(Read more on the debt and equity markets.)

NEW YORK CITY-Industry professionals at Wednesday’s RealShare Hotel Investment and Finance Summit touched on a number of topics, but the theme they all came back to was the uncertainty facing the hospitality industry. For the first time in a while the future seems “fuzzy,” according to Patrick Ford, president of Lodging Econometrics.

The first ever hospitality-focused conference to be hosted by RealShare began with remarks from Michael Desiato, group publisher and editorial director of Real Estate Media, and Geoff Davis, president of HREC Investment Advisors; the event was co-sponsored by these two groups. The all-day event hosted more than 300 attendees from a variety of hospitality-focused businesses and focused almost exclusively on hotel investment and finance. Real Estate Media, publisher of GlobeSt.com, Real Estate Forum and a variety of regional and niche products, sponsors the RealShare Conference Series.

During his keynote address, Steve Mendell, EVP of HEI Hotels & Resorts, said the end of cycle’s peak might be nearer than some expected. “All indicators are showing the economy is weakening quicker than expected, even from a couple months ago,” he said. “I’m a little bit anxious at what I see in the data.”

That data Mendell mentioned was illustrated more clearly by Ford. “We expect record profitability again in ’07 and ’08, making this an eight-year real estate cycle; but we’re fuzzy after 2008.” Part of the uncertainty lies in the large amount of new hotel projects in the pipeline. For 2007, Lodging Econometrics is tracking some 4,500 development projects across the country, which should add 690,000 keys to the market. This number is up significantly from 2004, which saw 2,334 projects in the pipeline.

Ford told the attendees one of the trends he was watching was the hotel/condo projects in the pipeline. Currently there are 84 such projects under construction throughout the US, which will account for 25,000 rooms. These projects represent 8.5% pf the total pipeline–a figure Ford said is significant. Ford, for his part, was optimistic and said he could see the cycle lasting a total of 10 years, but added the industry’s future will be highly impacted by the state of the economy.

Mike Cahill, president and founder of HREC-Hospitality Real Estate Counselors presented the Top 10 issues facing hotel investors, offering attendees data from the IFLC’s third annual lender survey. The most interesting findings included: 62% of those surveyed believe the lending volume will remain the same in 2007; 73% “view hotel lending as confident in future hotel performance but increasingly uncomfortable with the risk reward relationship of debt positions;” 65% of lenders believe hotel values will increase slightly in the next 12 months; 43% of lenders will loan up to 80% of the transaction’s total value, while 66% will loan up to 75% of the value; 66% will loan up to 75% of development costs while 72% will allow firms to ‘mez it up’ to 80% or 85%.

Cahill said those surveyed identified luxury high-priced properties as the least risky investment, followed by urban properties. Budget hotels in suburban highway markets were named as the most risky. Those polled also listed the top three threats to the business as: a general economic slow down, an increase in competitive supply and refinance risk due to higher exit cap rates. Marriot, Starwood and Hilton ranked as the top three brands lenders were interested in aligning to, with Marriot garnering 86%, followed by 68% for Starwood and 59% Hilton.

Both lenders and equity investors talked about becoming more calculated in the way they do deals. John Buza, managing director of Morgan Stanley, said “We are just buying bigger deals, playing in the arena that other folks can’t.” He cited the just approved purchase of CNL Hotels & Resorts as one way Morgan Stanley was trying to differentiate itself. Mike Medzigian, chairman and managing partner of Watermark Capital Partners LLC, told attendees that he’s found “adding value is the only differential today,” a sentiment that was echoed by both lenders and investors alike. A change in management, reflagging a property, and renovations were all among the sought-after ways to add value. “We look at new managers, people who are able to drive revenues; a focused manager is really the key,” according to Mark Lanspa, vice president at Goldman Sachs & Co. Buza added, “You turn that Marriot flag on and it makes a remarkable difference.”

Issues that keep the speakers up at night included another terrorist attack, a capital markets nosedive, construction and labor costs, consumer spending based on the housing market slowdown and the strengthening dollar. Richard Case, VP of Goldman Sachs added, “I worry about the loans we’ll be doing today and in 12 months. The worst loans are the ones made in the best of times.”

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