Private Lodging Companies Nervous Despite Prosperity

Twenty-two hundred of the hotel industry?s movers and shakers crowded into the Westin Century Plaza Hotel last month for the annual UCLA Hotel Investment Conference, probably the industry?s most notable gathering that sets the stage for where we are headed this first year of the new millennium. About the only thing everyone could agree on at this particular conference was that the ?Heavenly Beds? at the Westin were indeed heavenly. There was as much talk about the beds as there was about the state of the industry. Another Good Year Once you got passed the beds, the consensus definitely was that the hotel industry was going to have another good year, but the degree of ?how good? was often open for discussion. The public companies were more concerned about the depressed state of the stock prices and let this color their feelings about how profitable the industry was going to be this year. The kind of record results they are looking for are not in the cards, given that in most areas supply has outstripped demand, even with demand being up. The private companies came to the conference looking to make deals, but found that the deals were scarce and the prices are not depressed since few owners seem to feel the pressure to unload. As far as new construction, there was definitely a reluctance by the lending institutions to make available the keys to the treasuries. If a project made real sense and the developer was willing to invest a large percentage of the equity, then at least they were willing to talk, with the emphasis being ?talk.? This made the ?privates? nervous and colored their thinking for the new year. But, bottom line, if you look at this objectively, the reluctance of the lenders will, in the short run, lead to demand and supply coming into balance sooner, and could lead to significant positive numbers in 2001 and 2002. This does not mollify the bulk of developers who are happy with their numbers now, and are excited enough about new projects and don?t see overbuilding affecting them. Positive Cash Positions So with the reluctance of owners to dump properties and with the lenders acting sensibly for a change, the ?privates? with positive cash positions were in no mood to think positively about the industry going forward. They refused to concede that we will in fact enjoy another year of relative prosperity, even if it is not on their terms. But the heavenly beds were something which we all could understand.

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