Articles Posted in Outlook and Trends

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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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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16 October 2012

What happens to the hospitality industry with certain likely political and economic scenarios?

Here is another insightful analysis of hotel industry performance and forecast. But unlike many industry analysts, Mark Woodworth and his team at PKF Hospitality Research forecast the effect of how Washington deals with the “fiscal cliff” deadline and related budget issues.

What happens if the automatic budget cuts currently the law of the land kick in because Congress can’t agree on an alternative course of action? What happens if they “kick the cliff down the road.”?

The results may surprise you. One scenario likely leads to a recession in the first half of 2013, but in any event Woodworth and his PKF team say ” Under all scenarios considered, 2014 will be a great year for the industry. It remains a great time to be investing capital in the industry.”

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10 October 2012

Where are we and where do we go from here?

Vail Brown is Vice President, Global Business Development & Marketing, with Smith Travel Research, and recently presented a comprehensive report on the hotel industry performance at the Phoenix Lodging Conference, entitled ” Statistics, Trends and Projections for 2013 & Beyond.” See HotelLawyer.com at for the full presentation or click here.

All Smith Travel presentations can always be found at www.hotelnewsnow.com. Click on “Hotel Data Presentations”. We appreciate their consent for us to post the presentation on HotelLawyer.com as well.

We caught up with Vail after the Phoenix Lodging Conference and asked her what she thought were the most notable developments at this moment. She gave us three key observations from STR’s standpoint as it relates to the U.S. hotel performance data through year to date through August 2012.

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9 October 2012

JMBM’s Hotel Lawyers Post 500th Blog
HotelLawyer.com and Hotel Law Blog are resources for hotel owners and lenders

LOS ANGELES — October 8, 2012. Jim Butler, Chairman of the Global Hospitality Group® at Jeffer Mangels Butler & Mitchell LLP (JMBM) announced today that the Group posted its 500th blog on the Hotel Law Blog.

Launched in 2006 for hotel owners, developers, investors and lenders

Jim Butler founded and launched HotelLawBlog in 2006 — the first of its kind to focus solely on hotel law. It was designed particularly for the needs of hotel owners, developers, investors and lenders. Through the blog, JMBM’s hotel lawyers offer legal and business perspectives about trends in the hospitality industry, challenges in hotel operations, and insights on other important industry issues.

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9 October 2012

Phoenix rising? Sentiment at the Phoenix conference?

Please forgive the play on words, but given the location of The Lodging Conference and the continuing ascent of lodging industry fundamentals, I was simply unable to restrain myself on the title of today’s post. I am also an ardent student of mythology, so once I looked up “phoenix rising” in Wikipedia, I had to go with the title. My “research” on this subject is at the end of this article.

But the metaphor may be appropriate. Harry Javer and Morris Lasky have done it again. Another great annual event at the Arizona Biltmore, with more than 1,400 attendees, matching the all-time record set in 2007. I have usually found that conference attendance is something of a barometer of the mood in the lodging industry, so this showing bodes well.

What is the take of the lodging industry “think tank” on the state of the industry?

Three times a year, the Lodging Industry Investment Council (“LIIC” pronounced “lick”) gathers leaders of the industry for formal think tank sessions on various topics of importance. The approximately 70 members of LIIC represent approximately $20 billion of hotel properties from all segments and locations. The most recent meeting was held last week in conjunction with The Lodging Conference.

I am privileged to be one of the three co-chairs of the Lodging Industry Investment Council, along with Mike Cahill and Sean Hennessey. Mike is CEO and Founder of Hospitality Real Estate Counselors or HREC based in Denver, Colorado, and Sean is President of Lodging Advisors LLC in New York City.

After a special State of Industry briefing by Vail Brown of Smith Travel Research, and a robust discussion of what the LIIC members are experiencing right now, Mike Cahill provided this summary of his take on the environment.

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