Unlike the hotel industry's sudden, swift and deep downturn three years ago, the recovery has been slow, even painfully slow for some owners, operators and brand companies. Yet the talk among attendees and speakers at this week's Hunter Conference in Atlanta reflects the general mood of the industry—conditions are improving but we still have a long way to go.
Mark Woodworth, the oracle from PKF Hospitality Research, explained it this way at the opening general session: “Your good feelings are well founded.” As he demonstrated graphically, at this time last year the industry had not yet reached the trough of the current cycle. “Now, we're half-way up the curve of the cycle, and by 2013 or '14 we should be to the point where we see meaningful amounts of new hotel supply.”
But Woodworth introduced a reality check into his remarks, noting that while the hotel business no longer faces the headwinds that buffeted it for the past three years, it has yet to see any tailwinds. Macro economic trends—persistent high levels of unemployment, continued weakness in housing, the prospect of higher levels of inflation and a reduction in constraints in airline capacity—promise to both promote lodging recovery and keep the pace slow but steady.
One very promising sign at this year's Hunter event is the number of lenders in attendance and their willingness to talk about extending money for a variety of lodging transactions—mostly for acquisitions (often for properties in distress) but also for renovations and, believe it or not, new construction. Conference founder Bob Hunter said 34 lenders registered for the event and, “like the Marines, they're looking for a few good hotel loans.”
As I witnessed at the ALIS conference in January, the overall mood of industry leadership is a combination of joy at the improving fundamentals and recognition that full recovery is many months away and some pitfalls may still slow the process. Cautious optimism is the best course of action now and until the future path becomes clear.