One of the most heavily attended sessions at ULI’s Fall Meeting in Los Angeles this October concerned—surprisingly enough—hotels. With hotel performance wavering nationwide and new Federal Deposit Insurance Corporation regulations setting strict capital requirements for lenders, the problem of locating funding for proposed hotel projects where value cannot be substantiated has made it hard for hotel owners to take on debt. This has affected not only hotel loans, but also transactions and values.
Increasing occupancy or rising hotel rates, or both, do not necessarily translate into higher property values. In the current marketplace, with speculative investors mostly gone and a crisis in consumer confidence, it is imperative for developers to understand how assets are valued. Even though business is improving—brokered hotel deals and revenue per available room (RevPAR) picked up in 2011 for the first time since the recession began—developers need to preserve the core values of their products in order to retain and build consumer confidence.
In this issue, members of ULI’s Recreational Development Council discuss hospitality trends, changing buyer mind-sets, the fate of second-home products, and game plans for the challenges that lie ahead (page 54). Predictions are for strong growth in RevPAR and values beginning in 2013 and continuing into 2015.
Markets that did not get overbuilt and locations that make new competition difficult will fare best. Bright spots ripe for resort development outside the United States include Thailand, Vietnam, Colombia, Brazil, Peru, and Chile. Chains such as Hyatt and Marriott are focusing more on operations and trending away from resort ownership. The fractional ownership industry, which went from $10.6 billion three years ago to $6 billion today, is seeing buyers have difficulty obtaining financing; but the downturn has created the opportunity for inventory absorption.
In terms of trends, consumers are tending to turn to blogs and social media for information on resorts and vacation homes, bypassing developers and direct marketing efforts. Also, industry observers are seeing a huge opportunity in catering to businesswomen, who, single or divorced, CEOs or executives, have their own impressive income streams. A need for change in master-planned communities has produced some creative strategies, such as reuse of historic assets to provide mixed-use product combined with various housing options. In the financial arena, signs of growth can be seen in commercial mortgage–backed securities and conduit lending.
This issue also takes a look at real estate education, where a wide variety of disciplines, including design, are becoming part of creative programs both in the United States and abroad as students tackle planning and programming around the world.
Also, with this issue, Urban Land begins publishing a special ULI’s 75th Anniversary section, as we look back to the Institute’s most memorable moments.