Friday, July 1, 2011

SWIMMING NAKED

These are tough times. In spite of its sustained attempts at recovery, the U.S. economy is still struggling. Unemployment remains close to 9.5%. Consumer confidence remains shaken by the continued weakening of housing values which represents much of the wealth accumulation of the middle class.

As for the hotel business, we are trying to get traction and to return to a state of normalcy. The challenge in this recovery is in trying to grow rate. Demand is attempting to come back and, in some markets, we are beginning to get traction with our mid-week business travel patterns. Leisure still remains “iffy” due to the uncertainty of gas prices and continued pressures on spendable income. We are hoping to avoid $4 per gallon gas prices this summer which some areas have already seen for a few weeks in late spring/early summer. We remain hopeful that people will not again “stay-cation” this year but, will instead, venture out and enjoy a much-needed vacation break.

As for Hotel Equities, we have been extremely fortunate. We have managed to stay buoyant and have added 15 new deals so far this year through mid June. Some of those deals are new development projects which we will not see come out of the ground until financing loosens up and the money supply is more plentiful. Construction prices are creeping up as material costs continue to climb. Many of our new deals are third party management assignments as the demand for our award winning management services remains high. During this time of uncertainty, owners and lenders seek quality hotel operators with proven management systems and solutions to help them weather the storm.

I love what Warren Buffet said about what occurs when inexperienced management teams face turbulent times… “ You can tell who is swimming naked when the tide goes out”.

As for the hotel business in particular, all boats float similarly during various tides. In other words, all hotels are impacted by similar economic swings. The reason why we are busier than most companies is, in my opinion, due to a “flight to quality” which we are experiencing in our industry. These times of turbulence and uncertainty have given Hotel Equities an opportunity to excel and be recognized for its award winning approach to operational excellence, while consistently delivering on our commitment to exceed the expectations of our three key stake holders; our guests , our associates and our investors.

To all of our great Hotel Equities’ team members……Thank you for helping us not swim naked.

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