Hotel & Motel Management - December 29, 2008 - (Page 68)

» BY CHRIS CROWELL, ASSOCI AT E EDI TOR Year of the turtle: Slow, steady will win race T he economic ups and downs of 2008 have put a strain on forecasters, leaving many unsure of exactly what is coming next. For hotel owners, the consensus is 2009 will be tough and there won’t be many transactions, but prepared, experienced companies will survive like they have in any other downturn. “Every couple of years you kind of go through a digestive cycle that separates the men from the boys and the hotel people from the speculators,” said George Glover, chairman and CEO of Baystar Hotel Group LLC, which owns six hotels. Glover believes many owners not used to the hospitality industry or those with poor planning are being weeded out along with the problems in the ﬁnancial markets. “Prices got a little inﬂated based on construction costs, [capitalization] accumulated—with leverage being rates … and it was a seller’s marthe determining factor. ket for awhile. That pendulum has “It’s all about the level of debt swung and now you’re getting back that ownership has put on its portto good, sound economics.” folio,” Bierkan said. “If the leverEven when the market started age is modest, ownership is probtightening up in ’08, Baystar didn’t ably going to make it through just have trouble ﬁnancing the two deals ﬁne. It’s the investor who decidit got done, Glover said. One of the ed to boost yield by leveraging up Cerrone reasons for this success, which he HOTEL EQUITIES who feels the most pressure, whethbelieves will continue into 2009, er that’s ﬁve hotels or 105 hotels.” is the familiarity and track record Success in 2009, according to the company has in its area of business. “We Bierkan and Fred Cerrone, president and don’t necessarily deal in the mainstream CEO of Hotel Equities, is predicated on the lending. We’re dealing in our backyards with deals made during the good times. Cerrone people who know the company.” said a good deal rests on ﬁve factors: market, According to Ross Bierkan, EVP of ac- site, brand, operating team and the ﬁnancquisitions and development for RLJ Devel- ing in place. opment, which owns 124 hotel properties, “When you weather a storm, if you it’s not the size of a company’s portfolio that haven’t done those things right—maybe counts in 2009, but how that portfolio was you’re not in a great market or secondary site or it isn’t a top-tier brand, or maybe you hired a ﬁrst-time management company or maybe your property is overleveraged and you have no breathing room—those hotels are going to struggle.” Cerrone said the downturn will be rough for inexperienced hospitality owners, especially those who jumped into the industry when times were good a few years ago. “It depends on how big you are and how far along you are in the life cycle,” he said. “If you only have one deal and this is it, you’re dead in the water.” Deals to be done? Hotel ownership in 2009 will be focused on how companies can deal with slowed activity and a tough selling environment. Glover emphasized the 2009 battle cry of getting back to fundamentals and being selective in deals but not bringing the company to a halt. “This has made us sit back, assess markets and make sure when we’re doing [deals] See 2009 owners | page 80 68 HOTEL & MOTEL MANAGEMENT | THE ADVISOR DECEMBER 2008 www.HotelMotel.com http://www.HotelMotel.com

Table of Contents Feed for the Digital Edition of Hotel & Motel Management - December 29, 2008

Hotel & Management - December 29, 2008 Contents Viewpoint Outlook Purchasing Companies See Green and Save Purchasing Chart Designers Target Lifestyle, Lobbies and LEED Design Chart Construction Chart Construction Outlook Bleak Lending Chart Lenders Tighten Standards in Uncertain Market 2009 Requires Changes Across the Board Brokers Chart Brands Chart Building, Developing a Brand Tight Management Will Be Key in Downturn Management Chart Year of the Turtle: Slow, Steady Will Win Race Owners Chart Consumer Trends

Hotel & Motel Management - December 29, 2008

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