year with the shows that were
booked years in advance, but
attendance, food and beverage
and overall on-site spending are
expected to be down. Bortz does
expect sector fundamentals to
be impacted by major cutbacks
in meetings with shorter lead
times, such as incentive meetings or sales meetings, at least
through the first half of the year.
in 2009 and early 2010.
Supply will grow by 2. 5 percent to 3 percent in this period,
about or even slightly above
the industry’s long-term average. The timing is unfortunate,
Overton says. “Coupled with
negative demand growth, it
paints the picture for significant
REVPAR declines into 2010.”
Analysts expect new supply
growth to fall off sharply by
Supply Pipeline Slowing third quarter 2010—at about
New supply in the lodging indus- the same time that the eco-
try moves slowly from financing nomic recovery will be gaining
to construction to opening, a pro- some traction. Additionally, the
cess that can stretch out for five tight credit market plus soft
years or more for a luxury prop- lodging industry fundamentals
erty in a high-barrier market. suggest that new projects will be
Although new starts are nonex- on hold for at least several years
istent, the last of the projects that until the industry recovers and
[
were financed prior to the credit capital is more readily available.
market meltdown will be opening In the long-term, this all bodes
well for hospitality REITs, Bortz
says. He looks for improvements
in occupancy and rates across
the industry beginning as early
as the second half of 2010 and
continuing into 2011, with supply growth staying at “very low
levels” through 2015.
That’s good news for investors, Loeb says. “For those
who are willing to look out far
enough, the prospects for a long,
lucrative, high-growth cycle are
great,” he says. As cloudy as the
hospitality sector looks now, the
long-term prospects are clear,
Overton adds. “This is only the
third time historically that REIT
prices have pulled back more
than 20 percent to 25 percent,”
he says. “And every time this has
happened, it’s been an excellent
time to invest.” ✦
]
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