As the 18th edition of The Lodging Conference starts today under 100-degree-plus weather in Phoenix, the hotel business is facing a familiar conundrum: Why do we have a lot more questions than answers about the near-term future of the industry?
For the next four days, hundreds of hotel owners, operators, developers, chain executives and a precious few lenders will talk about many of the same things that occupied them at other investment conferences held this year and last. They’ll discuss when financing is coming back for acquisitions (no one knows), the outlook for new development (not for awhile) and if and when the still-presumed avalanche of distressed lodging assets will come to market and at what price (the biggest unknown of all).
Sometimes, it seems industry leaders are too busy looking at the forest to see the trees. Despite everyone’s concern about the looming fiscal cliff, the possible outcomes of the election and the fiscal and political rumblings across the ocean, there’s still a lot of good news in the hotel business. We just finished the best summer season since before the recession, yet even though demand, occupancy and rates continue to climb, it’s not fast enough for some owners.
And hotel acquisitions are happening again, although again not at a rate that makes everyone happy. But it’s likely the volume of hotel transactions in 2012 will come close to last year’s $15 billion total. And according to data released yesterday by Jones Lang LaSalle Hotels, five major markets have accounted for about $4 billion in hotel sales already this year. New York City led with 13 hotels sold for a combined $1.9 billion.
Even the pace of new hotel development is beginning to creep up, it’s also at a very slow pace. That’s good news for developers, who now at least have a hope they’ll be able to get back to building hotels again. But it will be a number of years, at best, before increases in new supply outpace demand increases, giving owners and operators of existing hotels some breathing room and much-needed pricing power.
I expect very little hard news to come out of this week’s conference: no new brands announced, no major acquisitions, no significant partnerships. But I do believe the mood will be a little better than it was at the NYU conference in June or ALIS last January. Just like the hotel industry, and the economy in general, the buzz at industry conferences is slowly, but surely improving. We all hope the trend continues, but why can’t it happen quicker?