LOS ANGELES—The third and final day of the Americas Lodging Investment Summit is dubbed “Money Morning,” with sessions focusing on acquisition and development lending, private equity, real estate investment trusts and alternative financing.
This year, much talk centered on Chinese capital and the potential restrictions that may keep money from flowing out of that country as it has in the past. Turning to domestic concerns, oversupply worries continue to foment in the background, as financiers navigate a widening bid-ask gap.
Still, the overall sentiment is optimistic, as investors look with laser focus on the deals left to be had in this cycle.
Photo of the day
The lobby of the JW Marriott Los Angeles L.A. Live gets a little less busy on the final day of ALIS. (Photo: Stephanie Ricca)
Quotes of the day
“Supply growth by itself isn’t a concern for me. Supply growth pared with deep freezing demand is a concern for me.”
—Justin Knight, president and CEO, Apple Hospitality REIT, during an interview with Hotel News Now.
“It’s gotten a little tougher, but for good projects, guys are paid to get money out. If you’re dealing with the right capital sources, those guys are not paid to hang on to the money.”
--W. Michael Murphy, head of lodging and leisure capital markets at First Fidelity Companies, on the availability of financing and lenders’ attitudes.
“Arguably, hotels fare better than other property types in inflationary times. This hotel space does better with rising interest rates.”
--Michael Medzigian, managing partner, Watermark Capital Partners, on the topic of rising interest rates.
Tweet of the day
From Mobile Developer to Data Scientist, #hospitality's home to many of the US’ best jobs https://t.co/DJlD2re9VG @glassdoor #ALISconference pic.twitter.com/1niHqRkvGg — Hilton Worldwide (@HiltonNewsroom) January 25, 2017
Editors’ takeaways
As usual, there is an internal conflict when it comes to the hotel and lending disciplines that converge each year at ALIS.
On one hand, the hotel industry craves money from lenders to acquire, refinance and develop hotels. All in all it’s a mutually beneficial relationship as both sides make money—especially when times are good like they have been for the past five years or so.
One the other hand, lenders can fuel too much supply growth by making too much new-construction debt available. That hasn’t happened just yet—many industry executives and observers laud the discipline shown by lenders during this cycle. The caveat is that lenders have been held in check by regulations implemented by the Obama administration. Now that there’s a new sheriff in town, that could change.
Most ALIS attendees believe President Trump will ease those regulations, which will increase cash available to developers. That’s when the red flag should go up. With STR, the parent company of Hotel News Now, releasing its forecast for room supply growth in the U.S. to be 2% in 2017 and 2.2% in 2018, there could be trouble in paradise. When you talk about growth of more than 100,000 rooms in the U. S., a warning bell should sound. We’re just about there, so while the easing of regulations might appear well on the surface, it could cause situations that won’t be pretty down the road.
The bottom line is that hoteliers have plenty of things to keep an eye on as the Trump presidency takes hold and the hotel fundamentals continue to be positive. But most of all, they need to stay on top of supply additions to their markets because it will always be a street corner business.
--Jeff Higley, editorial director
@jeffhigley1
The final day at ALIS is always money day, and while the crowd has certainly thinned out, the diehard dealmakers were still there, sharing their opinions on everything from rising interest rates to the benefits of private equity investments over real estate investment trusts. Speakers on a private equity panel talked about how that financing source stacks up these days against public and privately traded REITs (turns out, it’s pretty good), and speakers addressed the continuing good environment for deal making in the U.S.
While select-service hotels in urban cores are still an industry darling, this year I heard more and more about developers who are identifying pockets of demand in all sorts of different markets. I see more and more interest in college markets, secondary downtown markets, research cores and more areas that generate their own unique demand. The worry, of course, is that the industry may once again fall into the trap of creating too much supply.
--Stephanie Ricca, editor in chief
@HNN_Steph
The talk at Wednesday morning’s IREFAC panel revolved around the global landscape, particularly with how much Chinese investors are still interested in the U.S. and if they can actually chase that interest. A recent wave of regulations from the Chinese government seem aimed at keeping too much Chinese money from flowing out of that country, but panelists seemed to agree it’s almost impossible to guess how much of an impact that ultimately will have.
Mark Elliott, president of Hodges Ward Elliott, said that is constantly at the top of his mind because his company is working on a deal involving Chinese capital. He noted that there seems to be a recurring cycle of Chinese regulation and business people still finding ways around them.
“That’s what we ask every time we talk, ‘Can you actually get your money out,’” he said. “And they say, ‘oh, no problem.’”
--Sean McCracken, news editor
@HNN_Sean