Is That a Grin On Your Face?

Attending hotel investment conferences is a good way to judge the health of the industry — not just the fitness of big hotels and big hotel companies but also how smaller brands, mid-size companies and entrepreneurs are faring. That was my mission at last month's New York University International Hospitality Investment Conference: Is the industry still strong with clear skies ahead or will the murmurs of a downturn soon come to fruition?

Gladly, I can report that nearly every one of the 2,300 or so attendees had broad smiles on their faces and nary a discouraging word was heard, either from the hundreds of speakers or those swilling martinis at the conference receptions or myriad other social events that swirled around the three-day event.

A reliable touchstone is often the IREFAC panel, an annual free-for-all in which eight or 10 of the industry's top money guys and gals alternately talk about the industry and jab each other over personal or professional foibles. Matt Hart of Hilton and Lawrence Geller of Strategic Hotels and Resorts are the master kibitzers and usually have opposite views on most subjects. Both of those guys were remarkably subdued this year, not because they're pessimistic or guarded about the industry. Rather, they were nearly giddy over the fact that business remains strong, acquisition money is plentiful and investors are acting in a generally rational manner.

Even Geller, always something of a curmudgeon, conceded that “while these aren't bubbly times, they're solid times.”

In more concrete terms, valuation guru Steve Rushmore presented his unique look at industry fundamentals and his forecast for the near-term.

According to Rushmore, hotel values rose 22 percent in 2006 and should go up another 16 percent this year. Better yet, he believes that while increases in values will begin to decline, the downward movement won't be as severe as in either 1990 or 2001. He advised owners thinking about selling their properties to do so now before increases in value slow down. He, too, was upbeat about the industry, believing that the “U.S. hotel industry still has some very good years ahead.”

So what does this all mean to you, mister or ms. hotel owner, manager or employee? The laws of gravity dictate that everything good and bad seeps down from the top. When public hotel companies and private funds are out of control in their buying and selling, and when capital-flush developers get the bug to build lots of new hotels, every street corner in the business suffers.

Higher sale prices for hotels heat up competition and put undue pressure on operating costs. And of course, excess amounts of new hotels are always a concern for owners and operators, especially when crazed developers put them across the street from you.

While you may not own a $1,500 suit or run in the same crowd as the attendees at the NYU Conference, it's important to realize what they think and do can have a profound effect on you and your business.

So today you should have a big grin on your face because the money people are happy, confident and seemingly rational.

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