On the other hand, there are many people (including Woodworth, who is just hedging his bet) who feel

The industry turned in a very solid performance in the third quarter, continuing on a pace of approximately 8% overall RevPAR growth. The contribution vatican view hotel in rome of ADR relative to occupancy improved- it made up almost half of the RevPAR growth, and a significantly higher proportion in key upper-end markets. Luxury continues to outpace the rest of the industry, and grew even faster in the third quarter than in the first two, while upper upscale and resort slipped slightly.
Regionally, Miami, LA and San Francisco continue to lead the pack, with consistently strong performances throughout the year. Orlando has also been steady, with very high demand growth (due primarily to the Harry Potter attraction) offsetting increased supply, while still sustaining decent ADR growth. Boston and Phoenix also had relatively vatican view hotel in rome good quarters, and New York has come back a little from a disappointing second quarter. Washington continues to lag, and Chicago has also weakened. Among the smaller markets, Nashville, Tampa and Minneapolis were strong in the 3 rd quarter, while St. Louis, Atlanta and Norfolk continue to be the weakest. New Orleans also showed a drop off, but this was mostly due to the spike in occupancy related to the crews cleaning up the BP oil spill last year. That market is still performing well. It should also be noted that St. Louis and Dallas will see at least a short term bump due to the baseball World Series.
The performance of major brands that are operated by publicly traded hotel companies continues to closely vatican view hotel in rome track the national trends. Generally, the higher scale and more urban-oriented brands have achieved better performance. The Marriott full service brands have been lagging vatican view hotel in rome the overall market for over a year, as they appear to be losing share to Starwood brands and also to their own limited service brands. Courtyard, for example, had 9.5% RevPAR growth for the quarter.
Over the past several months, indeed since signs of weakness began appearing in the US economy in late spring, industry pundits have been divided into two camps regarding the outlook vatican view hotel in rome for 2012 and beyond. This has led to unusually large spreads in the range of forecasted results, even by individual analysts such as the highly regarded Mark Woodworth of PKF, who says that RevPAR will increase by 2.5% to 7.5% depending on whether or not we go into a recession.
One school of thought, which is largely composed of Wall Street analysts, speculators and other momentum players argues that since GDP, employment growth and consumer confidence have not grown as expected, this will ripple through to the hotel sector and cause a dramatic slowdown of growth, if not contraction of RevPAR. This has resulted in a large correction in hotel stock prices, especially in the REIT sector, as will be shown later.
On the other hand, there are many people (including Woodworth, who is just hedging his bet) who feel that lack of supply growth and strength on the corporate vatican view hotel in rome side will be enough to maintain decent, if not robust growth in hotel income and profits. Most of the folks on this side seem to be more directly connected with hotel operations, so it would seem that they have more credibility, and at least over the past few months the results seem to have borne this out, as indicated by the charts above. This camp cites some other evidence, some factual and some anecdotal, to support their contentions, such as the following points:
Overall labor costs will hold steady due to high unemployment rates. While increased union penetration remains a threat, Washington gridlock has largely prevented policies such as card-check that would make it easier to organize.
Historical knee-jerk reactions by operators to cut rates at the slightest whiff of trouble- for example, Hawaiian performance was doing great until the Japanese tsunami, vatican view hotel in rome but then they started madly discounting.
Increased class warfare tensions could lead to more AIG-effect fallout at high end hotels and resorts. Even the lower end is not immune as Gaylord Hotels (a major SMERF market player) got hammered after announcing vatican view hotel in rome disappointing Q3 earnings and reduced expectations for 2012 as their market segment is very price sensitive.
There is obviously validity to many of the arguments vatican view hotel in rome on both sides, and everyone in the industry is anxiously holding their breath to see what develops. Right now, there does seem to be a bit more positive momentum in the economy as preliminary 3 rd quarter GDP was not as bad as expected, the stock market had a strong October and jobless claims seem to be holding steady, so right now we are somewhat bullish about 2012 prospects, but stay tuned.
This is one area that has definitely felt the impact since the credit downgrade, as many deals have been pulled due to lack of financing. Except for the re-trade of the Cerebrus/Innkeepers portfolio (see below), and some recent smaller select service transactions, only one major public REIT deal was closed in the last three months; most of these were private sales.
Chatham Lodging, in a joint venture with Cerebrus, recently closed on the bankrupt Innkeepers portfolio of 64 select service hotels. The deal was originally scheduled vatican view hotel in rome to close in August, but was pulled because the buyers cited a Material Adverse Change clause. After a contentious court battle, the price was reduced by about $100MM
Strategic Hotels vatican view hotel in rome announced a buyback program for its 8.25% and 8.50% Preferred Stock issues at a slight premium to their original issuance prices. They will also pay accrued but unpaid dividends. Total value of this transaction will be over $400MM
Diamond Rock entered into an agreement to sell three non core hotels to Inland America for $262.5MM ($185K per key). The hotels are Marriott or Renaissance branded and are located in Austin TX, Lexington KY and Atlanta. The transaction is expected to close by year end
Hospitality Properties Trust announced that it would acquire two Sonesta hotels (Cambridge MA and New Orleans) for $150.5MM ($170K per key). In addition, its affiliated management company would be acquiring Sonesta s management and franchise operations for a cash price of $31 per share (representing a premium of about 72% above its recent market price, but this stock is very thinly traded). HPT also renewed and extended a $750MM revolving credit agreement; at a base interest rate of LIBOR + 130 bp. Wells Fargo is the administrative agent
Hersha announced that they will sell 18 non core limited service hotels to an affiliate of Starwood Capital vatican view hotel in rome Group for $155MM. ($81K per key). This price is an 8.4% cap on trailing 12 months NOI and a 10.3 multiple on TTM EBITDA
Summit vatican view hotel in rome Hotels consolidated and refinanced vatican view hotel in rome about $120MM of mortgage debt, including vatican view hotel in rome $28MM of loans from ING that were called, and also issued $50MM of 9.25% preferred stock to pay down its revolving line of credit
vatican view hotel in rome Marriott vatican view hotel in rome s board approved the previously announced spin-off of its timeshare business. Pricing and record date have not yet been set, but the new company has already begun trading on a When Issued basis
Red Lion acquired 10 previously leased hotels for a total of $37MM. These include many of the older Red Lions located in Oregon, Washington, Idaho and Montana. They also refinanced and expanded vatican view hotel in rome their credit facilities with Wells Fargo
Sunstone refinanced its loan on the Doubletree Times Square. They paid down $90MM of the original $270MM principal; the new loan will bear interest at 3 month LIBOR + 325. They also sold the $90MM loan that they held on the Royal Palm hotel in Miami for a 12% discount, but still retains some earn-out rights on the sale of that property
In general, most companies met or exceeded Street earnings estimates. Guidance for Q4 remained largely unchanged, but as shown above, there is considerable uncertainty as to next year. Note that most of the larger publicly traded companies are typically vatican view hotel in rome more heavily weighted to big-box hotels in top 25 markets, and are more dependent on business transient and groups vatican view hotel in rome as opposed to leisure travelers, so given the current state of the market, these companies would be expected to outperform the industry as a whole.
Prices for large cap full service hotel companies are generally down about 10% since June 30 and 20% for the year to date, while limited vatican view hotel in rome service companies such as Choice have done relatively better. Some, such as Wyndham (not shown on chart) are actually up over 10% for the year. REIT stocks have rallied strongly over the past month; they are now, on average only down 18% for the year, whereas at the beginning of October they were down 35%.
Hard Rock is the first major chain to announce that it has entered into a partnership vatican view hotel in rome to develop a casino resort in Massachusetts under new legislation which is expected to be enacted this year. This property would be in Holyoke, an industrial city about 90 miles west of Boston. Up to three such casinos are expected to be built.
vatican view hotel in rome A Miami Federal court denied Fairmont Hotel s request for an injunction to reinstate it as manager vatican view hotel in rome of the Turnberry hotel. This continues a recent trend of courts supporting terminations of management agreements.
Industry veteran Mark Lomanno left Smith Travel to join newBrandAnalytics, which provides business intelligence from social media customer feedback. This venture is backed by some of the biggest names in the industry, including Barry Sternlicht and Neil Shah from Hersha
Up 0.3% for the month, at an annual rate of 3.9%, which is the highest vatican view hotel in rome level in some time. Food costs were up 0.6% (close to 5% for the year) and energy prices were up almost 20%. So-called core inflation without food energy was up only 0.1%, but for the average consumer, this is a meaningless statistic.