The former Sheraton Orlando featured in today’s top story will become the Sonesta Hotel Orlando Downtown on Jan. 17. The 341-room property recently bought by Glenmont Capital Management and Resolution Services will be the first in the U.S. to operate under the Sonesta flag. Sonesta is an international collection of upscale hotels, resorts and cruise ships, with properties in St. Martin, Brazil, Chile, Colombia, Peru and Egypt. Sonesta, based in Boston, launched its U.S. franchise program earlier this year.

We’ve all been waiting for the first big transaction to get things going. Maybe it happened today with news that Thayer Lodging Group and China’s Jin Jiang Hotels will buy Interstate Hotels & Resorts. We’ve seen a handful of single distressed properties being sold the past month (Wyndham Orange County, Sheraton Orlando, W Union Square, etc.), but today’s was the first significant hotel company being sold (for $307 million in an all-cash purchase).
This comes on the heels of Jones Lang LaSalle Hotels transaction forecast earlier this week that predicted a 20 percent to 40 percent increase in global transaction volume for 2010 ($11-$13 billion, up from $9 billion this year). The Interstate deal won’t close until the first quarter of 2010, so chalk up that $307 million toward next year.
Before the news broke today, I had just finished a story on distressed hotel assets that you’ll soon be seeing in our new distressed real estate ereport we’re producing with our Penton Real Estate Group partners National Real Estate Investor and Retail Traffic.
Let’s hope these are all signs of the transaction market flowing again, meaning that maybe we are really at bottom and on the road to recovery.

The revenue manager may be the most dangerous person in your hotel or company. That, in so many words, is what Mike Leven told attendees at last week’s Vantage Hospitality convention in Las Vegas, and I agree with him. He believes the wanton and irresponsible rate cutting that’s overtaken the hotel business in response to the 15-month-and-counting downturn is a direct result of the black-and-white nature of modern revenue management.
At one time, general managers and/or owners made the daily decisions regarding rate. When business got soft, they would make judicious adjustments based on experience, education, market knowledge and good-old-fashioned gut instinct. They knew they sometimes had to lower rates to meet market conditions, but they also knew rates that fell too far or too fast hurt business once recovery began.
Today, in many cases rate setting is a function of computer calculations that merely measure and react to supply and demand: Demand goes down, and rates go down, irrespective of possible long-term implications. And let’s face it, many property-level revenue managers are youngsters who’ve never had to manage their way out of a tight economy. They’re more likely to be computer operators than they are experienced business people.
Mike believes, and I’m not as convinced of this argument, that revenue management is equally bad for the industry in good times. Again, because current principles of revenue management hinge on supply and demand, hotels may be guilty of pushing rates too far during periods of high demand. Mike argues it’s better to set rates at levels equal to the true worth of the experience to the guest, not just what the traffic will bear. Do this, he reasons, and guests will be loyal to you through good times and bad. But again, these kinds of decisions need to be made by experienced hoteliers, not clerks or button pushers.
You may quibble with my credentials to make these arguments, but no one can taint Mike’s standing. Among other jobs in his nearly 50-year career, he’s been head of Days Inn, Holiday Inns, US Franchise Systems, HSMAI and helped co-found AAHOA. His opinion carries weight.

What a great time it is to have access to credit or, better yet, a pile of cash. Distressed hotel inventory is stacking up across the country, and in the past few weeks we’ve seen a number of deals consummated at bargain prices. Yesterday, PKF Capital announced it assisted in the foreclosure sale of a 238-room Wyndham in a prime Orange County, CA location. Buyer Rosanna, Inc. paid $21 million for the hotel, a parking garage and three acres of land. At $88,000 a key, that’s a steal, especially when you consider the seller originally bought the property three years ago for twice the amount.
Those equity funds, private investors and a few public entities that have been stockpiling cash during the industry downturn are now reaping the rewards of their brilliance. In the coming months, I guarantee we’ll see more deals like this Wyndham transaction, and perhaps at discounts even better than the 50 percent we saw in this deal. The new owners say they’ll spend more money to fix-up the property and probably re-brand it. The result, which will be repeated as other deals of this kind get done, will be a better hotel that eventually will be able to command premium rates and make a handsome profit for the owners, both on the operations and ultimately when they exit the deal.

Today, the massive CityCenter project on the Las Vegas Strip begins to open. When completely opened, the $8.5-billion complex will add nearly 7,000 additional lodging units to a destination that’s been battered as bad or worse than any other from the ongoing economic downturn. But that’s not all: Last week, the Golden Nugget in downtown Las Vegas opened a new 500-room tower, and later this month the Hard Rock Hotel will unveil a new all-suite tower with 359 units. Other projects in the market are in various stages of development, and while some (the Fontainebleau) may never open, others will.
The knee-jerk reaction to this sudden increase in the Vegas room inventory begs the question: Who the hell is going to fill all these new hotels and additions? Logic would dictate an even sharper slump for the city, with occupancies and rates plunging even lower than they’ve been for the past year.
But examining the city’s history of the past 30 years might lead you to a different conclusion. Every time the city saw a slew of new room openings, the naysayers predicted the death of the Las Vegas resort industry. In fact, just the opposite occurred. Every new spectacular hotel or attraction served to bring even more visitors to the city, enabling the destination to soar to greater heights than any one thought possible. Who knows, Las Vegas may have another trick up its sleeve and may be able to make history repeat itself.
Again, logic may finally catch up with the city at some point, but not because of a surplus of new hotels and lodging units. Rather, Las Vegas’ Achilles heel may ultimately be the limitations of its infrastructure. The airport has nearly reached its capacity and is hemmed in by the city, negating the probability of expansion. And don’t get me started about the traffic. There’s nothing worse than navigating the Strip on a Friday or Saturday night, or just about any night. And what about water? It is in a desert, after all, and the Colorado River can only provide so much liquid to fill the pools and fountains and Scotch and waters needed by the city and its visitors.