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Hoteliers Challenge

Hospitality industry faces challenges mid-year but signs of good times also ahead

Hazel Heyer, eTN  Jun 16, 2010

NEW YORK (eTN) - Things have not really turned around just yet for the hotel industry as a whole. As reality begins to set in, the industry comes face-to-face with other challenges beyond discounting and hotel supply levels. Positive developments, however, have already started to trickle in.

Like tourism, the hospitality industry has not taken it "easy" since the recession started. Taxes levied solely against the lodging industry are unfair to us, said Jonathan M. Tisch, chairman and CEO, Loews Hotels and co-chair of the board and office of the president, Loews Corporation. Addressing the audience during the 32nd Annual NYU International Hospitality Conference held in New York last week, Tisch added that as an industry, they have to deal with the oil spill in the Gulf, compelling them to send a committee to assess the impact or effect on most businesses as guests have already abandoned some destinations. He said their analysis will have to be taken up to the congressional levels.

Furthermore, the immigration issue in Arizona has unintended consequences like the travel boycotts, which will be felt by the lodging industry and related industries supporting travel. “It is important that we spread the message that they can debate the issue, but not harm our industry. Don’t harm the people that have worked for so many years in travel and tourism with your boycott,” added Tisch.

Andrew Coslett, CEO, IHG (InterContinental Hotels Group) remains "quite" optimistic about the hotel industry’s performance through the rest of 2010. “Demand for us has come back. Although group business will be seen as only preparing for the future, transient business is doing quite well,” he said. Understanding the potential impact of the oil slick in the Gulf, Coslett said his chain is forging ahead regardless with their 2010 programs.

Coslett sees strong growth in Asia, especially China, in the periods ahead. “China is a prospect that’s growing bigger,” he added.

Mark Hoplamazian, president and CEO, Hyatt Hotels Corporation, stays bullish in the market for 2010. Hyatt has expanded with 459 hotels last year despite a soft economy. “Demand has definitely come back. Year 2011 will catch up with demand,” he said adding that they will soon see double-digit growth.

Outside the US, China, Brazil, and a number of countries in Europe have shown positive results for the Hyatt brand in terms of investments.

David Kong, CEO, Best Western International expects a positive summer season ahead. He believes the economy is improving. “There will be room nights improvement and increase in occupancy,” he said adding that their focus will be on Asia, India, Europe, and South America, especially Brazil, in the months ahead.

“The industry has come back. But while there are fabulous facilities out there, the ones that are hurting the most are the ones that cannot drive rates,” said Arne Sorenson, president and CEO, Marriott International Inc., adding Asia is "incremental" for his flag currently. Room business is now setting the pricing for the future. “Group business will come back, however, transient is doing well,” he said.

According to Mark Lomanno, president, Smith Travel Research, ADR (average daily rate) has seen some growth. His actual forecast for 2010 sees supply growth growing only 2 percent versus demand growth rising at 5.7 percent. He said that in 2009, occupancy saw a very low 54 percent across the country. With this occupancy level, it was obviously difficult to raise rates. “However, the global hotel industry is recovering; demand is definitely back but pricing isn’t,” said Lomanno.

Transaction volumes will be low this year, but will pick up significantly in 2011 and 2012. “We are still indeed at the bottom of the cycle; supply growth will be limited over the next 4 years. Don’t sell now – ride the wave of recovery. 2012 is the best time to sell,” said Steve Rushmore, president and founder, HVS Global Hospitality Services. Expect a lot of buyer competition from all the "cash on the sidelines." Rushmore said, “Now is the best time to buy. Today is the best buying opportunity since 1991."

Advised Rushmore, “Look to buy in high-volatility markets where values will increase significantly over the next 5 years.” Such cities are New York, Miami, Los Angeles, Las Vegas, Anaheim, Omaha, Austin, San Jose, San Diego, and Washington DC.

Hospitality industry faces challenges mid-year but signs of good times also ahead
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