2010 is going to be another rough year for hotel owners, managers and brands. While there is little in the way of new construction deals materializing, hotel companies continue to nurse along existing stalled developments, public/private deals and the few brand conversions that come their way – all are welcomed with open arms.  The brands are taking this time to introduce more new brands and catching up with those “lifestyle” brands that led the way with design innovation, fresh ideas and product offering that appeals to the newer generation.  They face uncertainty regarding exactly when that new traveler they are targeting and designing to will have the opportunity to experience and become brand loyal to “their product.” They also wonder when the resulting success of those new brands via new development will come their way and start the development ball rolling again.  The answers to both questions rely heavily on the capital markets, a rebound in demand and how rapidly both begin to show their new colors.

Brands are also taking this time try to clean up and reinvent old brands that have lost their swagger or look for new brands to buy and expand their reach.  Some brands are taking this opportunity to expand their presence by fishing at the trough of hotels that have dropped or been forced to drop their more upscale brand affiliations. In many cases these hotels suffered from bad timing of capital expenditures and lacked cash to update the hotel to meet brand standards.  A few of the expanding brands are cashing in by providing money, great terms and most importantly, “time” to get everything done to meet their new brand standards.

With the incredible tangle of institutions and servicers burdened with bad assets while at the same time new and existing funds flush with capital are searching for bargain-priced deals that may or may not materialize, it helps to have someone in your corner to sort it all out.  Hotels in markets that have good bones, are in excellent locations in quality markets will not be trading at pennies on the dollar.  Yes there will be bargains, but those with capital on the sidelines hungry for deals do not want to stretch on deals, make bets and lose long term on assets they purchase that are not fully vetted by those who have been here before – return sensitivities demand excellent execution.  Qualified, experienced consultants will be kept busy over the coming 12 months, inundated with projects that I suggest will include:

• Working with receivers, attorneys, and lenders to figure out what to do with their distressed assets. Particularly, stopping the bleeding, recovering value and working proactively with the in-place or newly hired management company.
• Assisting funds to quickly discover the true value, vet the assets and the market and thus help insure the return associated with an asset they are considering buying;
• ·Providing due diligence expertise and offering hands-on assistance in making critical decisions and sorting the wheat from the chaff.
• Strategizing with groups on what assets to save, which to invest in today and which to send back to the lenders or discount and trade.  A consultant’s past experience in a down cycle is essential in this process.
• Assisting in repositioning strategies and brand negotiation of PIPs. In certain cases tying up the brand before others obtain it or working a deal to your best advantage.
• Continuing to review, recommend and execute sales, marketing, revenue management and top line plans – advice that is critical to recapturing value, average rate and performance in a competitive environment.
• Asset managing hotels on behalf of investors keeping a watchful eye that the investors returns are maximized and capital investment managed properly/protected.

Value and greater certainty will be created in hiring smart consultants who can help you make good decisions. Veterans of previous downturns will help you understand the risks, upside, downside, and pitfalls in each market.  They will help you avoid critical mistakes that could kill fund performance with a few bad or ill thought through asset acquisitions that in the coming competitive environment may damage returns – they will end up proving their worth in saving some of you in support of the old adage, “That was the best deal we never did!”.