• Melding statistics from Smith Travel Research and currentforecasts for the US economy, PricewaterhouseCoopers LLP predictsan 11.2% drop in RevPAR in 2009, which comes after RevPAR declinedonly 1.9% in 2008. Behind that double-digit plunge is ananticipated 3.9 percentage point decrease in occupancy to 56.5% dueto declining demand. That slump in heads in beds, combined withfewer guests gravitating toward higher-priced hotels, is expectedto result in a 5.2% reduction in average daily rate.
• Meanwhile, PwC's former lodging industry practice leader, BjornHanson, now a clinical associate professor at the NYU Tisch Centerfor Hospitality, Tourism and Sports Management, says after spendinga record amount on capital expenditures last year, hotel ownerswill put on the brakes on sprucing up their properties in '09. Heforecasts that the CapEx total for this year will hit $3.75billion, a plunge of 30% from the $5.5 billion that was spent in2008.
• If capital expenditures are down this year, it's probablybecause more hotel owners will encounter problems paying theirdebt. According to PKF Hospitality Research, the number offull-service hotels in the US with insufficient cash flow to covertheir debt is expected to rise by 25% this year. Mining itspropriety database of 6,000 financial statements, PKF found that anestimated 15.9% were unable to generate sufficient cash fromoperations to cover debt service payments in 2008. Based on currentRevPAR and NOI predictions, the firm anticipates that number willrise to 19.9% by the end of this year.

Some owners, therefore, may be forced to dip into their ownpockets to meet debt obligations, points out Bob Eaton, executivemanaging director of PKF Capital/Hotel Realty. If there are stillshortfalls, workouts or foreclosures may result, he adds.PKFfurther predicts that property values are on track to decreaseanother 20.1% in '09 following a 14.1% decline in 2008. Between2007 and 2001, the firm estimates that full-service hotels willtake a 35.4% hit in values due to fluctuating profits and risingcap rates.

• As values dive, so has transaction volume. Jones Lang LaSalle,in its "Investment Outlook 2009" report, calculates that $24billion worth of lodging assets changed hands in 2008, aprecipitous drop the $113 billion recorded worldwide in 2007. Thefirst half of this year will likely mirror late-2008. But volumemay pick up in the latter portion of this year as some investorswill be forced to sell or undertake a strategic portfolioreadjustment and dispose of assets "even while pricing remainsweak," says Arthur de Haast, global CEO of JLL Hotels.
• For a majority of owners in the Americas, which includes theUS, Canada, Mexico, the Caribbean and South America, the mostviable option appears to be to simply hang onto their propertiesfor the next six months. In its most recent Hotel InvestorSentiment Survey in December, JLL Hotels found that 51.1% ofrespondents said they intended to hold their assets in the nearterm. That's a jump of 13 percentage points from the previoussurvey in July. Only 32.3% indicted they plan to buy, while 7.9%foresee development in the near future, and 8.6% want to sell.
• Moody's Investor Service predicts that the falloff in hotelperformance will "likely be deeper and longer lasting than the lastdownturn following 9/11." Consequently, CMBS pools with significantconcentrations of hotel loans are expected to experience downwardratings pressure. Specifically, single-borrower, multi-hotelproperty deals could see multi-notch downgrades.
• But there are always optimists even in a down market. In DLAPiper's 2009 Hospitality Outlook Survey, two out of threerespondents contend the current market has created good buyingopportunities for well-capitalized investors.