Hotel Online  Special Report

Top Ten Investment Challenges Facing
the Lodging Industry /
Lodging Industry Investment Council 

Los Angeles, CA - April 5, 2002 - Jim Butler, Chairman of the Global Hospitality Group of Jeffer, Mangels, Butler & Marmaro LLP (JMBM) and Vice Chairman of the Lodging Industry Investment Council (LIIC) announced today that JMBM's Global Hospitality Advisor has published the hospitality industry think tank's list of the Top Ten Investment Challenges facing the industry over the next two years. The list is based on a survey of LIIC members, in combination with member roundtable discussions.

Top Ten Hotel Investment Challenges Over Next Two Years  

1.  Finding first mortgage debt capital at loan-to-value ratios and interest rates conducive to achieving targeted equity rates of return.
2.  Locating suitable, quality product at a viable price for acquisition and/or rehabilitation by narrowing the bid and ask prices between buyers and sellers.
3.  Predicting and quantifying the timing of the hotel industry's rebound for specific lodging markets.
4.  Assessing and responding to the long-term impact of the recent recession and 9/11-related revenue and profit declines.
5.  Resolving problems being encountered by lenders and borrower with ambiguities and restrictions in conduit loans, REMIC rules and related pooling and servicing agreements.
6.  Accessing capital for renovations in light of profitability declines and tighter lending criteria.
7.  Credibly and reliably underwriting hotel deals in the current uncertain market.
8.  Determining the most reliable cash flow basis (trailing 12, hybrid 1999-2000, pro forma) to determine appropriate asset pricing strategies to consummate successful deals.
9.  Maintaining profit margins in the face of revenue declines and upward salary and wage pressures
10.  Coping with the medium- and long-term impact on asset values and product quality from the use of reserves to meet short-term operating needs.

LIIC is actively monitoring this situation for the lodging industry to be considered at the next LIIC think tank roundtable to be held in conjunction with the NYU Hotel Investment Conference in June 2002.

Mike Cahill, President of Hospitality Real Estate Counselors, Inc. (HREC), and Co-Chairman of LIIC commented, "Because LIIC is a nationally recognized industry think tank comprised of over 70 leaders within the lodging industry investment community, it was well suited to conduct such a survey.  In response to the current volatile and uncertain hotel investment climate, we felt compelled to relay the  consciousness of the industry as a whole."

Sean Hennessey, Practice Leader and Director at PriceWaterhouseCoopers, and Co-Chairman of LIIC, added, "The ensuing 'Top Ten' list provides valuable insights and addresses timely issues.  For instance, we learned that the industry's equity players are anxiously awaiting the debt market to loosen the reins on mortgage capital at terms conducive to completing transactions and that a significant amount of equity capital may be available to complete deals, but it remains to be seen whether the available yields will be sufficient for this opportunistic capital."

Butler noted, "It is not surprising that financing and liquidity are dominant issues today. The LIIC survey is very timely and reinforces the importance of JMBM's Meet the MoneyTM conference-which annually presents the largest hotel finance panel in the U.S. The conference, being held in Los Angeles on May 9, will feature the traditional panels of debt and equity financing sources, as well as panels which will address issues of major concern to LIIC members and the industry as a whole.  New panels this year include a special CMBS panel and the new JMBM Lender Survey of more than 300 lenders.  Financing is definitely the foremost concern in the industry right now." 

JMBM is a full-service business law firm with more than 150 attorneys working from offices in Los Angeles and San Francisco. JMBM's Global Hospitality Group is internationally recognized as "the premier hospitality practice in a full-service law firm." The Group has handled hundreds of transactions around the globe, representing more than $20 billion in sales, financings, developments and acquisitions for high-profile hotel, restaurant, resort, cruise ship, senior living, and sports facility projects.  Through its annual Meet the MoneyTM conference and other industry activities, JMBM provides a gateway of finance for the hotel industry.



James R. Butler, Jr.
 [email protected]

Mike Cahill 
Hospitality Real Estate Counselors 
[email protected]

Also See Outlook 2002: A Roundtable Discussion / The Global Hospitality Advisor / JMBM / January 2002 

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