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Over 2,000 attendees gathered in Atlanta this past week for the Hunter Hotel Investment Conference. Despite all the concerns about the banking industry and rising interest rates, there was still positive news and an inspiring keynote from Shelia Jonhson, Sheila Johnson, co-founder of Black Entertainment Television (BET), founder and CEO of Salamander Hotels & Resorts.
Optimism in the Face of Banking Challenges
Adam Sachs, president of Tourism Economics, started the conference in his session, "Can the Travel Industry defy Economic Gravity?" He believes it can and will for four specific reasons.
US Households are in a position of strength.
Pent-up travel demand and consumers are prioritizing travel in their spending.
Businesses are still restoring necessary travel
International travel is still rebuilding, especially inbound to the United States.
Sachs expects a mild recession in 2023 due to inflation and higher interest rates, but consumers' and businesses' strong balance sheets should limit this downside.
To understand how the banking crisis might affect the pace of acquisitions and development in the industry and see their plans for their portfolios, a few female executives at the conference offered their insights.
MaryBeth Cutshall, Managing Director from Amara Capital Group, said the banking crisis is already affecting M&A and development. "It is changing a lot of perspectives on which banks are secure. Will they be around if they make commitments? If there are deposits, will those deposits be secure? When deals come out for refi in the second half of the year, I think it's going to be a challenging environment to replace that debt, and I think there's going to be a lot of recapitalizations going on. People may have to put in extra equity."
Katie Kuhlhorst, VP Asset Management, The RADCO Companies, felt, "It comes down to two words: certainty and credibility. Due to the liquidity crisis, groups who were in development pre-planning phases are suddenly wondering, 'will we actually be able to finance the opportunities that we've created up to this point?'"
Julie Arrowsmith, President, and Interim CEO of G6, said, "Any time there is noise like this in the economic environment, it will give investors pause. But the Fed and Treasury's response signaled that they viewed the latest banking events as somewhat isolated and that workable solutions could be found. Large M&A deals may be sluggish, but smaller deals will likely persevere when the deal is right as most developers see the long-term value in the hotel space and find a way to make the deal happen for the right property."
Janis Cannon, SVP, Upscale Brands, Choice Hotels International, is "continuing to see good projects with strong sponsors secure debt and move to construction starts. Much of the hotel debt is with small to midsized regional banks where many developers have a proven track record and a standing relationship allowing them to move forward in today's environment."
Dipal Patel, Managing Partner, Shyana Hospitality Development, sees a "significant impact on lending. I keep hearing there's a lot of capital out there, but it is really hard to access that capital. I do believe it's going to get slightly more expensive to find money, but I think in the end, there is such demand for travel that you will be able to figure out where to get financing from."
Laurie Ivy, SVP Lending, PMC Commercial Trust, expects some difficulty "in the short-term but is hopeful that as things shake out that there will be funds available for hotel, particularly M&A, and as we go forward construction as well."
Hotel Deals Are Getting Done
Even in this market, deals are getting done. Cannon said, "Choice has 21 Cambria Hotels currently under construction, with more ground breaks coming this year." Arrowsmith said, "G6 is fully focused on supporting franchise investors who want to expand or diversify their portfolio in economy lodging." G6 is expecting upwards of 100 openings this year, and they are pacing ahead of plan on signings.
Cutshall is an "opportunistic buyer [but] also a patient buyer. It's about doing the right deals with the right people having a lot of fun, and having them be successful." Kuhlhorst's company is capitalizing on the uncertainty in the hospitality industry, particularly over the past 16 months. The RADCO Companies have acquired 11 assets on the hospitality side from both small family owners and institutional owners and "will continue to find opportunities to acquire and expand our portfolio for next 12 months as long as there are groups coming to the table willing to transact on realistic numbers." Patel is also looking to "continue to find development projects in strategic areas and continue to grow different brands."
Inspiring Keynote: Sheila Johnson, co-founder of Black Entertainment Television (BET), founder and CEO of Salamander Hotels & Resorts
The legendary Shelia Johnson, co-founder of Black Entertainment Television (BET), and founder and CEO of Salamander Hotels & Resorts, was interviewed by Rachel Humphrey, founder of the Women in Hospitality Leadership Alliance. In addition to her roles at BET and Salamander, Johnson has also been a part-owner in three professional sports teams––the Washington Capitals, Mystics and Wizards––and began her career as a concert violinist, she drew on those experiences as well as hospitality in the conversation.
During her music career as a violinist, Johnson stayed in some of the finest hotels in Europe, inciting her interest in hospitality. She credited music for teaching her to be more vulnerable and learn to listen to others. She relied on others at first to teach her about hospitality, and to learn the business side, and had to overcome many challenges as a woman of color to get financing and secure deals.
Other top takeaways:
Employees first. Bring experiences not only to your customers or fan base, but to your employees.
Hire into your value system. Know what your brand stands for, set it out, and hire people who embody it.
Make it work. Persevere through adversity, don't make excuses, and refuse to accept the status quo.
Castell@College and AHLA ForWard also held panels during the conference which had a strong showing from women, though there were still a few panels lacking female representation, progress is happening.