Members of the Lodging Industry Investment Council see some potentially lasting impact of the recent partial government shutdown, and were more critical of long-term effects from 2018’s tax reform legislation.
LOS ANGELES—What happens politically in Washington, D.C., can have a ripple effect on the United States hotel industry, and two recent events to make their mark were January’s partial government shutdown and the effects of 2018’s tax reform legislation.
Participants at the Lodging Industry Investment Council meeting held prior to the start of the Americas Lodging Investment Summit shared their thoughts on the short- and long-term effects of the shutdown, plus what tax reform has meant for their business and the industry as a whole.
LIIC members shared what, if any, short-term effects the shutdown had on their business on video:
While some with portfolios outside areas hit the hardest called the shutdown “a non-event,” others saw potentially long-term issues.
Scott Socha, president of Delaware North’s parks and resorts business, said that “from a macro level, the government shutdown is potentially a big (deal) for us,” though national parks staying open was a positive.
“We hope we get to some resolution (during the short-term reprieve) because as consumers look forward and from a booking standpoint, it would be great to just have this behind us,” he said.
On the subject of lasting impacts from 2018 tax reform legislation, LIIC members had mixed feelings about overall positives for the hotel industry.
“The tax cuts may have given a false sense of health,” said Prism Hotels & Resorts President and CEO Steve Van. “But what will we do in 2019 and 2020? There’s some danger in that big of a stimulus.”
Bill Blackham, CEO of Condor Hospitality Trust, agreed, saying that “with tax cuts, there was instant euphoria … but today it’s almost forgotten.”
He pointed out that the cuts should have resulted in increased investment in capital-intensive long-term projects, but he and other panelists said they haven’t seen that.
“Most went to stock buybacks,” pointed out Gary Gray, chief investment officer of Twenty Four Seven Hotels.
Many LIIC members talked about the potential of opportunity-zone development for the hotel industry.
Robert Leven, chief investment officer of Procaccianti Companies and TPG Hotels & Resorts, said his company has done an opportunity zone investment deal, and the investments have the potential to make “a significant impact over the next 3-5 years.”
Jim Butler, partner at Jeffer Mangels Butler & Mitchell, and chairman of the firm’s global hospitality group, put the program in context for the industry: “Most people will find that if they had a project they wanted to build (in a zone), it will sweeten the economics,” he said. “We think that like many things, there will be a spectrum. … There’s a great opportunity and eventually there’s no tax on the gain from the date of the investment.”