Article Excerpt:
TWST: Give us an idea of what you cover in this space.Mr. Jain: Two of the largest players, Hilton (HLT) and Starwood (HOT); the two publicly traded timeshare companies, Sunterra (SNRR) and Bluegreen (BXG); and two of the more interesting stories in the space, Choice Hotels (CHH) and Gaylord Entertainment (GET). On a cursory level, we also follow what is happening with the industry at large.
TWST: What is going on with the industry at large at this point?
Mr. Jain: Things are good on an operating basis. The RevPAR trends have
been very strong. People point to the upbeat economic outlook and the
declining supply as far as hotels are concerned, and generally associate
those two factors with recent rate strength. Not every hotel has
participated equally in the rate growth, but the majority have.
Obviously, this is a very good thing for hotel companies because higher
rates have come with little additional costs and have a
disproportionately positive EBITDA impact. Rates have been on the uptick
since the end of 2003 and the growth was very strong in 2005. The
leading indicators suggest growth will be strong through 2006 and most
likely into 2007 as well. The main caveat is that continued growth
becomes increasingly difficult when times are good, because everything
is viewed relative to past performance. With two years of impressive
growth on the books, a continuation of high single-digit to low double-
digit gains is tougher going forward. That's the million-dollar question
' can hoteliers sustain the pace of growth in 2006 and 2007? For now, we
can only speculate. Nobody is of the mindset that there won't be growth
on an absolute basis, as all leading indicators point to higher group,
transient and convention rates in 2006. But, will the growth be as
compelling as it was in 2005 and 2004?
Tickers included in this excerpt: BXG, CD, CHH, GET, HLT, HLTGY, HMT, HOT, IHG, MAR, S, SNRR
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