News for the Hospitality Executive |
Hotel Lawyers in Phoenix:
By
Jim
Butler
of the Global Hospitality
Group®
Author of www.HotelLawBlog.com September 26, 2011 Hotel
lawyers: Are we at a turning point in the industry? At the
Hotel Law Blog, what happens in Phoenix does not stay in Phoenix.
Here's what
we heard. "It's
not just me. The market has changed in just the last 60 days!" A widely-held view was that it seems like someone hit the "PAUSE" button on hotel finance and purchase-sale transactions. Some fear a "reset" button may also have been tripped. The global market turmoil of the past 30-60 days triggered by the inability of our politicians to resolve deep U.S. budget issues, along with questions about political resolve by European governments to deal with their own problems continue to raise major issues. And there are all the usual specters of big increases in taxes, continued high unemployment, sagging consumer confidence, rising labor costs, rampant inflation to deal with $14 trillion of debt, operating costs rising faster than RevPAR as well as war, plague and pestilence. So here are some insights from industry leaders and vignettes JMBM's hotel lawyers gathered at the Phoenix Lodging Conference. In many cases we have omitted the speaker's names because I was not certain that the comments were intended for attribution. INSIGHTS President, PKF Hospitality Research I am
having a hard time being negative. Bruce Baltin Senior VP, PKF Consulting USA The
fundamentals of the industry are holding up well. On the
transaction side, the first part of the year was very active. We were
even
doing feasibility studies on new hotels. A lot
of people are saying, "The fundamentals are good, let's keep moving." SVP , Davidson Hotels & Resorts Declining
numbers creates uncertainty on how to underwrite a deal. Everything
is taking longer. Everything we have done is all cash. No debt. We
think this is an opportunity for guys like us to be competitive without
losing
to the REITs every time. President & CEO, RockBridge Capital, LLC We
don't think over the next 5 years the economy will shrink. Buy
the right asset. Position and capitalize it correctly and you will be
OK. A lot
of hotels need capital. There has been a standoff on the needed PIPs. The
cost of debt is attractive. Principal, KSL Capital Partners, LLC We are
trying to push rates, but in the last 30 days, that has not been
achievable.
There is a market reset going on like in 2008. We
thought to be in the middle of a very strong recovery off a low bottom,
but
this [development of the last 60 days] changes everything. VIGNETTES And
here are some "vignettes" or stories recounted . . . Vignette #1 Vignette
#2 But
Tom Naughton, Managing Director and Principal of Clearview Hotel
Capital, LLC
had a different experience. We are
not seeing same cancellations we did in fall of 2008. Vignette
#3 Vignette
#4 NOTABLE
QUOTABLEs President, Richfield Hospitality, Inc. We
have been active on the acquisition front and will continue to do so. I just
returned from China where we are working on another 10-20 hotels. The
last 30 days has not had much of an impact on us. We are
working on bringing our parent company REIT over to the U.S. to acquire
assets
over the next 12-18 months. President & CEO, Prism Hotels & Resorts Half of our business is distressed hotels. We are hiring a lot of people. We have 41 new hotels coming in between now and the end of the year. Jack Levy SVP Finance, Pyramid Hotel Group How
you are doing is market-by-market. For example, Hawaii was great in 1st
quarter
of 2011 but not good after the tsunami hit in Japan. We
have not seen cancellations yet and are optimistic about next year. COO, Stonebridge Companies We have not seen any impact from the recent market turmoil . But maybe this has leveled out the playing field for opportunities . And it is causing us to focus on what has to be delivered to our shareholders and owners by end of the year. Paul Novak President, Bedrock Partners The
challenge in the last 30-90 days is finding financing, even 50%
financing. The
biggest challenge we all face is if and when financing market comes
back. This
creates an opportunity for private funds with a lots of cash available. SVP and Director Hospitality Practice Group Recently, it seems like our main business has been selling assets for lenders. The properties sold range from a 325-room full-service hotel to closed Days Inns. Buyer
confidence has sagged in the past few weeks. They are all taking second
look at
their underwriting. Banks
are even more loath to carry back debt. There
has been a pause in the market for 60-90 days. Cantor Fitzgerald If you are planning corporate events, you may think more about laying people off than sending 1,000 people to a seminar, or you may decide to push off the meeting from February to October. ANONYMOUS
QUOTES AND NOTES
What's it all mean? The fundamentals for the hotel industry are good! They are improving. The stage is set for continued improvement in ADR and profit margins. But some are having trouble in pushing rate while others are not. Will our Congress resolve the postponed budget crisis or will the U.S. take another hit to its credit rating? And how about Europe? What will happen with Greece, Italy, Spain and Portugal? Will the euro survive? Can slowing economies in the US and Europe avoid slipping back into a global recession? Will the political mess, volatile markets and business uncertainties keep leisure travelers home and lead businesses to curtail travel? Or will the bifurcated economy continue to see the employed continue to travel, and businesses proceed to book hotel rooms on pent up demand. The next few weeks should tell us a lot. There is either a more level playing field and great opportunities for those with cash, or some very uncertain times ahead. Maybe a 3-5 year investment horizon solves those uncertainties. Or maybe it doesn't. This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer, signing off. We've done more than $60 billion of hotel transactions and have developed innovative solutions to help investors be successful in bidding for hotel acquisitions, and helping investors and lenders to unlock value from troubled hotel transactions. Who's your hotel lawyer? ________________________ Jim Butler is a founding partner of JMBM, and Chairman of its Global Hospitality Group® and Chinese Investment Group™. Jim is one of the top hospitality attorneys in the world. GOOGLE "hotel lawyer" and you will see why. Jim and his team are more than "just" great hotel lawyers. They are also hospitality consultants and business advisors. They are deal makers. They can help find the right operator or capital provider. They know who to call and how to reach them. JMBM’s Global Hospitality Group® The hotel lawyers in the Global Hospitality Group® of Jeffer Mangels Butler & Mitchell (JMBM) comprise the premier hospitality practice in a full-service law firm and are the authors of the Hotel Law Blog. We represent hotel owners, developers, investors and lenders and have helped our clients find business and legal solutions for more than $60 billion of hotel transactions, involving more than 1,000 properties worldwide. For more information about the Global Hospitality Group®, go to www.HotelLawBlog.com. For more information about full range of legal services provided by JMBM, go to www.JMBM.com. |
Contact:
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