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Why Is Anybody Surprised?

At the Lodging Conference closing session in 2015, I made the statement that the party was over and owners should talk to their broker about selling.…

Joel Ross

At the Lodging Conference closing session in 2015, I made the statement that the party was over and owners should talk to their broker about selling. It seemed obvious that occupancy had risen to its possible high, and that ADR had risen to a point that there would be price resistance given that guests can now compare prices easily online, and brand loyalty is being diminished by the huge proliferation of new sub brands. The recent CBRE paper that says the industry was surprised by the failure to meet budget in 2016, and likely in 2017, seems to simply prove the point that the hotel industry lives in a world of its own of overoptimism and pundits who are reluctant to be the bearers of reality.

On average, there is a maximum practical occupancy that hotels can achieve no matter what the demand. Most markets are not New York where occupancy can be over 80% on a consistent basis. Most locations do not have the international and national tourist inflow year round that New York has. So, to assume that occupancy can just keep rising is simply ignoring reality. There is also a clear failure to recognize that, just as happened with Amazon and retailers, there is now the ability for consumers to compare price value on hotels, and to make simple choices based on price.

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Joel Ross

Joel Ross

Joel Ross began his career in Wall St as an investment banker in 1965, handling corporate advisory matters for a variety of clients. During the seventies he was CEO of North American operations for a UK based conglomerate, and sat on the parent company board. In 1981, he began his own firm handling leveraged buyouts, investment banking and real estate financing. In 1984 Ross began providing investment banking services and arranging financing for real estate transactions with his own firm, Ross Properties, Inc. In 1993 Ross and a partner, Lexington Mortgage, created the first Wall St hotel CMBS program in conjunction with Nomura. They went on to develop a similar CMBS program for another major Wall St investment bank and for five leading hotel companies. Lexington, in partnership with Mr. Ross established a hotel mortgage bank table funded by an investment bank, and making all CMBS hotel loans on their behalf. In 1999 he formed Citadel Realty Advisors as a successor to Ross Properties Corp., focusing on real estate investment banking in the US, UK and Paris. He has closed over $3.0 billion of financings for office, hotel, retail, land and multifamily projects. Ross is also a founder of Market Street Investors, a brownfield land development company, and has been involved in the acquisition of notes on defaulted loans and various REO assets in conjunction with several major investors. Ross was an adjunct professor in the graduate program at the NYU Hotel School. He is a member of Urban Land Institute and was a member of the leadership of his ULI council. In 1999, he conceived and co-authored with PricewaterhouseCoopers, the Hotel Mortgage Performance Report, a major study of hotel mortgage default rates.

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