| Boulder, Colorado�December 22, 1998 � While Wall Street
saved the lodging industry after the market collapse of the early 1990s,
it did not create a �perfect market,� according to Dan King, vice president
of HVS International in Boulder, Colo. In fact, rather than making the
industry less susceptible to the excesses and market plunges characterized
by the 1980s to early 1990s, the public markets have made the peaks higher,
the valleys lower and the cycles shorter.
�Now that the era of rapid REIT expansion and �easy deals� is over, it remains to be seen if Wall Street will make the sale of a hotel simpler, or subject to less market imperfection,� says King. �At the moment, it appears that the market has given us the illusion of efficiency, and rather than providing discipline, the market may have made the industry more susceptible to fluctuating volatility, quarterly earning reports and the �madness of the crowds.�� King compares the hotel industry over the past 15 years and the problems
of the early 1990s resulting from overbuilding, the 1990 recession and
the coup de grace of the Gulf War forcing national occupancy levels to
drop to 61 percent. Delinquent loans, loans in foreclosure and owners selling
properties at liquidation prices resulted in values dropping precipitously
low and a total loss of value over a two-year period of 35 percent, or
17.5 percent per year, says King. �The loss of value during the early 1990s
was a debacle during which the industry painfully demonstrated its undisciplined
and inefficient nature.�
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