franchisees when he maintained: “Cendant is on the move again, looking to aggressively grow and develop our hotel system.” And, while much of his message may have been intended to motivate growth on the micro level, the company hasn’t been above leading by example, as evidenced by its recent acquisition of the AmeriHost Inn and AmeriHost Inn and Suites brand names and franchising rights.
