Leisure Real Estate Blog

Good News!!! Development pipeline has slowed.

Tuesday, September 14 2010 9:39 AM
Categorized In Industry News

According in todays issue of Hotel News Now, STR/TRW/ Dodge is reporting a year over year decline of 24.2% in hotel construction starts. Every bit of positive news is helpful in today’s hospitality environment. I told one of my best owner clients to remain positive and he said he was……he said, “I am positive that my business is in the crapper!!!” Although his comment was made in fun (somewhat), we are seeing definite signs of life. Our activity is up considerably over the first half of 2010. We are seeing stabilizing revenues and some pockets of improvement. Of course, we are still facing the problem of the gap between a buyer’s willingness to pay and a seller’s expectations, but that issue will always be present……it is just a little deeper than normal, as caution is deeply imbedded into each buyer’s psyche.
Having a lid on new development will certainly curb new competition, as the hospitality industry seems to always eat its own with new development. We have always emerged from previous downturns……..and the weakness of the development pipeline will certainly help the recovery process.

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STR forecast somewhat encouraging

Wednesday, September 1 2010 7:35 AM
Categorized In Industry News

Smith Travel Research, through its on-line daily e-news publication Hotel News Now, released its projections for year end 2010, with two of the three major indicators predicted to increase.  Year over year occupancy and RevPar are both expected to increase by approximately 4.3%, while ADR is projected to remain flat.  In our brokerage practice, I would concur with the STR projections, as our group is seeing increases in occupancy and RevPar.  Increase in ADR has been more resistant, though.  One possible reason is that owners have made an effort to resist lowering their rates during the recession and therefore, the rebound in rates will be somewhat less dramatic.  Also, the owners have been more interested in building occupancy and, therefore, rate management will depend on their ability to build occupancy.   Not many owners want push rates until the recovery is more consistent. 

Although the STR predictions are good news, they are just predictions.  The recovery holds the key to the fundamentals of the hotel business and time will tell.  I am hopeful that they are right and we actually surpass their projections.  With that said, I hope everyone has a great Labor Day weekend.

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Historically low rates for SBA 504

Friday, August 13 2010 9:54 AM
Categorized In Industry News

Check this out!!  The SBA posted its August rates for the 504 program and the effective rate is lowest it has been in 20 years.  The 4.93% is the effective rate, which means the fees are included in the rate calculation.  For those unfamiliar with the 504 program, the 4.93% is a fixed rate for 20 years.  As most of us in the business know, this is an extremely low rate, especially hotel loans.  40 to 50% of the loan package will be the SBA portion…..the rest is funded by a tradional bank, with the borrower providing  the balance is equity.  These loans require some extra paper work and fees, but they are certainly worth considering, especially when one considers that a traditional non-SBA loan for a hotel deal will often require upto 40% down.

If you are looking to purchase a hotel and you satisfy the SBA requirements, you will not find a better 20 year fixed rate.  What do you think?

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