The 2016 Lodging Conference – Phoenix, AZ
The 2016 Lodging Conference in Phoenix, AZ took place in October and was held at the Arizona Biltmore Resort and Spa. The overall tone of the The Lodging Conference was a mix between lingering confidence in today’s industry and caution looking forward. The expectation is that we will see a flattening and possible negative RevPAR growth as soon as 2018 on the macro level. Occupancies are at their peak in many markets, transactions are down as much as 52% in some regions and there are no distressed assets to be found. Issues of concern discussed at the conference were labor, overtime, rising expenses, immigration, presidency, and ability to complete projects from planning to opening with good lending in place at costs close to original projections. Other areas of interest covered were branding, technology, loyalty programs, transaction volume, and work / life balance.
ON HILTON: Hilton announced the astronomical growth of Tru by Hilton and why it is an attractive model for owners/developers. Hilton Canopy has reported its entrance to the market with its first opening in Reykjavik, Iceland. Canopy is an upscale lifestyle brand that is not prototypical and highly customizable with a focus on having fun and bringing great ROI to investors.
ON LENDING: In today’s market it is important for borrowers to have a good mortgage broker on their side and to make sure the loan package is submitted properly the first time – this is most critical in construction financing. Different lenders will look at deals differently, so make sure your broker has the necessary relationships in place to get the deal across the finish line with the right debt in place. Lenders are still mostly active but slowing down and being more cautious. If GDP remains steady and positive, then we can expect lending to remain in place.
ON A VIEW FROM THE C-SUITE: The Chiefs of Industry gave some perspective on life, work and what gets them excited about today’s market. With busy and demanding lifestyles most executives understand that meetings can be rescheduled but life events like birthdays and anniversaries cannot. Among the most important topics at hand included technology, legislation, immigration, franchises, and culture. There is concern about leisure travel contraction and slowing of RevPAR Growth. Low interest rates have been a cost mitigation allowing for new ground up construction despite rising construction and labor costs. All investments should be viewed prospectively and not retrospectively. There is some opportunity in Asia, secondary markets and some tertiary markets. Loyalty programs are becoming a more important way to know customer demands and to compete with OTA’s. Air B&B is still a major concern because they are not playing by the same rules. Some hoteliers are hoping for a reform with a new President that would focus on immigration with expansion and better management of Visa program, improved infrastructure, minimum wage and tax reform to a possible flat tax. Other concerns are the strength of organized labor and this not being a benefit to employees or owners.
ON DEVELOPMENT: The most hotel openings ever will happen in 2018. Lenders are becoming more critical on underwriting with the coming new supply. Increasing labor costs in some markets are going up by 1% per month meaning that a deal that breaks ground today and was underwritten 18 months ago may have increased costs of 15% – 20%. due to labor and material shortage and demand. Dual branding is showing efficiencies and other benefits to ownership. Technology and common social areas are among the most important design elements. Consolidation will continue so that some brands become more global. Owners be careful should not to sacrifice current operations and focus only on growth.
For more specifics or further discuss interest in hotel investment in the Pacific Northwest, please call Brian Resendez directly at 503-577-7710.
