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In light of the recent upheavals on Wall Street and the ongoing credit crisis, a group of lodging executives speaking at the opening session that kicked off the second day of the Lodging Conference 2008 said they have modified their firms’ strategies in light of today’s environment. Ted Darnall, COO at HEI Hotels & Resorts, and Monty Bennett, president and CEO of Ashford Hospitality Trust Inc., said they are carefully monitoring their capital expenditures as it pertains to asset improvements. Both executives participated in a panel entitled, “The Great Hotel Owners Debate.”

For instance, Darnell said that hoteliers used to have easy access to debt to fund renovations. “That period is gone for a while,” he stated, adding that his firm now focuses only on those upgrades that will bring in customers.

“Capital is dear,” Bennett said. He noted that while Ashford still spends above its capital reserve requirements to keep its hotels up to date, it has cut back on discretionary expenditures, such as adding a spa to a property.

Meanwhile, Charles S. Henry, president of Hotel Capital Advisors Inc., said no one has yet figured out how to take advantage of this current credit dislocation. However, he added that now might be “the time to start buying hotels again,” particularly poorly operated hotels in the US.

However, Bennett said that the bid/ask spread between buyers and sellers is getting wider and deals are taking longer to get done.

Unlike in past down cycles, hotel operators this time around might hold off on deeply discounting room prices. Stephen P. Joyce, president and COO of Choice Hotels International, said his company’s franchisees are, to date, holding the line on rates. For its part, Choice encourages its franchisees “to do things to induce demand,” rather than cutting prices. Although he conceded that sometimes a hotel must discount to remain competitive in its marketplace, “travelers are going to come whether or not you drop rates.”

The hotel industry is closely tied to the airline business and in that regard, one of the panelists, Paul Brown, president of Expedia North America, offered some discouraging thoughts. He pointed out that airlines are cutting seat capacity and therefore, “some markets are going to take it on the chin.” He said that even if travelers ante up the increased airfare, they are likely to cut back on their lodging expenditures.

As for when the present economic malaise will end, Henry said that the recession of the early ’90s took five years to work out. Bennett said that it depends on what form the bailout being discussed in Congress takes and how quickly banks will start lending again.On the upside, Darnell pointed out that with debt “virtually impossible” to get, less hotels will be built, which helps the industry as a whole.

The panelists did speculate on what the mood of the conference–and by association, the industry—will be next year. Joyce said he expects modest declines in 2009. Bennett said that he anticipates the hotel industry will be “bruised and feel pain, but we’ll be in a recovery and not know it.” This year’s Lodging Conference, which drew in more than 1,400 attendees, ends on Friday.

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