James E. Burba, chairman of ALIS and president of BHN, recalled that at last year's conference, the attendees "knew something was happening, but we didn't expect it to be this bad." Therefore, the focus of this year's event was the outlook for 2009 and thereafter, he said.

A survey--sent out to past and current ALIS delegates before the conference began--found that 47% believed an economic turnaround was in store for the lodging industry in 2010 or beyond. No one thought a recovery was possible in the first quarter of this year and only 5% foresaw a rebound in the second quarter. Yet, 21% and 27% predicted a recovery by the third and fourth quarter of '09, respectively.

Furthermore, a vast majority--65%--agreed that the federal government needs to pass more economic stimulus measures to get the economy in better shape. When capital does start flowing again, 77% said the money would go toward acquisitions.

A trio of industry prognosticators then gave their takes on when the hotel business could expect to see an upswing. Mark V. Lomanno, president of Smith Travel Research, said that demand must increase before the industry sees a recovery.

However, he said demand and average daily rates will rebound in 2010. After a projected 5.9% drop in RevPAR in 2009, Lomanno predicted that 2010 will see a 2.4% increase in RevPAR.

Hit hardest by the recession are luxury hotels and resort destinations. "The real impact has been at the high end of the market," he said. "Resort demand has been declining for more than three years and that segment will continue to struggle."

Lommano also stressed the importance of not slashing room rates even in this tough environment. "Maintaining pricing will serve you better in the long run," he said.

Mark Woodworth, president of PKF Hospitality Research, said his firm is projecting a record low occupancy of 57.8% in the US in 2009. He further predicted a more protracted recession that will last until mid-2010. Woodworth concluded that 2009 will be a "year of stress" for all industry participants.

On the transaction front, Arthur W. de Haast, global CEO of Jones Lang LaSalle Hotels, reported that in 2008, $24 billion worth of hotels changed ownership globally, a precipitous drop from the $113 billion charted in 2007.

He expects the first half of '09 to be "very subdued," with only about $5 billion of hotel transactions taking place. The pace will pick up in the second half, when de Haast predicted a deal volume of about $10 billion.

The only deals that are getting done currently are those with all-cash buyers or when the buyer can assume existing debt on the property, de Haast noted. The Americas Lodging Investment Summit began Monday at the Hilton San Diego Bayfront hotel and will last until Wednesday.

Instant Insights /

Lodging Industry in for a Tough 2009

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