The DJIA was up 14 points today while Nasdaq was up 15 and
the 10 year treasury yield crept closer to 5%, up .021 to
4.882%. Lodging stocks were mixed but Equity Inns
jumped 4.7% on further speculation that they are the next
lodging REIT to be acquired.
Robert W. Baird & Co. reported that Equity Inns’ IR
firm contacted them to cancel their meeting on Wednesday,
the second day of the National Association of Real Estate
Investment Trusts’ annual Institutional Investor Forum.
The IR Firm said ENN will not be hosting meetings before
Thursday. Baird & Co. said given ENN
maintained its Thursday meeting schedule, it is premature to
make any assumptions regarding the cancellation.
They will watch for any sign that ENN is not attending
NAREIT at all. Remember that last week ENN was the
subject of press reports that they were considering their
strategic alternatives.
JP Morgan said they believe investors should use the
recently pullback in lodging stocks to buy names like FelCor,
Hilton, Starwood, Host Hotels, IHG, Marriott and Sunstone as
upside from fundamentals over the next 12-18 months should
drive upside of 20-50 percent. JPM said
investors are skeptical that RevPAR can accelerate from 5%
in the 1st quarter to 8-10% in 2nd half 2007 but JPM said it
is happening. JPM said they view the 1st quarter as an
intermission in pricing power, not a decline to sub 5% full
service RevPAR growth that would cause a “sell and stay
away” signal. Occupancy, demand and pricing have
stabilized and are showing signs of reaccelerating. A
catalyst for lodging stocks will be the 2nd half 2007
strength of RevPAR which has the potential to surprise
investors positively. JPM said STR data is showing
room demand is turning positive following 8 consecutive
months of negative/flat growth. Occupancy is
stabilizing after 6 consecutive months of 1-2% contraction.
Investors are concerned about supply growth, much like last
year but JPM said supply growth in sectors that drive their
recommended stocks is benign and overall room growth will
remain under 130,000 through 2008. JPM also
pointed out that the balance sheets of most lodging
companies are much stronger in this cycle versus last and
valuations are still historically attractive.
JPM is seeing potential upside of 20%-50% in their
Overweight rated gaming stocks. Obviously we can say
that JP Morgan is the bull on lodging stocks and Goldman is
the Bear.
PricewaterhouseCoopers said the U.S. lodging industry will
achieve a new record number of occupied rooms per night of
3.14 million this summer. The previous record was
achieved last year at 3.08 million occupied rooms per night.
Summer occupancy is forecast to be slightly lower than 2006,
at 69.6% this year versus 70.2% last summer. They
expect occupancy for Memorial Day and Labor Day weekends to
be 73.9% and 70.1%, the highest since 2000 and 2004
respectively. Gasoline induced occupancy declines are
concentrated in the last three quarters of the year.
Between Memorial Day and Labor Day, PwC believes an
additional 10% or $0.30 per barrel increase in the price of
gasoline will result in approximately 8,000 fewer occupied
rooms per night. PwC also said there is emerging
price resistance following hotel average daily rate
increases of 5.5% and 7.1% in 2005 and 2006 respectively
based on STR data. PwC believes this will be another
great season for the lodging industry but not a record year
as supply exceeds demand growth during the summer for the
first time in four years.
USA Today published a story saying the hotel industry is
renovating so much that guests are starting to get a bit
miffed about having to stay in a hotel work zone.
The American Hotel & Lodging Association told USA Today
that 15% of more than 9,3000 properties say they expected
to start a major structural renovation within 12 months.
The article suggested guests ask if there is construction
when booking rooms. They also suggest asking if the
hotel is full as that can give you an indication of just how
much construction is going on.
American Hotel Development Partners, LLC and affiliates of
Glenmont Capital Management LLC announced the consummation
of a joint venture created to pursue the development of
extended stay hotels in select markets throughout the U.S.
The JV’s first development property, an infill parcel in
Columbia, South Carolina, is the site of five story, 112
room Candlewood Suites Hotel. Construction is
set to commence this month.
IHG announced the first Candlewood Suites outside the U.S.
is scheduled to open next month in downtown Montreal,
Quebec, Canada. The 147 room Montreal-Centre
Ville is one of several properties the brand expects to
develop in Canada over the next few years. The hotel
is owned by Aquillini Group Properties, Ltd and managed by
Pacrim Hospitality Services, Inc.
Waterford Hotel Group opened a $13 million Homewood Suites
by Hilton in Ithaca, NY last week. The new Homewood
Suites Ithaca includes 91 suites, a breakfast buffet, indoor
pool, fitness room and meeting facilities. The hotel
is owned by Ithaca Suites, LLC, a partnership of affiliates
of Waterford Group, Slavik Inc. and developer Glenn Jette.
Waterford will manage and operate the new hotel.
Crescent Real Estate Equities announced the sale of some
hotels and an office building for $445 million.
The hotels include the Ventana Inn & Spa in Big Sur, CA;
Park Hyatt Beaver Creek Resort & Spa in Avon, CO; Denver
Marriott City Center; Renaissance Houston Hotel; Omni Austin
Hotel; and the Austin Centre office building. CEI
expects to close on the sale of 2 additional properties, the
Fairmont Sonoma Mission Inn & Spa and Sonoma Golf Club
during the 2nd quarter for a gross purchase price of $175
million.
Scout Real Estate Capital, LLC announced the completion of
the first phase of a multi-year $77 million restoration plan
for the historic Harbor View Hotel & Resort on
Martha’s Vineyard. Scout acquired the 124 room
Harbor View Hotel and the neighboring 60 room Kelley House
in December 2006. Scout plans to continue improving
the Harbor View Hotel and begin renovating the nearby Kelley
House in October 2007, after the summer season has
concluded.
The West Baden Springs Hotel in French Lick, Indiana
reopened last week after being closed to travelers since
1932. The opening marks the complete renovation
of the two historic hotels at the French Lick Resort Casino
destination. The French Lick Springs Hotel reopened
last October.
Starwood Hotels & Resorts Worldwide will rebrand the
Moana Surfrider as a Westin hotel on Thursday June 7th.
The hotel has almost 800 rooms and suites and is called the
First Lady of Waikiki because it opened in 1901. The
hotel is owned by Kyo-ya Hotels and Resorts.
Elysian Worldwide LLC and Lodging Capital Partners LLC
closed on the purchase of the historic Hotel Jerome in
Aspen with published reports speculating the purchase price
was about $50 million. The seller, Oklahoma Publishing
Co., paid $33.7 million for it in 2005. The hotel has
been closed for the past month but is expected to be
reopened as the new owners want to get to know the Aspen
market before completing plans for renovations.
RockResorts will manage the property.
Hilton Hotels announced late last week that Matthew Hart
will assume the role of president and CEO effective January
1, 2008. Hart is the company’s president and COO and
was widely expected to take over the role upon the
retirement of Stephen Bollenbach. The reason for the
modest decline in the stock was because of the speculation
that HLT would be sold to a private equity group.
Investors were acting like it was one or the other but the
company can be approached even if Hart is the CEO.
Orient Express Hotels announced Friday that Paul White will
resign as VP-finance and CFO, giving six months notice. OEH
has been rumored to be a takeover target for some time,
given the resignation announcements by their chairman and
CEO. That was ignited on Friday with this
announcement but realistically if another CEO was named,
they would probably want to pick their own CFO so this
should not be viewed as a sign that a takeover is imminent.
eSuites Hotels announced that Bryan Langton C.B.E. joined
the company as vice chairman. The company is a new
concept hotel brand that will launch later this year.
Langton is former chairman, president and CEO of Holiday
Inns, Inc.
Carlson Hotels Worldwide announced the hiring of Kaaren
Hamilton as new director of national sales. Hamilton
was previously with Hyatt Hotels overseeing corporate sales
for the Hyatt Regency Jersey City.
Global Hyatt Corp. announced the appointment of Stephen
Haggerty as executive VP, real estate and development.
Haggerty was previously with Marriott International, most
recently in London as senior VP, international project
finance and asset management for Europe, Africa, and the
Middle East.
Sunstone Hotel Investors announced last week that Jon Kline,
president, will leave the company on June 30th to pursue
other business opportunities. SHO also announced they
amended their $200 million unsecured revolving credit
facility with the interest rate based on grid pricing 25 to
30 basis points lower than the prior facility. SHO
increased the initial maturity of the facility from 2010 to
2011. The maturity may also be extended for one year
and the commitment increased to $300 million.
Carlson Hotels Worldwide increased their ownership stake in
Rezidor Hotel Group AB to 41.7% from 35%. They
purchased an additional 10.1 million shares from SAS Group
of Stockholm.
