HOTELS

Roger Hill

Planning For The Un-Planable: Hotel Development In Rough Economic Times
October 9, 2008

Economists continue to deliver discouraging news, challenging everyone in our industry, but especially hotel developers. As such, I thought that this week, hearing from my associate, Jerry Zeitner would be helpful.  Jerry has been with Gettys since 1995 and in the past few years has spearheaded our company’s growing efforts in development. He has been advising me regarding strategy in these turbulent economic times so I thought that his words of wisdom might be helpful to our readers here. Here is Jerry's post:

Reading an article on stress in the workplace not so long ago, I learned that bus drivers have one of the highest on-the-job stress levels. “How could that be!?!” I asked myself. Bus drivers surely have important jobs, but wouldn’t a brain surgeon or a hostage negotiator or an air-traffic controller have a more stressful job!?! 

The article went on to explain that any job where the ability to succeed relies on variables over which one has zero control results in extreme stress. For the bus driver, it is his or her job to arrive at each stop at a scheduled time, yet he or she has no control over levels of traffic – which is the sole dictator as to whether success can be achieved. 

As I read the same newspapers that I am sure that you do, the headlines for the past few weeks have made me feel like that bus driver. As one of Gettys’ vice presidents in charge of overseeing new development projects, it is easy to feel as if there is no variable over which we have control. Banks – a developer’s lifeline – are seizing up on loans. Commodity prices continue to rise even as the economy falters. And in addition to this, construction prices are strong, freight costs are holding and pricing values on FF&E remain sturdy. 

You have heard it every night on the news, our current economy is unlike anything that we have ever seen before. Many Americans – even those in the financial sector - are barely grasping the issues that have gotten us to this point. For those of us who are still responsible for earning a living while growing our businesses (that’s all of us, right!?!), it is really difficult to take the wait and see approach when we are dependant on the economy’s fluidity.

So, I thought that it would be helpful during these times to highlight some good news. Good news, you ask!?!  There may not be a lot of it, but we do have a head-start on a handful of the variables that will dictate our success in the near future.

• Good News Variable #1: Time is on our side.
There are two major events set to take place within the next one to two months that will make planning and guessing the trajectory of our future a little bit easier. First, on November 4, 2008, the United States will elect its new President, dictating some of the economic ideology that naturally comes with a new administration and allowing us to better plan for the next four years of our endeavors. Second, as the bailout bill of last week has now passed, the treasury is saying that it will take at least 30 days for the money to begin filtering into the system, easing the seize on banks and freeing up capital. Even just a little will help us right now.

• Good News Variable #2: There has never been a better time to plan.
How long does it take to get a development deal together? Twenty-four months? Thirty-six? Everyone agrees that down markets are when great riches are made. So while I’ve been hearing a lot of people say that right now they are “doing nothing,” waiting for the markets to begin to steady, I am going to recommend that we all begin costing out our next projects. Prioritize now and execute later. It has been said that luck is the meeting of opportunity and preparation. Well, I think we all know that opportunity may not be knocking right now, but preparation can be well underway.

• Good News Variable #3: There is a certain comfort in the certainty of rock bottom – and it should come soon.  It means that things can’t get any worse. While some banks may still close, all in all, the country is finally operating with a very clear view of our economic status. Instead of having our lives dictated by consumer confidence indexes and a constantly fluxing Dow Jones, we will be finally judging our situation based on facts, not emotions, which will put us in a better place than we were in six months ago.

With more certainty, combined with oil’s overall drop over the past six months, freight, construction and services are likely to stabilize shortly, making the logistics of putting projects together more attractive to banks and ultimately getting the pistons greased up and moving once again.

For all of us, success is all about finding variables that are controllable - even when we feel out of control. Unlike the bus driver, we really do have more opportunity for success than we can easily see in this economy. So, take some time to seek out the positives in this marketplace and make it work. Plan for the future and seek out opportunity in places that you haven’t necessarily considered before. 

What are you doing to control the destiny of your developments in this tough market?

Posted by Roger Hill on October 9, 2008 | Comments (6)