PHOENIX—The owners, lenders and investors forum was the final session at the Lodging Conference held at the Arizona Biltmore last week. The session moderator was Michael Desiato, vice president and group publisher, ALM/Real Estate MediaGroup. Panelists were Richard A. Hightower, managing director and research analyst at Evercore ISI, Nelson Knight, executive vice president and chief investment officer of Apple Hospitality REIT Inc., Jay Stein, chief executive officer of Dream Hotel Group, Michael Tall, president and COO of Charlestowne Hotels, and Jon S. Wright, president and CEO of Access Point Financial.
The discussion centered on near-term and long-range trends in hotel investment, financing, up-and-coming markets, supply and brand outlook. The group kicked off the session by talking about cycles and what they are seeing in the market these days that may be causes of concern.
“In a portfolio, you see the creep,” said Wright. “Our underwriting has held up over time but the metrics started creeping this year. Experience proves out that longevity matters. Delinquencies have started to creep a bit and those costs are passed along.”
Hightower pointed out that industry RevPAR is not going negative soon.
“But there is an appropriate level of caution and a cautious view of underwriting,” he said. “We are in a much better spot than we were in 2007. Industry demand is a function of the economy. Occupancies are at structural peaks and you can't get RevPAR through ADR. Corporate travelers are slowing money spend and RevPAR is soon to follow.”
Knight responded by saying the national slowing of RevPAR growth in macromarkets is resulting in investment in urban and suburban markets. For example, there is strength in Dallas/Fort Worth, Phoenix and Los Angeles, he mentioned.
“Supply has tightened. There is a slowing in Chicago, Miami, Houston and New York City,” Knight said. “Less new growth is presenting new opportunities at all points in the lodging cycle. When minimizing risk, look to invest with brands that produce high RevPAR and maintain flexible balance sheets so we weather cycles.”
When discussing specific markets, there were mentions of both strong areas and those feeling the effects of softness across the country.
“Urban gateway cities are the focus but in the middle of the country,” Stein said. “Dallas and Nashville are great markets. We love micro and don't compete with Marriott and Hilton. Our guests don't focus on points but rather experience.”
Knight said during the last cycle, suburban and tertiary markets were built out and got hit first. Currently, he's noted softness in New York but strength in Tucson and Boise, ID. Knight added there are high-cost markets and those with lead time.
Hightower mentioned that the upward pressure on cap rates varies market by market. Large institutions have multiple bids and trade at attractive pricing, he added.
“The bid-ask spread feels wider now,” Hightower said. “We don't see large portfolio transactions but smaller transactions will be easier unless new buyers enter the market, which we haven't see yet, or a downturn occurs.”
Tall said pipelines for Charlestowne Hotels include leisure markets, not gateways, and include adaptive reuse projects.
“Trepidation is a word I've heard,” Tall said. “A sharpening of the pencil may prevent us from falling off a cliff rather than seeing it as a slowdown.”
PHOENIX—The owners, lenders and investors forum was the final session at the Lodging Conference held at the Arizona Biltmore last week. The session moderator was Michael Desiato, vice president and group publisher, ALM/Real Estate MediaGroup. Panelists were Richard A. Hightower, managing director and research analyst at Evercore ISI, Nelson Knight, executive vice president and chief investment officer of
The discussion centered on near-term and long-range trends in hotel investment, financing, up-and-coming markets, supply and brand outlook. The group kicked off the session by talking about cycles and what they are seeing in the market these days that may be causes of concern.
“In a portfolio, you see the creep,” said Wright. “Our underwriting has held up over time but the metrics started creeping this year. Experience proves out that longevity matters. Delinquencies have started to creep a bit and those costs are passed along.”
Hightower pointed out that industry RevPAR is not going negative soon.
“But there is an appropriate level of caution and a cautious view of underwriting,” he said. “We are in a much better spot than we were in 2007. Industry demand is a function of the economy. Occupancies are at structural peaks and you can't get RevPAR through ADR. Corporate travelers are slowing money spend and RevPAR is soon to follow.”
Knight responded by saying the national slowing of RevPAR growth in macromarkets is resulting in investment in urban and suburban markets. For example, there is strength in Dallas/Fort Worth, Phoenix and Los Angeles, he mentioned.
“Supply has tightened. There is a slowing in Chicago, Miami, Houston and
When discussing specific markets, there were mentions of both strong areas and those feeling the effects of softness across the country.
“Urban gateway cities are the focus but in the middle of the country,” Stein said. “Dallas and Nashville are great markets. We love micro and don't compete with Marriott and Hilton. Our guests don't focus on points but rather experience.”
Knight said during the last cycle, suburban and tertiary markets were built out and got hit first. Currently, he's noted softness in
Hightower mentioned that the upward pressure on cap rates varies market by market. Large institutions have multiple bids and trade at attractive pricing, he added.
“The bid-ask spread feels wider now,” Hightower said. “We don't see large portfolio transactions but smaller transactions will be easier unless new buyers enter the market, which we haven't see yet, or a downturn occurs.”
Tall said pipelines for Charlestowne Hotels include leisure markets, not gateways, and include adaptive reuse projects.
“Trepidation is a word I've heard,” Tall said. “A sharpening of the pencil may prevent us from falling off a cliff rather than seeing it as a slowdown.”
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