LOS ANGELES - The stock market continues to bounce like a yo-yo, President George W. Bush has been talking about the possibility of a recession, and the Federal Reserve recently cut interest rates to spur the slumping economy. Even so, the mood was upbeat at the 16th Annual Hotel Industry Investment Conference held Jan. 16-18 in Los Angeles.
"We're not changing any of our marketing plans at this stage. We're not changing any of our operating plans at this stage," said Paul W. Whetsell, chairman and CEO of Washington, D.C.-based MeriStar Hotels & Resorts, at one of the conference's sessions. "I think this industry is really positioned for a terrific second half of the year, and 2002 looks equally positive. So, I remain a little more bullish than what I read in the newspapers and see on TV."
The conference, which was sponsored by the UCLA Extension Real Estate Center at the Century Plaza Hotel & Spa, offered 40 panels and workshops aimed at helping industry members develop strategies. The second panel of the conference, "The Outlook for the Industry," set a positive tone. Four of the industry's top executives, including Whetsell of MeriStar, discussed the state of the industry with moderator Roger S. Cline, director of hospitality consulting services at New York-based Arthur Andersen.
The panelists agreed the hotel industry is positioned for success and that any slowdown in the economy will be short-lived. Whetsell said customers have not indicated that they plan to cut down on travel, unlike in 1998 when customers had a "doomsday" outlook.
Charles A. Ledsinger Jr., president and CEO of Silver Spring, Md.-based Choice Hotels International, was skeptical about economists' projections of a drastic downturn in the economy. "This is the long-coming slowdown we've heard about for the last five to seven years. We haven't seen it yet," Ledsinger said. "We think if there is a disruption, it's going to be small and fairly short."
Thomas R. Oliver, chairman and CEO of Atlanta-based Bass Hotels & Resorts, noted that the investment community is worried about the economy. However, he added, "I think the general reaction within the marketplace has been pretty good. We certainly haven't seen any significant declines."
Consolidation continues to be a major concern in the industry. However, mega-mergers have been rare, and the consensus among panelists was that the industry is unlikely to be dominated by two or three huge companies, as opposed to the airline industry.
Fred J. Kleisner, chairman and CEO of Dallas-based Wyndham International Inc., said there are "just too many brands out there" for a small handful of companies to dominate the industry, at least for the near future. Ledsinger noted that consolidation will continue because investors want to see companies grow. "I think you'll see the big guys continue to get bigger and there will be fewer of them," he said.
Whetsell predicted untraditional alliances will become more common, such as deals with timeshare companies and MeriStar's recent merger with American Skiing Co., which owns ski resorts across the United States. Oliver said consolidation in the industry will no doubt continue, but added there always will be a place for the smaller players.
In addition to the seminars, there were several press conferences and award presentations, including:
- The deal of the year, mergers and acquisitions, was awarded to MGM Grand's $6.4 billion acquisition of Mirage Resorts Inc., which added several of the fanciest Las Vegas resorts to MGM's growing portfolio, including Bellagio, The Mirage, New York-New York and MGM Grand Las Vegas. The acquisition "will position MGM Mirage as the dominant competitor in the upper-middle and premium segments of the Las Vegas gaming market."
- The deal of the year, major hotel category, went to Olympus Real Estate Corp., which bought 27 Susse Chalet and Grand Chalet properties in several northeastern U.S. locations from Chalet Susse International Inc. for $129.5 million. The award praised Olympus for its ability to make the deal at a time when the limited-service hotel sector has been reluctant to sell its portfolios.
- Beverly Hills, Calif.-based Hilton Hotels Corp. announced that it has signed an affiliation agreement with Mexico City-based Camino Real Hotels. Under the affiliation agreement, Camino Real plans to rebrand the resorts under the Hilton flag after spending $40 million in renovations over the next 26 months. In the interim, Camino will have access to Hilton's sales and reservation support.