News for the Hospitality Executive
When Does the Hotel Industry Recover?
By Jim Butler
21 May 2009
Here are the insights provided by hotel industry leaders at Meet the
Money® 2009 on the issue of "recovery".
Mark Woodworth, President of PKF Hospitality Research
This chart shows the PKF projections on where we are in the hotel cycle of emotions and opportunity. We are in a period of capitulation foreclosures and depression that will last through 2010, with relief beginning to appear in 2011, and optimism coming only in 2011 or 2012. This slide emphasizes that the time of greatest financial opportunity is in 2009 and 2010!
As measured by a 4-quarter moving average, employment and hotel room
demand do not start positive growth until 2011.
PKF projects that the employment levels affected by current recession
will not return to pre-recession levels of Q4 2007 for 15 quarters. They
will not return to pre-recession levels until Q1 of 2012.
Big ADR declines will set any "modern record" in NOI declines for the
hospitality industry as shown in this chart. This will be the first time
since 1936 that NOI was down 30% or more. In part this is because of the
confluence of 3 factors
Mark Woodworth points out that there have been 122 recessions around the world between 1960 and 2007. Only four of those 122 recessions had all three of the following factors:
1. Credit crunch
Mark calculates that with all three of these depressing conditions, GDP declines are 2 to 3 times greater.
When do we get out of this mess?
I don't know. But there is a lot of pain to endure before we get back to what we thought was normal. We do believe that the next 12-18 months represent the greatest buying opportunity in our lifetime, and that it may well be a long time (7 years or more) before we get back to 2007 levels of profitability and value, on an inflation-adjusted basis. We hope it is sooner.
Jim Butler is a founding partner of JMBM and Chairman of its Global Hospitality Group®. Jim is one of the top hospitality attorneys in the world. GOOGLE "hotel lawyer" and you will see why. JMBM's troubled asset team has handled more than 1,000 receiverships and many complex insolvency issues. But Jim and his team are more than "just" great hotel lawyers. They are also hospitality consultants and business advisors. For example, they have developed some unique proprietary approaches to unlock value in underwater hotels that can benefit lenders, borrowers and investors. (GOOGLE "JMBM's SAVE program".) Whether it is a troubled investment or new transaction, JMBM's Global Hospitality Group® creates legal and business solutions for hotel owners and lenders. They are deal makers. They can help find the right operator or capital provider. They know who to call and how to reach them.
Chairman, Global Hospitality Group
Jeffer, Mangels, Butler & Marmaro LLP
1900 Avenue of the Stars, 7th Floor
Los Angeles, CA 90067-4308
(310) 201-3526 direct
|Also See:||Is Leverage Dead or Just Deadly -- a Controversial New Investment Reality Nay be Taking Hold / Jim Butler / May 2009|
|New Hotel Data and Revised Predictions for 2009; Increased Hotel Loan Stress, Falling NOI and Slumping values / It's Going to Get Worse Before it Gets Better / Jim Butler / March 2009|