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Front Desk

Don’t Jump Off the Cliff, Current Up-Cycle Will Last Longer Than Normal

The better the lodging industry does, it seems, the more we hear about the bad news: the fiscal cliff, the election, political gridlock, concerns over the economies in Europe and Asia and more unrest in the Middle East. All those questions linger and were mentioned more than a lot this week at The Lodging Conference in Phoenix.

So for those of you looking for some good news, the leaders of a few of the lodging REITs were plenty optimistic during a breakout session Thursday morning:

“We are at the beginning of the second third of what could be a prolonged and sustained cycle in our business,” said Ken Cruse, president and CEO of Sunstone Hotel Investors. “We are still in the sweet spot for transactions in this cycle.”

Doug Kessler, president of Ashford Hospitality Trust, agreed. “The potential reason for extra innings to this cycle compared to prior cycles is there is always this overhang of new supply that needs absorbed. Not here.”

The typical cycle, from trough to peak, Cruse said, is approximately 70 months and “we’re 33 months into the current one.” But he predicted the peak wouldn’t come until 2016 or 2017.

Marcel Verbaas, president and CEO of Inland American Lodging Group, said supply dynamics are better than ever. It’s why Inland bought three of Richard Kessler’s Autograph Collection boutique properties in the Southeast last week and why he said they will continue to be net buyers as they prepare to go public in the next 12 to 24 months.

“I can’t remember a time in our industry where the fundamentals have been this compelling,” said Cruse. “Awfully, awfully compelling.”

So there’s a strong dose of good news and optimism, in case all the political talk and macroeconomic concerns have you down.

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