No one seems to know for sure where this industry is heading in terms of performance and realistic development opportunities. The good news at the moment of writing this in mid-May is that what was once dire pessimism has seemingly turned to muted optimism, with some expectation for recovery in the U.S. economy expected as early as the first quarter of 2009. However, and perhaps surprisingly so—even though experts initially predicted the credit crunch that started in the United States would not impact the juggernauts in Asia and the Middle East, the fact of the matter is that what happens in the U.S. still has a dramatic effect on the rest of the world. If GDP in the United States heads further south or into negative territory, there appears to be no doubt it will impact decisions made everywhere else in the world. We are part of a global economy with an emerging middle class that should have an unprecedented positive impact on the travel and tourism business, but the United States is still the engine that drives the train.

Based on conversations with numerous corporate executives and property-level general managers, universally, operating costs are up, especially as they relate to labor, food and energy. Layoffs have been avoided to date, as hotel companies want to hold onto their human capital, but replacement hires are being put on hold in some cases.

Development costs are jumping even higher as a result of a shortage of raw materials and manpower. The good news here is that supply will not come online as fast as expected, especially at the upper end of the market, where cost overruns can go as far as to cancel development plans altogether. That being said, Kimpton Hotels just raised US$246 million in private equity and plans to acquire some US$800 million in hotel and resort assets over the next three years. At the end of the day, the right projects in the right locations still can get done.

Looking ahead to the second half of 2008, executives in Europe and North America especially are expecting continued softness in corporate travel. With America on sale due to the weak dollar, inbound leisure travel should remain solid and help offset smaller crowds at conferences and meetings. While there may be some occupancy softness, to date rate increases have been the order of the day and have saved the first half of the year. Driving rate going forward will certainly

Jeff Weinstein Editor in Chief

Creativity is now a must for operators as they look for ways to control cost increases through more thoughtful purchasing practices, tore-engineer menus, and to promote new business from the emerging economies of Brazil, Russia, India and China.

It is time for everyone to work a little harder and prove their worth. At the same time, let’s hope the U.S. economy doesn’t falter even further.