Two pervasive messages of the Lodging Conference held at the Arizona Biltmore on Tuesday were more qualitative than quantitative, despite the general mindset of commercial real estate investors to focus on numbers.
The key takeaways? The hotel sector’s good times may soon be over — though that suggestion was, of course, challenged by those who remain cautiously optimistic:
“This year we surpassed the previous peak for hotel values, which was reached in 2006,” said Stephen Rushmore, Jr., president and chief executive officer (CEO) of HVS. “Expect continued growth, in the double digits (on a percentage basis) through 2016, and then proceed with caution.”
Added Mike Patel, principal, NewcrestImage and 2013 chairman of Asian American Hotel Owners’ Association, “The upside potential for hotels is strong, putting pressure on cap rates to go down even as interest rates go up.”
Others in the industry suggest more of a ‘don’t worry, be happy’ outlook. They said, “When things are good, there’s always a trend for people to say ‘things are going to get worse.’ We think it’s our job to predict the next bad time, but none of us are that smart, so just enjoy it.”
Asserted Bernard Siegel, principal, KSL Capital Partners, “The pace of growth won’t be as strong as the last five years, but real rate growth has yet to occur, so there could be some tailwinds.”
Noted David Kong, president and CEO, Best Western International, “Supply is growing at a healthy pace and outstripping demand. I think we have reached our peak, so we need to be cautious and have plans for what’s to come. The strategy has to be growing market share.”