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About Jerry
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Jerry Merkin has spent more than 40 years in business-to-business publishing with such titles as FLOORING, HOTEL & MOTEL MANAGEMENT and HOTEL BUSINESS. Now retired from publishing, Jerry devotes much of his time to consulting for GLM, LLC, specifically on the International Hotel/Motel and Restaurant Show.
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Jerry's Blog
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Mar
24
Written by:
Jerry Merkin
3/24/2011
As I scan the hotel and travel trade publications, one gets the impression that the recession has been laid to rest and we are on the road to full recovery. It is easy to get caught up in this euphoria, except when you dig deeper and discover that the recovery still remains centered in several of the leading regional markets in the United States, with New York City presenting the strongest case that better days will find their way to other key markets.
The fact that New York is leading the way is no surprise. Because of its reputation as a mecca for tourists and business travelers, the Big Apple had only a brief spin with the recession; London was the other strong contender and never suffered the effects of the full downturn. New York has not only helped increase occupancy and even RevPar throughout the Northeastern US, but the City has been able to keep new construction going, bucking its bleak story elsewhere.
Last year, I said that the industry would be able to declare recovery only after it cleaned up most of the foreclosures that grew out of the downturn. Some of that clean-up has occurred with the better properties being bought out by the Real Estate Investment Trusts, who are playing with public funds, and are therefore able to pay higher prices for assets that other equity holders were not willing to pay. The time for making a real “killing” has past, and the lenders and owners who were hanging on by threads, have stiffened their backs knowing that the worst is behind us.
As we rolled into the new year, the signs of positive momentum was showing up elsewhere in our cities: South Florida, San Francisco, Dallas, Hawaii and elsewhere mostly via better occupancy numbers. RevPar for the most part still remains weak around most of the country.
To ensure a broad industry recovery, we need to see much improvement in employment. The numbers have gotten better, but even better profits have not pushed major employers into acting faster to add more workers. The confidence level for many employers is not there yet; it is going to take further action by government to stimulate the economy and accelerate the turn around. And the year will continue to see major banks delay financing of major new construction projects while they continue to sit on “toxic” assets. But the renovation end of the business will be strong as the new buyers take concrete measures to dress up their new purchases to be competitive as the market improves.
And of course the international scene further clouds the picture for revival. Past recessions in this business have always been easier for the industry to deal with. When corporate profits returned domestically, you could see the light at the end of the tunnel.
However, today, the world view has held us hostage in recovery efforts. Last year and today, the debt crisis in Europe looms large. And this year we have the Mid East conflicts and its impact on oil and gasoline prices threatening to impact the summer vacation season. To make matters worse, unfortunately, we have a major earthquake in Japan that could end up changing tourism to and from Asia. These are just some of the uncertainties that we will have to contend with this year. And it’s only March!
While I may be sounding an alarm bell, I really do not want to sound like a “bear”. I do believe that we are going to do better as an industry this year. That said, I do want to stress that as we get better numbers, it is not going to be business as usual. The landscape for this industry continues to change dramatically. The biggest change is occurring among the hotel owner groups and their strategic moves during the downturn to own the recovery as it happens. And if you are not wired in, you will miss the opportunity, because it is just not the same business as we move forward. Take a long hard look at some of the majors in this business - the long timers and the new well financed entries, and you will better understand where this is all headed.
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