The worst is over for hotel industry, says report for Grubb & Ellis' Hospitality Services Group.NEW YORK--(BUSINESS WIRE)--June 4, 1995--Actions by hotel owners are finally resolving the problem of over-supply in the hotel industry, which caused the most dramatic recession to hit this investment sector in recent history, says a study for the Hospitality Services Group of the nationwide commercial real estate firm Grubb & Ellis. The study was issued by Grubb & Ellis consultant John Allen John Allen may refer to: Artists
Politicians
In the report, Allen states that record-level hotel foreclosures and bankruptcies in the 1988-93 period were, surprisingly, not solely caused by a three-part history of REIT-inspired building in the 1970s, savings and loan savings and loan n. a banking and lending institution, chartered either by a state or the Federal government. Savings and loans only make loans secured by real property from deposits, upon which they pay interest slightly higher than that paid by most banks. deregulation Deregulation The reduction or elimination of government power in a particular industry, usually enacted to create more competition within the industry. Notes: Traditional areas that have been deregulated are the telephone and airline industries. havoc in the 1980s and the 1986 Tax Reform Act. ``A glut glut pronounced as rut, slut Vox populi An excess of a service or skilled labor in a particular area. See Physician glut. of money was the culprit that did the industry in,'' Allen says in his report. During the '70s and '80s, ``there was amazingly little softening of occupancy levels or average daily rates'' in light of ``the effects that the three disasters might have suggested.'' Today, the industry is poised for recovery because of ``aggressive operating cost cutting, debt restructuring Debt Restructuring A method used by companies with outstanding debt obligations to alter the terms of the debt agreements in order to achieve some advantage. Notes: , foreclosures with later resales at make-sense prices, no debt or less debt and lower interest costs for those who got in before the Federal Reserve rate hikes in 1994.'' The 10-part report comprises Grubb & Ellis' quarterly newsletter, Investor Outlook. In the study, Allen also examines: o Why some real estate investors A real estate investor is someone who actively or passively invests in real estate. An active investor may buy a property, make repairs and/or improvements to the property, and sell it later for a profit. profit and others don't, such as over-concern for whether the market has peaked. o Some actions investors can take -- such as discounting the prior year's earnings by at least two percent and carrying the discount forward -- in response to research by Holiday Inns and others which strongly indicates that every hotel's most profitable life cycle is inevitably short. o Four economic indicators Economic indicators The key statistics of the economy that reveal the direction the economy is heading in; for example, the unemployment rate and the inflation rate. that can help investors reduce risks that apparently stem from forces beyond one's vision. o Near- and longer-term prospects for hotel financing, including increased availability of financing for acquisitions and renovation near term and, long term, for new construction. o Some significant changes that are making hotels more investor friendly; ``a large portion of any manager's fee is now tilted towards an incentive fee based on how much they increase the NOI NOI Net Operating Income NOI Notice of Intent NOI Nation of Islam NOI Notice of Inquiry NOI Neuro Orthopaedic Institute NOI New Organizing Institute NOI Notice of Interest NOI No Offense Intended NOI National Olympiad in Informatics ,'' Allen observes. The report's key sections are: o Background Information, including investor concerns and an evaluation of the Holiday Inn study o A classification system for the principal hotel types. o Supply and Demand Considerations o Capital Sources o Management and Management Concerns o Value Indicators o Opportunities: Today and Tomorrow, and Trends and Conclusions Copies of the study are available by calling 714/937-0881. Also note that five additional market/industry analyses are currently available and post-conference commentary will be released. CONTACT: Din & Pangrazio, Inc. Judith Ladniak, 312/807-3601 or Grubb & Ellis Thad Seligman, 310/820-7722 |
|
||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion