NEW YORK—Hotel Business® held an Executive Roundtable on Development Dynamics at the W New York-Downtown here. Among the subjects discussed were the cost of capital, current underwriting standards and increasingly complex deal structures.
Hosted by Starwood Hotels & Resorts Worldwide, Inc., the event was moderated by Hotel Business Executive News Editor Stefani C. O’Connor, managing editor of HB’s Roundtables.
JP Ford, VP/director of business development, Lodging Econometrics, set the tone for the discussion by unveiling new, exclusive Q1 2014 data on the construction pipeline.
He noted there were some 3,226 projects under construction as of Q1, an increase of 206 projects over Q4 2013. He added the company expects 71,076 rooms to open in 2014 and some 86,258 rooms in 2015. Ford said Lodging Econometrics is projecting supply growth of 1.4% in 2014 and 1.7% in 2015.
“New construction is alive and well. I don’t expect the pipeline to create problems overall as it relates to hurting demand,” Ford said.
Paul Sacco, chief development officer, TPG Hospitality, talked about stricter underwriting standards. “Lenders and developers are learning from the downturn. Projects get scrutinized a little more. The projects that do get developed will be solid,” he said.
However, Plato Ghinos, president, Shaner Hotel Group, noted getting projects to pencil remains a challenge because of escalating costs. “The paperwork before you start moving dirt is getting more expensive. Construction costs are going up,” he said.
In terms of financing options, Kevin Davis, EVP/hotels & hospitality investment banking group, Jones Lang LaSalle, acknowledged the CMBS (Commercial Mortgage Backed Securities) market is a viable option again as he noted there are some 37 active CMBS lenders currently. “The CMBS market just exploded in the past year. We continue to see CMBS lenders get aggressive,” he said.
Mark Keiser, VP/development, Starwood Hotels & Resorts Worldwide, Inc., talked about the importance of relationships. “We spend a lot of time talking to lenders and educating them on our brands,” he said.—Dennis Nessler