JMBM: You've helped clients through several cycles of development supply demand imbalance and international investment. How is the current picture different from past cycles?

Nardozza: One of the major differences this time around is that a significant portion of hotel assets are in the hands of publicly-traded companies -whether C-corps or REITs. Well, the public capital markets have instilled a new discipline that wasn't there the last time around. Almost overnight the public debt and equity markets have told the lodging industry, "No more cash for acquisitions and development. The brakes are on." This is remarkable since, just earlier this year, equity capital for stock offerings had slowed, but debt capital was plentiful. The next 24 months is a "wait and hold" period. And so, the silver lining in the dark capital cloud is that most companies will focus on improving operations of their existing portfolios.

JMBM: One way to grow is to take advantage of currency shifts and enter foreign markets. In this period of global economic uncertainly, what client strategies do you - and your KPMG hospitality -partners from around the world - suggest to minimize global risks and maximize opportunities?

Nardozza: Hotel companies entering new foreign markets should strongly consider aligning with local business partners as a first step in minimizing risks. The second step is to understand fully how capital markets in a foreign jurisdiction differ from the US capital markets;  I'm referring to expectations for investment return, interest rates, and the mix of debt and equity; among others. The bottom line: Don't assume that U.S. investment return criteria translate precisely to foreign market realities. The risk and reward profiles are very different.

JMBM: You were instrumental in the AH&MA benchmarking study of luxury hotels just released in August. What were the surprises you found - particularly those that would be valuable to first-class, mid-range and economy hotel property owners?

Nardozza: There are four.  One surprise was that a number of hotel companies have talked about "moving boldly" into internet, web - based solutions for growing their book of business, yet total web-based bookings still represent less than 3% of total bookings. Second is the wide discrepancy in the type and amount of staff training provided to new hires and on an ongoing basis - ranging from 4-5 hours per year to several weeks. Another surprise finding in the labor area was that there was a significant disconnect between the top reasons for employee turnover and the strategies behind hotels' retention practices. One last surprise finding was in the area of customer satisfaction and relationship management: hotel companies are not paying attention to those guests who had previously been frequent visitors but whose stays had now stopped. They simply were not asking why.

JMBM: Most of the major hotel companies have some confidence in what they have done to address Y2K for themselves. What are some of the risk areas that still remain for the lodging industry? In your opinion what are the risks and likely impacts on hotel owners of the Y2K problems not resolved by "mission-critical" suppliers, vendors, managers, customers and franchisees?
  
Nardozza: I'll disagree somewhat with your premise. Most hotel companies have addressed Y2K in the areas of  reservations, property management and financial reporting, but one critical area that has not been addressed by all companies is the area of facilities management - the systems that are operating elevators, escalators, heating/ventilation, other mechanical systems, fire, safety. There is some ambiguity about who is responsible - the hotel operating company or the hotel owner.  And that could become a major area for dispute and litigation in the future.

To your question, though, there's also the mission - critical risk that franchisees, business intermediaries and vendors have not made their own systems Y2K ready and that could have a significant impact on a brand's relationship with customers. Rightly or wrongly, the flag - not the vendor or franchisee - might be blamed for customer transaction glitches and the public's perception of the brand could suffer.