The big story at this year’s Americas Lodging Investors Summit is no story. Sure, everyone here in Los Angeles says they’re positive about the near term; yet every pronouncement of optimism comes with a but: Hotel fundamentals look good, but macroeconomics could derail recovery. Hotel transactions may pick up this year, but debt financing is still scarce. Billions in CMBS debt comes to maturity this year, but many of those assets may not come to market.

“There’s a lot of equity out there, but my concern is that the debt markets are currently schizophrenic,” said Dave Johnson, president and CEO of Aimbridge Hospitality, on a panel of private equity company executives, a group of investors that partially plugged the transactions gap in the middle of last year when lodging REITs backed away from the market.

Aimbridge, like some of the other companies represented on the panel, look to buy “broken assets,” which they can they recapitalize and reposition as need to add value. On a later panel, executives from four leading hotel REITS said they have little appetite for lodging acquisitions, at least for the first part of the year. Richard Smith, president and CEO of FelCor Lodging Trust, said his firm will be a seller of assets in 2012 and use the proceeds to reduce debt and shore up its balance sheets. One panelist, Ashford Hospitality Trust President Douglas Kessler, is hedging his bets.

“We’ll be opportunistic in our approach to possible acquisitions this year,” said Kessler. Ashford took a big bite last year with its $1.3-billion acquisition of the 17-hotel Highland Hospitality portfolio through a joint venture with Prudential Financial. “When there is less noise about possible risks, they’ll be more certainty and confidence in the market and capital will rotate back into the market.”

Scott Berman moderates a panel of hotel company leaders at ALIS. Photo by Harriet Lewis Pallette.

Another question many speakers tackled is whether the wave of CMBS debt maturing this year will prompt either forced or unforced sales of distressed hotel assets. Ed Walter, president and CEO of Host Hotels & Resorts, seemed to sum up the consensus among many ALIS speakers and attendees.

“We’ve all been wondering for three years whether these assets will be forced to market,” he said on an opening day general session. “While I think we’ll seen some of this debt coming to market this year, it’s more likely lenders will encourage owners to either sell those assets at lower prices or refinance them with additional equity.”

Not surprisingly, the most optimistic talk came from hotel brokers. A Monday afternoon panel of these middlemen spoke of the renewed interest in the U.S. lodging industry by foreign investors, particularly from Asia. As Rob Stiles, principal of Cushman & Wakefield, said a lot of wealthy foreigners are looking to establish a base in the U.S., and some of them are doing it by buying trophy hotel properties in gateway cities with which they’re already familiar.

“Chinese buyers in particular are smart cycle buyers, and they generally don’t overpay for assets,” said Stiles, comparing them to the wave of Japanese buyers of the 1980s and ‘90s, many of whom overpaid for the hotels they purchased.

The brokers offered a checklist of where they view opportunities for hotel purchases this year. Kevin Mallory of CBRE Hotels favors hotels on both coasts and purchases of hotel portfolios. Louis Stervinou of Eastdil Secured believes some portfolio owners, particularly the REITs, may be willing to sell some properties they view as non-core to their investment strategies. Stiles sees opportunity in properties with brand-mandated PIP issues.

Despite the guarded talk, hotel investors remain bullish about industry fundamentals. “It’s much, much more likely the industry will perform better in 2012 than many people expect it do, and that’s irrespective of any macroeconomic trends in play,” said Ken Cruse, president and CEO of Sunstone Hotel Investors.

Related Stories
ALIS Returns to LA with Big Names, Numbers
Capital Markets Key to Hotel Real Estate Rebound
Lodging’s Winding Road to Recovery