HB ON THE SCENE: Management Roundtable Assesses Industry Outlook

NEW YORK—The 2015 Hotel Business Management Roundtable was held here at the Dream Downtown last week. Entitled “Operating in an Upswing: How to Make It Even Better,” the event was hosted by Debut Hotel Group, with additional sponsorship from Arthur J. Gallagher Insurance, Profitsword, Simmons Hospitality Bedding and Valley Forge Fabrics.

One topic that the panelists debated was how long the industry could expect the upswing to remain. “I think we’re past halfway but not greatly past that,” said Joseph Bojanowski, president, PM Hospitality Strategies, Inc. “There is a lot of supply coming in and, when you look at the U.S. as a whole, it’s very market specific, with a high concentration in Manhattan and a few other places—not so much in suburban markets. I think we’ve got a little bit of running room in front of us… but I wouldn’t put it too much past three years.”

Herb Warmbrodt, president, Warmbrodt Hotel Investments, noted that we’re probably in the sixth or seventh inning, but we’re in a paradigm shift. “The world is smaller than it ever has been. People traveling into the U.S. who haven’t before, so that’s a different twist on it as far as the demand—is it going to continue to grow?” he said. “I have concerns about how interest rates will affect us.”

Jeff Kolessar, SVP of development, GF Management, agreed about interest rates. “In all of our investment models we’re trying to bake out where interest rates will be. I think that’s critical because that affects your cap rate on an exit strategy when you’re running your investment models,” he said, adding that another factor is the loan maturities coming in in 2016 and 2017.

For his part, Larry Spelts, VP/business development, Charlestowne Hotels, noted that interest rate pressure would bring down new supply. “It’s tempting to take a chronological progression toward an inevitable end. I think it’s more phases,” he said, adding that this was the first recovery where hotel RevPAR didn’t increase in tandem with employment. “Employment is back and, if the economists are right, the next step is wage growth. Adjusted for inflation, we’ve had no wage growth in 20 years. These are huge opportunities and challenges for us. Wages are going to go up, so finally we will see consumers with more money to spend from employment and wage growth. We’ve got more time than we expect.”

Chris Flagg, SVP/ business development, Crestline Hotels & Resorts, returned to the idea of market specifics. “Don’t bet on national averages; it depends on the market,” he said. “We’re at different stages in different markets so understand yours. For investors coming in, be careful. Your five-year hold, we’ll likely see a downturn.”

For more coverage, look for the editorial feature in the April 7 issue of Hotel Business.

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