Schizophrenia reigns at the New York University International Hospitality Industry Investment Conference underway this week at the Marriott Marquis in New York City. On one hand, a lot of speakers and attendees are proclaiming optimism for the short- and medium-term future of the hotel industry. Even Arne Sorenson, president and COO of the typically conservative Marriott International, said he's “wildly optimistic” about the industry, predicting “rates will come back (rise) soon and, in fact, are already beginning to do so in some markets and segments.”
Predictably, other CEOs at an opening general session before a throng that surely was larger than last year's crowd were more circumspect. Andy Cosslett of IHG said the “clouds are lifting, but there is still reason to be quite cautious,” citing the fragile economic climate in Europe as example. And Mark Hoplamazian of Hyatt believes we're at the “very, very early stages of what feels like a recovery.” His concern, however, is the state of the larger economy, especially jobs and housing prices.
Everyone seemed to agree the luxury and, to a lesser extent, upper upscale segments of the market will lead the way to recovery. Mark Lommano's updated industry forecast shows luxury occupancy rising 8.2 percent this year. And while rates will only be up slightly, RevPAR should increase by 8.5 percent. RevPAR for the whole industry should be up by 3.0 percent this year, said Lommano.
“The death of luxury lodging is poppycock,” said Sorenson, noting that RevPAR for Ritz-Carlson is growing faster than any other Marriott brand. “Even during an economic decline, luxury hotels have distinct advantages in facilities and abilities to provide guests with unique experiences.”
Another divergence of opinion at the conference concerns the transactions market. A report released yesterday by Jones Lang LaSalle Hotels indicates that improving industry fundamentals are driving more buyers and sellers to market.
“The outlook for hotel investors is on the upswing,” said JLL CEO Art Adler in releasing the report. “There is a clear consensus that values of hotel assets—ranging from select-service properties to luxury hotels—firmed during the past three to six months, laying the foundation for a more congruous understanding of value.”
Yet, talk around the halls, bars and cocktail parties during the conference seems to contradict that notion that transactions volumes are about to increase exponentially. Most attendees still say financing is difficult, or nearly impossible, to find for most any kind of lodging deals.
“Private equity is about the only money available for any kind of transactions,” one president of an ownership group told me. “And the untold story still to come is the amount of distressed properties that have yet to boil to the surface.”