From the desks of the Hotel News Now editorial staff:
- Debt funds becoming major source of US hotel financing
- Successful select-service hotels go beyond brand standards
- Increasing gas prices could hurt US summer travel
- Those born in 1980s likely hurt most by recession
- MGM Resorts to reduce use of straws at resorts
Debt funds becoming major source of U.S. hotel financing: As traditional lenders are becoming more risk averse as the United States hotel industry cycle continues, debt funds are taking a more prominent role, Jones Lang LaSalle’s The Investor reports. Debt fund investment in hotels around the world reached $49 billion in 2017, a 200% increase from $16 billion in 2009.
Debt funds are more flexible than more traditional lenders, such as banks and commercial mortgage-backed securities, according to The Investor, at times lending up to 75% of the asset’s value. They’re also more willing to finance hotels that are opening or just coming out of renovation when they don’t have any cash flow.
“Debt funds’ willingness to finance these deals is notable because very few lenders were willing to finance such deals even one year ago,” said Kevin Davis, managing director at JLL’s New York Hotels & Hospitality team.
Successful select-service hotels go beyond brand standards: Select-service hotels are popular among developers and owners, mainly because of the return on investment they provide, writes Hotel News Now’s Jeff Higley, but because they are so popular, it’s important to make sure they stand out. A panel on select-service hotels at this year’s Meet the Money conference explained the way to ensure success of a select-service property is by exceeding brand standards.
“The days of taking the prototype with the token pool and just dropping it someplace, it probably would work, but I don’t think when the competition comes in it’s going to be to your benefit,” said Mark LeBlanc, EVP of development and acquisitions for Interstate Hotels & Resorts. “The cost of taking that public space, whether it’s the pool or lobby, and going above and beyond, it has a great return. The guest experience is really going from the room into the public space, and we need to be more thoughtful of that.”
Increasing gas prices could hurt U.S. summer travel: The national average for gas prices is nearing $3 a gallon in the U.S., which could be enough to turn Americans off from their summer travel plans, the Orlando Sentinel reports.
“High gas prices are starting to eat away at the travel plans of many, and the number will likely rise as gasoline prices appear poised to continue moving higher in the weeks ahead,” GasBuddy analyst Patrick DeHaan told the newspaper. “It's no shock as we continue to see price hikes in 49 of the nation's 50 states in the last week. And what rings true is that with such a big jump in prices, motorists are absolutely becoming more price conscious as they make plans this summer.”
A survey from GasBuddy reported 31% of Americans plan to drive 500 miles roundtrip this summer, down from 56% last year. Roughly 39% of people in the survey this year said the price of gas was influencing their travel plans, according to the article, and 24% fewer were doing “significant travel at all this summer.”
Those born in 1980s likely hurt most by recession: Call it bad timing. People born in the 1980s could become the Great Recession’s “lost generation,” The Wall Street Journal reports, citing research by the Federal Reserve Bank of St. Louis. The research finds those born during that decade “are at a substantial risk of accumulating less wealth over their life spans than the members of previous generations.”
This generation had a large wealth shortfall in 2016 and lost ground in relative terms between 2010 and 2016, the newspaper reports, while older generations benefited from increasing asset values. Had it not been for the recession, this generation would have wealth levels 34% higher than what they are now.
The hotel industry has been adjusting its approach to hospitality (service, F&B, design, etc.) as the millennials are coming into their spending power. Though there is some debate over the actual starting date, the millennial generation is generally believed to have begun in the early 1980s.
MGM Resorts to reduce use of straws at resorts: MGM Resorts International will phase out the use of plastic straws at all of its resorts, starting with Aria Resort & Casino and the Mandalay Bay Resort & Casino, the Las Vegas Review-Journal reports. The project is called “The Straw Reduction Initiative.”
Before the plan, the company used 250,000 straws a day, which adds up to 100 million a year. Under the new plan, the resorts will still provide straws to guests upon request, but they will not include them initially with a drink order, the newspaper reports.
Phasing out straws is a growing trend within the hotel industry as more companies try to operate in a more environmentally sustainable way, reports HNN’s Robert McCune.
Compiled by Bryan Wroten.