It's scary how quickly business conditions can change and the cascading effects those changes can bring. It was just a few weeks ago, I was reporting and writing a story on how some hotel developers are making initial plans to build new hotels. Their rationale: Economic and industry conditions are improving and by 2013 or '14 the market should be ripe for hotel openings, so now is the time to commission market studies, scout sites and source financing.
Of course, that was before the debate over the debt ceiling got to its absurd stage, before Standard & Poor's downgraded U.S. debt and before the stock market launched its roller-coaster ride of high highs and low lows. (As I write this on Monday afternoon, the market is calm, but who knows what tomorrow or next week will bring.)
My guess is many of those analysts and developers I referenced for my story may now be rethinking their plans to resume the development process. The smart ones are still making preliminary plans, but the sense of urgency may be gone and even the most bullish developers have become a little timid.
An even more telling signal of how the markets may have rattled hotel investors is the ongoing saga of the proposed $1.1 billion sale of 64 hotels in the Innkeepers Trust bankruptcy portfolio to a partnership between Cerberus Capital and Chatham Lodging Trust. The buyers abruptly cancelled the deal yesterday, citing what they only would call “a condition, change or development that could reasonably be expected to have a material adverse effect” on the deal. No one at any of the companies involved is talking about this announcement, but speculation is rampant that given the wide swings in the stock market and the economy, the investors are no longer as confident about the deal, the economy and whether the recovery in the lodging market will continue.
For better or worse, the financial world has become much like the weather in Houston: If you don't like it, wait five minutes for it's bound to change.