Hotel & Motel Management - November 3, 2008 - (Page 62)

62 News H&MM November 3, 2008 | HotelMotel.com www.HotelMotel.com/digital_edition Economic bailout Continued from page 1 “The hotel industry is right in the thick of things,” said Jim Merkel, president of RockBridge Capital. “Certainly from the investment side, it’s unlike anything we’ve seen in a long time.” Most agreed the bailout plan deﬁnitely won’t hurt. “The ﬁrst goal is stabilization—to revive a market that Warren Buffet said was in ‘cardiac arrest,’ but to do so with prudence,” said Kenneth D. Simonson, chief economist for the Associated General Contractors of America. Availability of capital The plan calls for the U.S. Department of Treasury to inject $700 billion into the lending market by issuing bonds for interested me Welco oin We Lodging J rs Trucke iation. soc As s rucker Have T o your dt Directe erty. Prop buyers, such as insurance companies and foreign countries. It will do this by purchasing bad assets off many banks’ balance sheets. In turn, hopes are that major banks will again be free to lend to each other and to interested businesses. “Residential real estate is on the front burner,” said Phil Gordon, a partner in the Hotel & Leisure Practice Group at the law ﬁrm Perkins Coie LLP. “Most of their time will be focused on things that affect that market. But, it can only be helpful for the hotel business.” Gordon said the ﬁrst step in unfreezing the credit market is to have lenders discover the true price of real estate assets. “It’s difﬁcult at the moment to ﬁgure out what a property is worth with no debt, and it’s also hard to determine what a structured deal is worth,” he said. Most say the commercial real estate market will beneﬁt, but a timeline for when banks will be free to lend again is unknown. “Eventually the banks will be back in the market to lend money; after all, that’s their business,” said Aik Hong Tan, president of Richﬁeld Hospitality, primarily a management company that also facilitates hotel deals with capital groups. “Depending on how they implement it, that will determine the time frame.” Although the Treasury Department discussed implementing the program as quickly as the week after the bill was passed and signed by President George W. Bush, making it one of the most immediate legislations in history, Merkel said anyone who claims to know a timetable of when capital will be available is simply guessing. “Visibility is extremely low right now,” he said. “What this does is signal we’ve hit bottom and put some foundation that our ﬁnancial system can build off of. Providing liquidity to the marketplace enables institutions to strengthen their balance sheets and be in position to make new investments. “This isn’t going to be an overnight ﬁx,” he said. “It’s a ﬁrst step in clearing out the market and the old conceived loans.” What the experts are saying It’s not clear how much consumers will be willing to spend. There are still things that look poorly. 159,000 jobs disappeared before this restructuring, based on payrolls on Sept. 12. I expect the October employment numbers to be bad, but ironically they won’t come out until the Friday after the election. The impression the public will have between now and then will be a bad picture and will make them reluctant to spend. Kenneth D. Simonson, chief economist, Associated General Contractors of America “ ” “ “ “ “ “ Depending on how they implement it, that would determine a time frame. Realistically, it will take two to three months to put in the structure and work out the details. Everyone is in wait-and-see mode. We’ll have to see how many banks and lenders will participate and that will determine how fast we can clear this mess. I’m hopeful that by the second or third quarter of ’09, we can see some loosening. Aik Hong Tan, president, Richﬁeld Hospitality To a large extent, there is an overwhelming fear that’s gripping pretty much everyone. What’s sending people bonkers is you have no idea whether you’ve reached the basement or we’re still on the 40th ﬂoor waiting for the ﬂoor to drop out. Phil Gordon, partner, Hotel & Leisure Practice Group, Perkins Coie ” ” What we’ll see is a greater dispersion of the risk premiums, which translates into higher interest rates for hotel rooms. And we’ll also see higher debt-service coverage ratios. We’ll see lenders require personal guarantees on smaller loans and hotel ﬁnancing will be more difﬁcult. That will continue for some number of years. Bjorn Hanson, clinical associate professor, New York University ” We’ve heard a lot of talk about the Wall Street rescue plan—bailout plan—but the average American doesn’t understand that, for the most part, these institutions have been obliterated. They have been affected by risks that they took. So the next go-round, there’s the institutional memory of what those risks were capable of doing to their company. Jim Merkel, president, RockBridge Capital Lenders remain cautious During the proposal stages leading up to the passage of the Emergency Economic Stabilization Act, and ultimately when the act was passed, politicians hammered CIRCLE NO. 126 I do not see it as similar to 2001. You are seeing a structural change in the economy that we did not see in 2001. In 2001, the consumers remained conﬁdent, they drove our success, they continued to buy. The consumer right now is as confused and as conservative as they’ve ever been. That’s a very different reality. Can the hotel company change? Can the hotel company recognize that it’s no longer business as usual? Laila Rach, associate dean, Preston Robert Tisch Center for Hospitality, Tourism and Sports Management, New York University ” ” http://www.HotelMotel.com http://www.HotelMotel.com/digital_edition

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Hotel & Motel Management - November 3, 2008 Contents The Rate Debate Accor Defines Motel 6 Prototype Rollout Holiday Inn Eyes Upscale, Timeshare Perspective Economy Sets Tone at The Lodging Conference Mellow Vibe Meets Bold Design at HD Boutique Expo IH/M&RS to Focus on Going Green Legally Speaking Sales Clinic On Finance Travel Trends Cornell Insights Franchise Law HotelWorld Update Trends & Stats Energy Star Update Energy Star Update An Industry Connected People on The Move Annual GM Survey Point-of-Sale Systems IH/M&RS Product Preview Outdoor Lighting Refrigeration Marketplace Ad/Editorial Index Classifieds Checking Out

Hotel & Motel Management - November 3, 2008

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