Articles Posted in Outlook and Trends

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www.MeetTheMoney.com
11 May 2013

Meet the Money® is one of the best places in the country for meeting the Who’s Who of the hotel world, getting financing and transactions done and catching up on the latest strategies and approaches. This year’s conference was held at the Sheraton LAX, May 6-8, 2013 and was attended by approximately 350 hotel industry leaders. Here’s a quick take on the mood of the conference and some information about
Mood of the hotel industry: optimism and sustainability of recovery

JMBM wrapped up its 23rd annual hotel conference this week amidst the strongest optimism for the hotel industry that hotel experts have seen for six years. The consensus was there is a lot of blue sky ahead. Some think the good times will only last for a couple of years, but many see a good run for at least 5 years!

Everyone at Meet the Money® seemed to be fairly comfortable that the recovery has significant sustainability, because the debt and equity markets have not gotten too frothy, and new supply has been very restrained.

Mark Woodworth of PKF summarized it well after presenting industry fundamentals by saying: “It is a great time to be in the hotel business!”
And Vail Brown gave the STR forecast that the outlook of continuing improvements is “Steady as she goes.”

Greg Hartmann of JLL sounded a slightly more cautious note. He agrees that everything looks pretty good for the next couple of years, but questions how long it can last, and suggests that investors might consider selling in the next year and a half to two years.

What inning are we in? Almost every panel gave its views, with the biggest consensus being that we are in the 4th or 5th inning — still early in the ballgame. John Alderson of Westfield thinks that the shopping center owners now getting active in adding hotels to their malls are way behind the rest of the industry (2nd inning?) and are likely to have their games continue as they implement strategic plans.

Hotel Industry Presentations from Meet the Money® 2013

Meet the Money® 2013 was buzzing with action and great information. We have decided to release some of the presentations for free download. Select presentations from Meet the Money® 2013 (described below) and are now available at www.HotelLawyer.com. Click on “RESOURCE CENTER” and then “Hotel Industry Presentations.”

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Jim Butler and the Global Hospitality Group®

08 May 2013

Lodging Industry Investment Council
Annual Top Ten Survey
Trends And Challenges

Strong hotel property value growth predicted, fueled by increasingly favorable hotel debt — despite overall sluggish economic growth, sequestration, unionization and Obamacare. According to the LIIC 2013 Survey, this is what the hotel industry has in store in 2013.

The Lodging Industry Investment Council (LIIC) is the hotel industry “think tank” whose membership includes the hospitality industry’s most influential investors, lenders, corporate real estate executives, REITs, public hotel companies, brokers and significant lodging equity sources. More than 80% of surveyed LIIC members have purchased a hotel in the last 12 months. Together, the members of LIIC represent ownership, control or disposition of well over $20 billion of lodging real estate.

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1 April 2013

Hotel owners: How the appellate decision in Marriott International v Eden Roc can affect your hotel investment (and why you should understand the law behind the court’s decision)

As we reported in our 27 March 2013 blog, a New York Appellate Division court made it possible for the owners of the Eden Roc Renaissance hotel in Miami Beach to oust Marriott as its operator — despite the long-term hotel management contract between the two, which would have lasted another 43 years. (See “Marriott loses appeal in Eden Roc case: Why all long-term hotel management agreements are now terminable.”)

Setting the stage: owner-operator disputes over hotel management agreements

The relationship between a hotel owner and hotel operator is complex. While the owner bears the financial risk of the hotel’s success or failure and its gain or loss in value, the operator has the exclusive right to manage the owner’s business and is paid “off the top” whether the hotel is profitable or not. The contract between the owner and operator — the hotel management agreement — typically transfers control of the hotel’s assets to the operator.

Hotel owners nationwide are keenly aware of both the benefits and impediments of long term hotel management agreements with branded operators (and nearly all such contracts are long term, often running 40 or 50 years). On the upside, the brand can provide stability, consistent standards, a reservation system, marketing expertise and professional staffing. But the downside can be hard for owners to live with — brands can rigidly incur needless expenses, be unresponsive to market conditions and impervious to the owner’s need to run a profitable business and protect its asset.

While the majority of hotel owners and operators work hard to achieve a balance that is a win-win for both parties, it is easy to understand how things can go badly, fast.

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15 March 2013

Great opportunity . . . and danger . . . await shopping center owners who seek to add hotels to their shopping centers, malls and retail centers.

An interesting confluence of factors has ignited a wave of hotel development — adding hotels to shopping centers, malls and retail centers. This trend is already underway and will be headline news for the next couple of years.

There are compelling synergies for both the shopping center and the hotel. These have been thoroughly documented by major players. One major shopping center owner performed a multi-year study on its 200+ properties and found that the right hotel can boost gross sales at shopping centers 20% to 40%. And the associated hotels also get a boost in Revenue Per Available Room (RevPAR) of 30% to 40% over hotels in their competitive set.

If you need more information on the basics — why people are adding hotels to shopping centers and malls — look at the articles posted on www.HotelLawyer.com. From the home page, scroll down and look on the right-hand side for under “Hotel Development” or go to www.hotellaw.jmbm.com/hotel_development.

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21 February 2013

US Attorney’s Office announces criminal convictions arising from Host’s claims against Molinaro Koger

On February 19, 2013, the US attorney’s office announced that Jonathan Propp, 48, of McLean, Va., pleaded guilty today to conspiring with others to steal more than $20 million from Host Hotels and Resorts L.P. (Host), one of the nation’s largest hotel owners, by executing a series of illegal sales of hotels.”

According to court records, Propp was the chief operating officer of Molinaro-Koger, an international hotel real estate brokerage firm headquartered in Tysons Corner, VA From 2009 through 2012, Propp conspired with others to illegally sell hotels owned by Host to straw buyers, who would then immediately sell the properties to a buyer at a higher price, with the conspirators pocketing the difference. Propp admitted that he posed as a straw buyer, forged signatures, and obtained a driver’s license for one of the straw buyers who had died before the fraudulent sale could be completed.

Todd Lawyer, 53, of Fairfax, VA, also pleaded guilty today for his role as a straw buyer in the conspiracy. The conspirators earned more than $20 million by illegally flipping the hotels.

In addition, Propp admitted that he participated in a scheme to steal and launder an additional $15 million from deposits provided by prospective buyers of hotels, which they purported to hold in escrow but instead used to pay for personal and business expenses. Propp used the money to pay Molinaro-Koger’s expenses and employee salaries, despite knowing the escrowed funds were obtained fraudulently.

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21 February 2013

Hotel Lawyers with Lodging Industry assessment: Demand is strong, supply is weak. RevPAR is healthy. What’s not to like?

We continue to receive calls from hotel owners, developers, investors, lenders, and members of the media asking, “What is the hospitality investment outlook for 2013 and beyond?”
There is a growing optimism among industry veterans and many of them are revitalizing acquisition (and a few development) projects. The level of activity has kicked up a notch or two.

One thing that everyone likes: barring unforeseen events, the stage is set for continuing improvement in hotel industry fundamentals and hotel valuations for at least 5 years – through 2017.

This presents a very attractive backdrop for investors, and experienced investors are already putting their plans in motion.

1. Fundamentals: What the numbers say

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16 February 2013

Hotel Lawyer on the Pros and Cons of dual-branded hotels

Dual-branding of hotels in a single structure or complex is quite a trend in the hotel industry and has been picked up by the popular press.

The hotel lawyers in JMBM’s Global Hospitality Group® have been working on dual-branded hotels for some time, so we thought we would share some our observations on the pros and cons of this approach.

My partner, Bob Braun, has worked on many hundreds of hotel management agreements and franchise agreements, and has written this article to provide an important update on this subject.

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27 January 2013

Hotel Lawyer with the mood of the hotel industry from the ALIS conference

If you didn’t attend the ALIS hotel conference in Los Angeles this year, you really missed something!

Hotel investment conference attendance is a barometer for the health of the hotel industry. Companies send lots of delegates to these conferences when they are doing well, expect increased business, and are optimistic about the future. By that standard, things are really looking up for the hotel industry in 2013 and beyond!

But industry fundamentals also backup this optimism. And there was more consensus than we have seen for many years that things are good and continuing to get better – – with at least a five-year run of improving economics and values. (5 years!)

But there is more good news . . .

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31 October 2012

New Expedia Traveler Preference Program: What owners should know about the potential negative impact to their bottom line

It is so true that the devil is in the details. Take for example, the new “Expedia Traveler Preference Program.” It seems straightforward on the surface. The new program from Expedia lets guests pay the hotel directly at checkout, rather than to Expedia at the time of booking. This is a positive option for US hotels that would like to attract more European guests through Expedia as these guests prefer to pay the hotel at checkout rather than at the time of booking–six months before their vacation.

A negative impact of up to $2.1 billion in hotel values

Seems like a simple enough change, approved … roll it out …. But wait! What are the financial implications for hotel owners of this rather straightforward guest oriented program? Expedia handles 5% of all US hotel Rooms Revenue, so maybe we should look a little closer. Peeling back a few layers of this seemingly benign change in process could have a negative impact on US hotel ownership to the tune of $2.1 billion in real estate value unless concessions by Expedia, brands and managers occur!

Hotel owners get stuck with the increased costs

The issue is not that Expedia is allowing guests to pay the hotel directly; rather the controversy revolves around the fact that the new model increases the cost to a hotel to acquire the same business and that the entire burden of this added cost falls on ownership, while Expedia and the hotel brands and management companies (the two constituents that negotiated the agreement) benefit from the change.

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Hotel Lawyer with Robert W. Baird hospitality research on hotel industry trends

We are very pleased to report that David Loeb has agreed to share his Robert W. Baird hospitality reports with us, and has agreed to make them available on HotelLawyer.com. Just click on the “Resource Center” and then “Industry Presentations.”

Here are the first two reports on C-Corps and REITs and Highlights from the Lodging Conference.

The first is the presentation given by David to the hotel industry think tank, the Lodging Industry Investment Council, on October 3, 2012, titled Hotel Update: C-Corps and REITs.

The second is a fascinating summary of RW Baird’s take on the state of the industry after more than 15 meetings with industry leaders in Phoenix. It is dated October 8, 2012 and is titled Highlights from The Lodging Conference, Select-Service Bullishness, Open Debt Markets.

Highlights from RW Baird’s reports

We asked David to give us his bullet point summary of the highlights in these reports, and here is what he said:

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Contact Information
Jim Butler, Chairman
Global Hospitality Group®
Jeffer Mangels Butler & Mitchell LLP
(310) 201-3526 • jbutler@jmbm.com
www.HotelLawyer.com

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