Stable and steady mark the hospitality industry, but for how long?

PHOENIX—Tom Corcoran, the chairman of the board for FelCor Lodging Trust, is someone who has seen it all in the hospitality space. With 40 years of experience under his belt, Corcoran has been witness to many cycles, bow ties and all.

Here's the way he sized up the industry during the Lodging Conference's "Lodging Leaders: A View from the Top" panel: "It's fairly steady eddie," he said. Fair enough.

While stability is one way to describe the current state of the global hotel industry, there is still a wait-and-see feeling: There are many factors out there that could dampen or delight. These, as Oxford Economics' Aran Ryan pointed out in an earlier session, include the long-term impact felt by the Brexit, a Trump presidency, tighter policy controls in China, secular stagnation and fiscal loosening, which could boost the global economy.

FREE DAILY NEWSLETTER

Like this story? Subscribe to IHIF!

The hospitality industry turns to IHIF International Hotel Investment News as the must-read source for investment and development coverage worldwide. Sign up today to get inside the deal with the latest transactions, openings, financing, and more delivered to your inbox and read on the go.

Meanwhile, the transaction landscape has not been as steady. According to HVS and its managing director, Adam Lair, transaction volume in the U.S. is down 52 percent in 2016, after reaching record highs in 2015. "There's been a pullback in CMBS, REITs and institutions are moving to the sidelines, there is a widening of the buy-sell gap and underwriting is more conservative," he said.

Portfolio transactions have also declined in 2016, Lair said, down to some $1 billion this year from $6 billion last year. "This was where REITs and institutions were active."

REITs, Corcoran argued, will continue to sell hotels and buy back stock as long as their stock prices are trading below net asset value.

China Influence

Like 2015, China continues to play a large role in global investment as cross-border ventures aren't letting up. Consider the largest third-party management company in the world, Interstate Hotels & Resorts. "We have 450 hotels and of that 40 are owned by Chinese owners," Interstate CEO Jim Abrahamson said. "They are growing and it's not a trend. They are long-term holders and see value in cities such as New York and Los Angeles."

Abrahamson added that he wouldn't be surprised if over the next few years a Chinese hotel company was one the three largest worldwide, especially factoring in the amount of sector consolidation.

On Brands and Distribution

Distribution, the concept of getting hotels in front of consumers to make the buy decision, continues to garner massive attention, especially in the age of OTAs and other disruptive forces.

"All our franchisees are looking for is distribution," said Geoff Ballotti, CEO of Wyndham Hotel Group.  That's what they are paying for."

Said Eric Danziger, CEO of Trump Hotels, "We cannot ignore the new channels and should embrace those, but it's about channel management. You hope to have more brand.com business because its about the customer and that relationship. There will be new channels out there we don’t know about yet. You have to manage them."

AAHOA Chairman Bruce Patel said its distribution, and the amount of options that are available, that makes boutique hotels and independents an easier play.

On the brand side, Danziger stopped short of saying there are too many hotel brands (why would he when his company just introduced a new lifestyle brand called Scion), but did make the argument that newer brands can be confusing.

"For brands to have value, they have to contribute and have clarity of what they are so the messaging is clear," he said. Taking a shot at the Marriott Starwood deal that just closed, he said, "I don’t know how you follow 30 brands. It's not good for the consumer or owner."

Corcoran, meanwhile, took a more carefree view and brought it back to the guest. "The consumer is changing and what we used to do doesn’t matter. It’s about what works today. I say go for it."

On Consolidation

Large-scale M&A continues to be a hallmark of the hospitality industry with the likes of the Marriott/Starwood deal taking center stage, but by no means alone.

Roger Bloss co-founded Vantage Hospitality and recently sold it to Red Lion Hotels Corp. in a multi-million-dollar deal. Part of why he made the deal was this: "We were not a tech leader and the way things are changing, it was a big issue. We couldn’t be a leader." He described Red Lion as "futuristic" on the tech front, but in an approachable and comfortable way.

According to Danziger, technology is about getting it right. "My biggest frustration is when technology doesn't work, so don't just add technology for the sake of adding—do it well."

When it does come to the Marriott/Starwood deal, Interstate's Abrahamson called the merger positive and a seminal moment when it comes to linking the two loyalty programs, especially. "They are at the precipice of doing this right or wrong," he said, noting a "set of power users loyal to SPG." 

He went on to say that the next-generation or next iteration of loyalty should be geared around experiences and not point accumulation. "The next-gen consumer is an experience junkie, not a points junkie," he said.

Suggested Articles

McKibbon Hospitality manages the 200-room Hyatt House Chicago/West Loop-Fulton Market.

The Four Seasons Hotel San Francisco at Embarcadero will replace the Loews Regency San Francisco in 2020.

As much as sustainability is deemed a goal to satisfy consumer demands, the main concern remains the impact it will have on profitability.