Pall over hotel industry financing shows signs of lifting - USA Today

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The doom-and-gloom attitude that's plagued the hotel industry for about three years is starting to lift.

During the annual Phoenix Lodging Conference last week, hotel developers, executives, designers and financiers huddled in discussions over possible deals — something not seen since the financial crisis.

"There was more positive activity at this year's event than last year's," says Nancy Johnson, an executive vice president at Carlson Hotels, which runs Radisson, Radisson Blu and Country Inns & Suites brands.

A prime reason why hotel development sank was financing dried up after Lehman Bros. crashed in September 2008, sending the globe into a financial crisis and keeping travelers at home.

"The pall of the recession has psychologically passed, if not financially passed," says Hotel Interactive's Glenn Haussman. "Everyone realizes it's time for things to happen."

But the financial pall may be lifting, too.

A senior executive with GE Capital's hotel financing arm told the audience that the giant is hiring sales people, and he invited them to call for loans.

"If you haven't heard from GE in a while, you're going to," said Scott Andrews, senior vice president of GE Capital's franchise finance. "We are fully back in the market."

Other signals of optimism:

•Budget hotel company Choice Hotels International just announced deals to build three locations of Cambria Suites — Choice's most upscale brand — in Washington, D.C., Houston and White Plains, N.Y.

Those are urban markets where it's easier to get new hotels financed, Choice Hotels CEO Steve Joyce says. "We are out providing significant seed capital to get deals over the finish line because we're sensing now is the right time," he says.

Choice also has started helping owners of its budget Sleep Inn hotels finance renovations.

•The Country Inns & Suites chain, specifically, signed twice as many hotel deals this year as last year, Johnson says. That exceeded expectations, although it's still not back to pre-recession levels. Most of the deals are conversions because financing has been lacking. But one deal will mean a new Country Inn in Port Orange, Fla., near Daytona.

•Major West Coast hotel developer R.D. Olson plans to open four new limited-service hotels in the next nine months. It's also working on a full-service hotel in San Diego, CEO Bob Olson says. With construction costs down as much as 30% from four years ago, he says, "It's an incredibly opportune time to build in certain markets."

The company invested in the four hotels that are slated to open, he says.

Some of the optimism stems from improving forecasts from hotel prognosticators. Revenue that hotels get per available room at the end of this year is expected to be 7.2% higher ($60.54) and rise an additional 7.3% in 2012, according to PKF Hospitality Research.

The average daily room rate this year in U.S. hotels is expected to reach $101 by year's end, a 3% gain. An additional 5% gain is expected next year, PKF says.

Still, any rebound in the hotel industry depends on the market.

For instance, at the Arizona Biltmore, the Waldorf Astoria-affiliated hotel where the conference was, average daily rates remain as much as $85 below pre-recession levels, says Andrew Stegen, the hotel's general manager.