Industry?s Mood Upbeat At UCLA Conference

LOS ANGELES? Contrary to what some people have been saying, financing is available, deals are out there and moderate growth is on the horizon for the hotel industry. This was the consensus at the UCLA Hotel Industry Investment Conference held here last month, which brought together more than 1,900 industry leaders at the Century Plaza Hotel and Towers? marking the 12th consecutive year of increased attendance for the event? and making the climate ripe for dealmaking, even if on a slightly smaller scale than previous years. According to Randy Smith of Smith Travel Research, the industry is in fact poised for yet another year of record profits. The firm estimates that the lodging industry will pull in $24 billion in profits in 2000. In addition, ADRs will continue to push upward at a rate of 3.8% in 2000 with occupancy dipping less than one percent. These strong fundamentals are due in part to strong demand growth for rooms, said Smith. Last year, the industry showed room demand growth increased 3.6%, ?the strongest rate since we?ve been tracking the industry,? said Smith. The trend of decreasing room supply between 1998 and 1999 is also expected to continue, said Smith, making things slightly easier as the industry moves forward. The shift from public to private market favorability was noted several times throughout the event by executives. Public companies? undervalued stock was a topic of concern as well. In an effort to figure out why that phenomenon continues, executives were faced with the realitythat Wall Street is fickle and things may not improve for public lodging companies until the Street feels comfortable with the industry again. Some said that may happen by 2001. Lenders and developers alike agreed that the best place to go to get capital is private sources, and that many more deals today require an equity stake from the developer. The trend of public companies buying back their stock is expected to continue ?because it makes sense,? said Paul Whetsell, chairman/CEO of MeriStar Hospitality, which is participating in that trend. While Whetsell took some hits for being part of a publicly-held paired-share REIT, he noted that his company is not without resources. He said that joint ventures, like the one his company formed with Oakhill Capital, are great ways for public companies to move forward. In fact, he said that Oakhill is dedicated to doubling the size of the fund it created for MeriStar. Echoing the frustrations of many, Tom Oliver, CEO of Bass Hotels and Resorts said, ?All the money [on Wall Street]is chasing the Internet dreams.? When asked what themes will dictate 2000 he answered, ?The industry should be concerned with infrastructure and becoming more efficient.? Stephen Holmes, vice chairman at Cendant Corp., meanwhile said that he thinks technology within the hotel industry will be the dominant theme of the year, with hoteliers working on how technology affects guests via interactive TV and the Internet. ?But will we be able to get a grip on technology? We don?t know yet,? said Robert Boykin, CEO of Boykin Lodging Company. And while the lodging industry has been far from a pioneer in technology, many executives expressed an interest in ?stepping out on the forefront? more in that area, although just how far depends somewhat on where a company lies in the foodchain. Thomas Pritzker, president of Hyatt Corp. and chairman, Hyatt Hotels Corp., said that international distribution growth will play a big part in his company?s strategic plan for 2000, a sentiment that was echoed by other executives. Opportunities for growth were noted in Europe, Asia, and Latin America. ?Europe is likely to enter growth rates that we?ve experienced in the United States,? said Oliver. ?Movement is good in Asia as well,? said Philippe Bourguignon, chairman/CEO of Club Mediterranee, who noted that his company is refocusing its business by improving its product and aiming to define itself as a pure service company for leisure