more color on what 2010 may look like in the terms of the
pace of GDP growth, then I think you could see a recovery in
the sector based on a 2010-11 outlook. Lodging cycles tend to
be fairly long, so when they turn, they turn for a few years.”
Against a backdrop of plunging stock prices and paltry or nonexistent dividend payouts, analysts, not surprisingly, advise investors not to buy lodging REIT stocks just yet. “We basically have
‘Hold’ ratings on most of our stocks. We are pretty cautious on
the group,” Rose says.
“We think the time to buy across
the board will be when RevPAR
gets back to zero.”
DAVID LOEB
ROBERT W. BAIRD & CO. INC.
Loeb forecasts that stock prices will continue to be highly volatile in the coming months. “We are not recommending that
investors jump into this sector yet,” he says. “We think the time
to buy across the board will be when RevPAR gets back to zero,
not necessarily when it stops declining faster. In other words,
when we go from minus 11 to minus five, that is still probably
too early. In the past two cycles, plus or minus three months,
the bottom in the stocks has been when RevPAR climbs back
to zero, which we think will occur probably late 2009. We may
start recommending a little bit earlier than that.
“Some of the companies have balance sheets that are clearly
positioned to survive even if things get worse,” Loeb continues.
“Those would probably be the names we’d look at first, but we
don’t see any reason to rush into them yet. We think when the
turn comes, it will be long and the up cycle will be very rewarding, largely because once the current supply pipeline is built out,
there is unlikely to be financing available for a long time for new
development.”
How stocks in other sectors of commercial real estate perform is another indication of whether it is time to jump into
the lodging arena, Rose says. “For REITs specifically, we need
to look at other classes of real estate to find what sort of cap
rates they are going to trade at,” he says. “We need price discovery, more transactions, and the CMBS market to get more
clarity. To some degree, lodging REITs are going to trade off
of what happens on those other core classes of real estate.
They are going to trade at a premium cap rate, because they
are more risky relative to those assets. I think we need to see
that, plus a better path to growth for the broader economy. We
need to get a better sense of what’s going on with the underlying value of the real estate owned by hotel companies and how
quickly they can improve the operating trends, which is largely
going to be a function of the macro economy. Most folks are
going to be focused on leverage and how close some of these
companies come to skirting their debt covenants and in the
background, the operational environment.” ◆
Reprint orders: www.remreprints.com
Enter code: F010910
HOTELS
SECTOR COVERAGE
Capital Markets
Green Outlook
Hotels
Industrial
Legal
Multifamily
Office
Retail
Technology
The news gathering capabilities and editorial talent of
GlobeSt.com
and the entire incisivemedia real estate product network have been
combined to deliver a more comprehensive hospitality market story.
Accessible via the Sector Coverage drop down menu on the
GlobeSt.com
home page, this new Hotels section was designed to provide readers with
one destination for streamlined information and enhanced marketing
opportunities.
FOR EDITORIAL INFORMATION
Contact John Salustri
212.457.9740
john.salustri@incisivemedia.com
FOR ADVERTISING INFORMATION
Contact Donald O’Keefe
212.457.9695
donald.okeefe@incisivemedia.com
www.GlobeSt.com/hotels/01
