By John Yellig Enthusiasm for the hotel business was widespread at The Lodging Conference 2010 in Phoenix thanks to improvements on the operating front, but concerns about the broader economy left some attendees with doubts. “Clearly, demand and occupancy are beginning to rise, and that’s good news,” Harry Javer, president of the Conference Bureau and one of the conference’s founders, said in opening remarks on Sept. 22. “Deal flow is beginning to return to the industry.” Granted, the deals that are occurring look different than those that occurred in previous cycles, namely less leverage. “But maybe that’s good because we won’t get ourselves into trouble,” Javer observed. R. Mark Woodworth, executive vice president of PKF Consulting, said he believes the hotel sector is now at the tail end of “the foreclosure, depression-type period of the industry.” “Arguably, this is the point of maximum financial opportunity,” Woodworth said. “So it’s a great time to be in your business, but importantly, as we go into 2011 [and] 2012, we think it’s going to be an absolutely wonderful time to be owning a hotel.” Vail Brown, vice president of global sales and marketing at Smith Travel Research, proclaimed “demand is back,” noting that in July, the U.S. hotel industry sold 102,307,179 rooms, the most ever sold on a monthly basis. And in August, all three operating metrics were up, with occupancy rising 6.4%, to 63.9%; ADR gaining 1.5% to $98.69; and RevPAR climbing 8.1% to $63.08, Hotel News Now reported Sept. 22, citing data from Smith Travel. Nevertheless, for all the optimism on stage, the mood among attendees and other participants was less bullish. “I don’t think they should be popping any champagne corks for a long time because a dollar increase in ADR is great, but it’s nowhere near what’s needed,” Michael Sacenti, a principal at Hospitality Investment Management, told SNL. “There’s just not enough profit in the industry right now to satisfy the debt demands. When everyone’s covering debt service, that’s when the recovery occurs.” Michael Medzigian, chairman and managing partner at Watermark Capital Partners LLC, said that while many hotel owners are optimistic of late, the mood in other industries is decidedly more mixed. “I don’t know many other people outside the hotel space that feel as good as we do right now,” he said while co-hosting a roundtable on equity investing in hotels. “The economy has slowed down recently, but we haven’t felt it in the hotel business.” Sacenti, who later spoke on a panel about the troubled CMBS market and consults for small- and medium-sized banks on their hotel loans, said the industry is currently in a “waiting game.” People are uncertain of what the future holds, he said. “I’ve been in the lodging-finance business for 25 years, and I’ve never seen anything as bad as what we’re in right now,” Sacenti said.
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