HB ON THE SCENE: Recovery, RevPAR, Capital Flow Heat Up Industry Confidence

PHOENIX— More than the temperature is heating up here at the Arizona Biltmore Resort and Spa where the attitude of attendees at the 10th annual Lodging Conference has become increasingly confident as session after session reaffirms economic recovery is underway and will buoy industry fundamentals along with it well into 2005. Indeed, the prospect of increased RevPAR, higher ADRs, better occupancy and more capital chasing hotel deals into the foreseeable future— and how the industry and its players are planning to leverage those conditions— were components of most of the interactive Think Tank discussions, as well as the key presentations. At Wednesday morning’s Deal Corral Power Panel, for example, several panelists described where they were focusing their attention right now. Michael Shannon, president/CEO of KSL Resorts, said his company is trying to get a handle on sales, and is spending “a lot of time on corporate sales…we’re trying to drive the top line of the business.” He viewed the current climate as mixed For Trudy Rautio, president/Carlson Hotels-The Americas, Carlson Hotels Worldwide, her focus centers on differentiating the company’s brands from their competitive sets. “We spent a lot of time understanding what our brand positioning’s need to be in each category. Now what we’re trying to do is establish means of differentiating those brands across each spectrum so that the customer has a unique experience when they visit the hotel,” she said, noting such initiatives are geared toward driving customer loyalty. Lodgian, Inc. is facing a “huge amount” of deferred renovations, said President/CEO Tom Parrington, and is “struggling very hard to catch those up.” In addition, Lodgian is trying to remix the business in its hotels, “dropping out the lower-rated segments and making space for the higher-rated segments to take advantage of the upswing we’re seeing,” said the executive. “We’re looking at disciplined growth,” said Monty Bennett, president/CEO of Ashford Hospitality Trust, noting the REIT not only owns hotels, but also delivers first mortgage and mezzanine loans. Bennett said the 13-month-old trust had just done an $80 million transaction that pushed its total investments to $570 million, putting it within the $500 million to $600 million goal range it told investors it would accomplish in its first year. The deal puts Ashford under definitive contract for the estimated 650-room Hyatt in Anaheim, CA. “So we’ve made those first goals. We still see opportunities in the marketplace to want to continue to grow our platform while we see those opportunities. That’s our biggest focus over the next few months,” said Bennett. In terms of fundamentals, he saw RevPAR increasing over at least the next 18 months, “where demand is going to outstrip supply where we start to get some ADR increases, so we’re very optimistic. We see ourselves as about one year into a five-year recovery cycle,” he said, adding “I think we’re in a great spot in the cycle.” At lunch, a second “power panel” tracked “Trends in the Lodging Industry,” which proved trying at times for the audience owing to a cranky audio system that sporadically cut out on the panelists. Making the best of it, Steve Belmonte, president/CEO, Hospitality Solutions, LLC, moderated the session. Presenters include: Ted Darnall, president/Real Estate Group, Starwood Hotels & Resorts Worldwide, Inc.; Mark Lommano, president, Smith Travel Research; Joe McInerney, president/CEO, American Hotel & Lodging Association; Steve Rudnitsky, chairman/CEO, Cendant Hotel Group, Inc.; and Stephen Rushmore, president/HVS International. “You have to characterize the first eight or nine months of 2004 as being probably some of the best months the industry’s had in a long time,” said Lommano. “The industry’s now selling more hotel rooms than it ever has in that time period and it’s generating a lot more revenue.” Rushmore noted values “have gone up significantly” in the past si