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Pillsbury at HOTELS conference: seize this halcyon moment

In the shadow of a global pandemic that has hit the global hotel industry harder than any other Black Swan event, what won’t change [about the hotel industry] is investor appetite for returns, said Lee Pillsbury as he opened HOTELS Opportunities Conference on March 31 in Miami, the first in-person industry event since the start of the pandemic.

The founder and chairman of TLG Investment Partners, Fort Lauderdale, Florida, was pragmatic in his remarks about the state of the global economy, but at the same time bullish about the prospects for many segments of the hotel industry, especially in the United States. “Hotels are the most volatile of real estate asset types, offering investors the strongest returns of any form of real estate during cyclical upswings,” he said in front of some 250 attendees at the Mandarin Oriental Miami. “We are heading into one of those upswings right now.

“The recovery is going to be stronger and faster than anyone is projecting. In my opinion, we are going to have a ‘snap back,’ which will see revenues and profits rebound very quickly. Halcyon days in the hospitality industry are here.  Carpe Diem… seize the moment for it is upon you.”

For HOTELS readers who want to buy access to all of the speeches and panel discussions during HOTELS Opportunities Conference, click here.

Lee Pillsbury addresses the crowd at HOTELS Opportunities Conference
Lee Pillsbury addresses the crowd at HOTELS Opportunities Conference

Pillsbury said a spotty recovery is gathering steam with luxury hotels, resorts, leisure and drive-to destinations doing well and about to do even better. He added that select-service and some extended-stay products are doing well, while upper-upscale, full-service and large branded hotels face more uncertainty as group business lags and Gen X consumers dominate the market.

“Hotels are looking at new tools to better forecast occupancies as existing tools are heavily dependent on historical data, which is of very limited value because of the pandemic,” Pillsbury said. “At the same time, hotels are scurrying to look at labor planning and productivity tools… Owners and operators who are not focused on this change will be at a significant disadvantage.”

He also recommended focusing on F&B offerings, again suggesting Gen X is driving demand for creative concepts like farm-to-table. “To succeed, hotels will need to tell a compelling story about the experience travelers will have at their properties,” Pillsbury said. “Canned, standardized products and services are giving way to customized, tailored offerings that capitalize on the unique aspects of the hotel, its environment, its people and its location.”

On the marketing front, Pillsbury further referred to rapid transformation. He pointed to third-party cookies, the leading source of identity data, which are rapidly going away due to new privacy legislation. He believes it is leading to a shift in how customers operate their devices and browsers. “Permission is the new buzzword when it comes to data collection and sharing,” he added.

The macros

Reviewing the macro-economic picture in the U.S. and globally, Pillsbury said policy makers are intent on major additional stimulus and government spending accompanied by tax increases to at least partially pay for it, and that there is a path forward for them to get it done.

“Fiscal policy will continue to be very accommodating, making borrowing and investing very attractive, at least for the next couple of years,” he said. “Beyond that there is a not insignificant risk of inflation and dislocation.”

He compared this moment in U.S. history to the 1950s and ‘60s when first the interstate highway system was built and then when NASA sent a man to the moon. In reference to planned infrastructure spending that could reach US$6 trillion, Pillsbury said, “We’re about to undertake massive government spending on scale you haven’t seen in your lifetime.”

The question now becomes how the government pays for the program without unintended consequences as massive spending, low interest rates and easy money policy from the Federal Reserve could trigger inflation, cause a spike in interest rates and create a retreat across all asset classes.

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