Hotel & Motel Management - March 3, 2008 - (Page 14) 14 On Finance IN THE details Capital markets in transition Market is correcting itself Supply pipeline tenuous Mezzanine markets to wake up H&MM March 3, 2008 | HotelMotel.com www.HotelMotel.com/digital_edition Bumps in road to ease in second half of year asten your seat belts because I anticipate a wild ride in 2008. The hotel industry continues to feel the aftershocks from the blowup in the subprime housing markets in 2007, which has affected the capital market’s perception of risk in an industry that, to date, has held up pretty strong. Let’s take a look at some F By James Merkel H&MM Columnist of the factors that will have an impact on the landscape in ’08: Capital markets are in a major transition as investors evaluate their portfolios and wait for the storm to calm—which is why I anticipate a relatively passive first half to the year. For the most part, equity capital still is available, but due to the volatility of debt pricing in the mar- kets, it is having a hard time getting put back to work. People who don’t truly understand the hotel finance business tend to shy away from the perceived riskier asset classes. This type of market correction forces skittish players to retreat and stronger players to minimize risk by focusing on their strongest relationships, which will limit avail- Stop using your vacuum cleaner as CHANGES YOUR VACUUM FROM A BATTERING RAM a battering ram that dents furniture, scratches baseboards, bangs up doors and walls. And leads to bruising repair bills. Instead, tame the beast with a Soft Vac Protective Vacuum Cover. • Ends vacuum damage forever • Installs in seconds with Velcro tabs • Soft, durable cordoura fabric outside • High-density foam rubber inside • Eliminates costly repair bills • Extends vacuum cleaner life • Increases housekeeping productivity • There’s a Soft Vac model to fit any vacuum To learn more, contact your distributor, or call us at or visit INTO A GENTLE LAMB softvac.com. 800-866-7001, able liquidity. As first-mortgage lenders retreat to lower loan-to-value ratios, expect the mezzanine markets to become more active. While there have been few appropriately priced mezzanine deals done that were commensurate with the risk, we’re seeing that changing as investors look to fill the gap in the capital structure. Industry fundamentals will remain positive, but growth will slow. On the transaction front, we have not yet seen an adjustment in sellers’ expectations of value. However, we expect buyers and sellers to realize that return expectations are higher. Because of the tighter flow of capital, we’ll see fewer buyers in the market, and as a result, less of a bidding war on assets. As the markets correct, the supply pipeline will be on tenuous footing. The adjustments in the market and rising construction costs likely will squash deals or significantly slow them down—keeping supply and demand in check. Smith Travel Research predicts that about 60 percent to 65 percent of the pipeline for 2008 will actually turn into new rooms. This will be down from a conversion of about 75 percent of the 2007 pipeline into new rooms. There has been a lot of talk about recession. As always, hotels are driven by their local economies. An economic slowdown will affect the industry, but long-term industry players see their way through these environments and know how to underwrite local investments driven by local economies. These are more likely than not bumps in the road. As we wait to see where the market is going to land with regard to underlying debt and cost of capital, the industry should find itself on firmer footing in the second half of 2008. This correction will enable the stronger players to continue to position themselves as such, which will strengthen the market in the long term. hmm@questex.com James T. Merkel is managing director of Columbus-based RockBridge Capital LLC. He can be reached at (614) 246-2505. CIRCLE NO. 129 © 2006 SOFT VAC CORPORATION http://HotelMotel.com http://www.HotelMotel.com/digital_edition http://softvac.com http://softvac.com
Table of Contents Feed for the Digital Edition of Hotel & Motel Management - March 3, 2008 Hotel & Motel Management - March 3, 2008 Contents Embassy Suites Refreshes Look, Service F&B Concept Set to Take Off Conference Promises Perspective Letter to the Editor Legally Speaking Guest Column HSMAI Consultant's Corner On Finance Travel Trends Energy Star Update Trends & Stats Transactions Property Management Systems Carpet: Mixed Media Planting Greener Greens Transportation Vacation-Ownership Update Ad/Editorial Index Marketplace Classifieds Checking Out Hotel & Motel Management - March 3, 2008 Hotel & Motel Management - March 3, 2008 - Hotel & Motel Management - March 3, 2008 (Page 1) Hotel & Motel Management - March 3, 2008 - Hotel & Motel Management - March 3, 2008 (Page 2) Hotel & Motel Management - March 3, 2008 - Contents (Page 3) Hotel & Motel Management - March 3, 2008 - Conference Promises (Page 4) Hotel & Motel Management - March 3, 2008 - Conference Promises (Page 5) Hotel & Motel Management - March 3, 2008 - Letter to the Editor (Page 6) Hotel & Motel Management - March 3, 2008 - Letter to the Editor (Page 7) Hotel & Motel Management - March 3, 2008 - Guest Column (Page 8) Hotel & Motel Management - March 3, 2008 - Guest Column (Page 9) Hotel & Motel Management - March 3, 2008 - HSMAI (Page 10) Hotel & Motel Management - March 3, 2008 - HSMAI (Page 11) Hotel & Motel Management - March 3, 2008 - Consultant's Corner (Page 12) Hotel & Motel Management - March 3, 2008 - Consultant's Corner (Page 13) Hotel & Motel Management - March 3, 2008 - On Finance (Page 14) Hotel & Motel Management - March 3, 2008 - On Finance (Page 15) Hotel & Motel Management - March 3, 2008 - Travel Trends (Page 16) Hotel & Motel Management - March 3, 2008 - Travel Trends (Page 17) Hotel & Motel Management - March 3, 2008 - Energy Star Update (Page 18) Hotel & Motel Management - March 3, 2008 - Energy Star Update (Page 19) Hotel & Motel Management - March 3, 2008 - Trends & Stats (Page 20) Hotel & Motel Management - March 3, 2008 - Trends & Stats (Page 21) Hotel & Motel Management - March 3, 2008 - Trends & Stats (Page 22) Hotel & Motel Management - March 3, 2008 - Trends & Stats (Page 23) Hotel & Motel Management - March 3, 2008 - Trends & Stats (Page 24) Hotel & Motel Management - March 3, 2008 - Transactions (Page 25) Hotel & Motel Management - March 3, 2008 - Transactions (Page 26) Hotel & Motel Management - March 3, 2008 - Transactions (Page 27) Hotel & Motel Management - March 3, 2008 - Property Management Systems (Page 28) Hotel & Motel Management - March 3, 2008 - Property Management Systems (Page 29) Hotel & Motel Management - March 3, 2008 - Property Management Systems (Page 30) Hotel & Motel Management - March 3, 2008 - Property Management Systems (Page 31) Hotel & Motel Management - March 3, 2008 - Carpet: Mixed Media (Page 32) Hotel & Motel Management - March 3, 2008 - Carpet: Mixed Media (Page 33) Hotel & Motel Management - March 3, 2008 - Planting Greener Greens (Page 34) Hotel & Motel Management - March 3, 2008 - Planting Greener Greens (Page 35) Hotel & Motel Management - March 3, 2008 - Transportation (Page 36) Hotel & Motel Management - March 3, 2008 - Transportation (Page 37) Hotel & Motel Management - March 3, 2008 - Vacation-Ownership Update (Page 38) Hotel & Motel Management - March 3, 2008 - Vacation-Ownership Update (Page 39) Hotel & Motel Management - March 3, 2008 - Vacation-Ownership Update (Page 40) Hotel & Motel Management - March 3, 2008 - Vacation-Ownership Update (Page 41) Hotel & Motel Management - March 3, 2008 - Vacation-Ownership Update (Page 42) Hotel & Motel Management - March 3, 2008 - Vacation-Ownership Update (Page 43) Hotel & Motel Management - March 3, 2008 - Vacation-Ownership Update (Page 44) Hotel & Motel Management - March 3, 2008 - Vacation-Ownership Update (Page 45) Hotel & Motel Management - March 3, 2008 - Ad/Editorial Index (Page 46) Hotel & Motel Management - March 3, 2008 - Ad/Editorial Index (Page 47) Hotel & Motel Management - March 3, 2008 - Marketplace (Page 48) Hotel & Motel Management - March 3, 2008 - Classifieds (Page 49) Hotel & Motel Management - March 3, 2008 - Classifieds (Page 50) Hotel & Motel Management - March 3, 2008 - Classifieds (Page 51) Hotel & Motel Management - March 3, 2008 - Classifieds (Page 52) Hotel & Motel Management - March 3, 2008 - Classifieds (Page 53) Hotel & Motel Management - March 3, 2008 - Checking Out (Page 54) Hotel & Motel Management - March 3, 2008 - Checking Out (Page 55) Hotel & Motel Management - March 3, 2008 - Checking Out (Page 56)
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