ALIS: Mood is optimistic but realistic
27 JANUARY 2016 9:06 AM
A full day of the Americas Lodging Investment Summit program brought CEOs to the stage to talk frankly about the pending downturn, how to deal with disruptors and what hoteliers should be doing now for a successful 2016.
LOS ANGELES—The second day of the Americas Lodging Investment Summit kicked off in full force, with a slate of speakers debating whether the industry really has reached its peak. Major brand and company executives took the stage Tuesday to share growth projections and their take on the state of the industry, offering opinions on everything from construction costs to the upcoming U.S. presidential election.
Quotes of the day
This exchange occurred at the beginning of the last “View from the boardroom” panel Tuesday when panelists were asked to describe the vibe of the conference:
Marriott International President and CEO Arne Sorenson: “I think to some extent it feels like a cloud hanging over our head but a cloud that’s over the horizon and we don’t know what direction it’s going.”
Hilton Worldwide Holdings President and CEO Chris Nassetta: “It’s funny. I’m surprised you didn’t say it, Arne, but I thought the whole vibe was about the launch of Tru by Hilton. That’s what everyone I’ve been talking to has been talking about.”
Sorenson: “Chris, why is there no ‘e’? … It’s a spelling issue. I guess when you’re in the moderate tier you don’t get a full word.”
Tweet of the day
Everybody keeps beating on: 1) NYC mkt, 2) Chinese economy, & 3) 'Alternative accommodations' #ALISConference— Adam Weissenberg (@aweissenberg) January 26, 2016
A plateau would be just fine, thank you. That’s the sentiment floating around the Americas Lodging Investment Summit as attendees assess where the hotel industry is heading. While the conference tagline “Where’s the peak?” is certainly apropos as executives try to figure out their next moves, it’s really about finding a level spot that weathers the ebbs and flows without being sunk by a rogue wave.
The U.S. hotel industry’s fundamentals are as strong as ever (outlined by the presentation from STR’s Jan Freitag on Monday). There is debt available—although the sources might be changing. While there’s a widening gap in the bid-ask equation when it comes to transactions, the general sentiment is that deals will continue to get done.
For those trying to time the peak perfectly, it might be too late. Teague Hunter of Hunter Hotel Advisors said during one panel session that the peak might have occurred in late 2014 or early 2015 because that’s when the floating-rate debt market had a major change in direction. Regardless of your thought on when the peak was or will be, most ALIS attendees would be content to bump along the current pace for the foreseeable future.
--Jeff Higley, Editorial Director
On Tuesday I heard a few people say a phrase I haven’t heard in a few years: “bid-ask gap,” and it’s indicative of a lot of the conversation at ALIS on its second day, which continues to focus on Wall Street sentiment, or lack thereof. In a panel titled “Wall Street outlook—Near the peak or still a long way to go?” speakers were blunt and realistic about explaining why investors seem to be running from hotel stocks, despite solid fundamentals.
“Put yourself in the mindset of a public investor and you can see that while hotel stocks have greater growth than (gross domestic product), they’re slowing and that’s concerning,” said Jeff Horowitz, global head of real estate for Bank of America.
But there are still plenty of buyers, just more on the private equity side, as evidenced by conversations with owners who all seem to have deals in the works.
I think 2016 will be a true reality check for the industry—that period when you can say all you want, but it’s what you’re able to do that will chart the course of business for the next few years.
--Stephanie Ricca, Editor-in-Chief
A good portion of the second day at ALIS focused on unpacking what industry consolidations, particularly the planned merger of Marriott International and Starwood Hotels & Resorts Worldwide, along with the deal between AccorHotels and FRHI, will mean for the industry as a whole.
Many hoteliers speaking through the course of the day seem to think there will be tertiary benefits of the move, even for companies not directly affected by the mergers.
During a “View from the boardroom” panel involving executives at companies focusing on the luxury segment, Jason Herthel, president and COO of Montage Hotels & Resorts, said he thinks many companies will “benefit from the stronger market power created by the mergers.”
Herthel also said it will help make ultra-luxury properties more unique.
“As big companies become bigger, it creates some homogenization of experience,” Herthel said. “It helps us stand out with differentiated experiences.”
--Sean McCracken, News Editor