Reflections on ALIS

The mood was quite favorable at the ALIS (Americas Lodging Investment Summit) Conference I attended in Los Angeles as more than 2,600 delegates (the largest number since 2008) were present to discuss hotel investments in the United States and internationally. Magic Johnson provided an inspirational keynote address about always striving to over deliver on work product. Various speakers expect hotel sale prices and RevPAR to increase in 2014 with RevPAR increases expected between 5% and 7%. Several speakers predicted relatively stable capitalization rates in 2014 as compared to 2013, although lower rates than from 2011. There is a difference in capitalization rates between cities. For example Boston may have up to a 300 basis point difference in capitalization rate from some Midwestern cities.

A major issue discussed was the property improvement plans (PIP).  Many brands are now requiring considerable renovations anytime a hotel sells.

One takeaway from ALIS was that although the fundamentals for the industry are strong now, oversupply will be an issue in a few years. 2014 is a good place in the cycle in most markets for both lenders and borrowers.