Americas LodgingInvestment Summit

| The message I'm getting is that even ifthere is a recession--and an increasing number of people are sayingit's here--the hotel sector shouldn't feel it greatly. Whynot?


Fishbin: A couple of reasons. When we look atdemand we also look at the economy and demographics, and there arereams of statistics out there focusing on the age and wealth of ourpopulation, their aspirations and leisure experiences. There are anumber of factors that support the demand for travel. On top ofthat--and this favors key cities and resort markets--is thedevaluation of our dollar, so international travel plus domesticdemand strongly favors the continuation of demand for lodging. Andone of the things that's different about this slowdown, and we arecalling it a slowdown rather than a recession . . .

| . . . And you're holding by that eventhis late in the day . . .


Fishbin: Yeah, there's a lot of data out there tohelp identify the trends in bookings and such. But one of thethings that's different going into to this slowdown is that wedon't have the hangover of new supply that we did in other shiftsin the cycle. Supply has been strongly constrained, and it createsan opportunity for existing hotels to hold, if not somewhatincrease, their rates, albeit not what we've seen over the priorfew years. On an overall basis, occupancy levels will be flat, androom rates will continue go up.

| Are we talking about particular segmentsof the market that might be immune--if that's not too strong aword? Are there some that are more exposed?


Fishbin: We don't show that any are immune. Allwill be somewhat impacted but at different levels. The segment wesee with the highest growth in RevPAR is luxury.

| Let's talk about this lack of overhang.Is it discipline?


Fishbin: There's more discipline in underwritingand financing new projects. Another reason is that, until recently,competitive or alternative uses--for-sale residential and office inplaces like New York--have won out. The other trend we're seeing inurban markets is boutique lifestyle product--200 rooms as opposedto 400 or 500-plus rooms. So it's the financial discipline, thecompetitive uses and the change of size and positioning.

| Last year was really a milestone in termsof M&As generally, but it hit the hotel sector in a great way.To what extent does this relate to lodging's stability?


Fishbin: There's definitely a correlation. Theacquisitions we've seen from the large private-equity firms and theinterest from the sovereign-wealth firms are all tied into thedemographics and fundamentals we've reviewed. Certainly through thefirst half of '07 there was very favorable credit financing thatwas available to assist with these acquisitions. That element ofthe industry obviously went away. But there's still a veryfavorable view to the hospitality industry, and history has proventhat on a risk-adjusted basis hotels are highly favored within thespectrum of real estate assets classes. Also, it is a truly globalsegment, and the large investment funds, private-equity firms andsovereign-wealth groups are very interested in global platforms,such as you saw with the Hilton deal.

| Does the acquisition by a major playerallow them to circumvent some of the debt-market problems?


Fishbin: A large investment group not so relianton the debt market would have opportunities in this window we'rein, opportunities to find transactions that were more highlycontested. The playing field might be a little less intense. Butthere's also the view on the capital side that a lot of theseorganizations bring tremendous relationships as well as access tocapital and to best-in-class developers and other synergies thatwould be accretive to the platform they are working on.

| What's the most significant trendimpacting the market right now? Is it the crisis or theM&As?


Fishbin: We're focused on all the things wediscussed but the thing we haven't discussed is branding. There area lot of new brands that have been created in the past 18 months orso and they're very focused on generating revenues and premiumsthrough the power of the brand, and it's beyond real estateopportunities.

| Are we overbranded?


Fishbin: Not yet.

| You hesitated.


Fishbin: Well I would say in some segments we are.In the mid- and upscale segment we're over-branded. But there arenew brands focusing on that new demographic, and those brands thathave done well will win out over the older brands that need toreinvent themselves to stay relevant. Time will tell.

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John Salustri

John Salustri has covered the commercial real estate industry for nearly 25 years. He was the founding editor of, and is a four-time recipient of the Excellence in Journalism award from the National Association of Real Estate Editors.