Hotel Financing – Move Fast and Break Things

Hotel Financing – Move Fast and Break Things

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  Hotel Financing – Move Fast and Break Things

A host of banking issues is complicating matters for the Fed, but are there silver linings for commercial real estate?

  • Banking issues complicate matters for the Fed

  • Rate hike expectations downshifting

  • Inflation slowly cooling

  • Retail sales better than headlines suggest

  • CRE looking for silver linings

The phrase “move fast and break things” often gets associated with technology companies, and rightfully so. But in this instance, it seems like the Fed has broken something, or at least contributed to something breaking. By now, much ink has been spilled discussing recent bank failures, a lot of it by people with no banking expertise. We do not wish to contribute to that din. But the situation certainly warrants consideration in the larger economic context, especially with the Fed meeting this week.

What’s the Fed to do?

Just last week we wondered what the Fed has to show for its aggressive hiking. In short, not as much as it would like. But now it seems that it has gotten more than it bargained for. The Fed’s aggressive hiking aimed to bring down inflation, with price stability the first part of its dual mandate. But the Fed likely waited too long to begin raising rates and then raced to catch up. In the process, the Fed likely knew that it was going to cause some damage to the economy to cool inflation. Namely, the Fed would probably have to sacrifice millions of jobs on the altar of price stability, risking its second mandate, full employment.

The Fed’s third mandate, financial stability, forced itself into consideration within the last week or so. The Fed’s aggressive hiking strategy contributed to recent banking issues. That does not absolve individual banks from responsibility, but clearly the rapid increase in rates played a role. Will that cause the Fed to adjust its course this week? While impossible to say for certain, the situation certainly warrants caution. We often hear that the Fed raises rates until it breaks something. Yet, it seems improbable that the Fed would cut rates this week or even pause rate hikes. Recent disruptions might soften their stance relative to expectations of a few weeks ago. Clearly, the futures market believes that the Fed will turn less hawkish, if not dovish, in the face of increasing financial instability. A hike of 25 basis points (bps) seems the most likely at this point.

“…it seems improbable that the Fed would cut rates this week or even pause rate hikes.”

What does it mean for the economy? Overall, the situation certainly amounts to a net negative. Will other banks run into trouble? While the government’s lending program should prevent the economic situation from getting much worse that does not mean it will avoid more bank runs. That largely depends on whether people behave in a calm, rational manner. What we are watching closely is the extent to which this causes lending to slow and/or how debt spreads are impacted. Tighter lending standards would present a minor drag on economic growth.

Remember data?

Seemingly lost during an onslaught of banking news, economic data releases showed some important developments. First, on the inflation front, data continued to show gradual cooling. Both the monthly headline and core consumer price index (CPI) for February came in roughly as expected, with the core CPI coming in just above expectations. On a year-over-year basis both indexes continued to cool gradually. The headline CPI eased to 6% year-over-year, the slowest rate since September 2021. Meanwhile, the core CPI grew at 5.5% on a year-over-year basis. The was equivalent to January’s pace, even with the rate from December 2021.

U.S. Inflation

Meanwhile, the producer price index (PPI) for February came in below expectations. The headline PPI surprisingly declined slightly while the core index came in flat. The headline index declined predominantly because of a drop in food prices, notably eggs which had recently garnered headlines because of how expensive they had become. On a year-over-year basis, both headline and core slowed more than expected and continued their trend of slowly decelerating. Overall, the data shows that inflation is easing, but slowly and inconsistently.

Retail sales better than first blush

Retail sales for February looked negative at first blush. But the details appear more favorable. Overall retail sales declined during the month, as anticipated. But overall sales for both January and December got revised upward. The key control series (which excludes autos, gas, building materials and food services) increased by +0.5% month-to-month in February, versus the -0.3% consensus. January and December got revised upward. The control series feeds directly into the GDP calculation and bodes well for first quarter consumption and GDP growth. With the labor market remaining tight and consumers still sitting on excess savings, spending remains resilient even in the face of elevated inflation and high interest rates.

What it means for CRE

We want to take care not to overreact to a fluid, dynamic situation. But right now, the net effect of the last week seems mostly negative, even without additional bank runs or failures. A tightening of lending standards would slow economic growth, generally unhelpful to commercial real estate (CRE). But some potential positives exist. Interest rates have declined, which could help some interest-rate-sensitive segments like the for-sale housing market. Rate hikes could possibly slow, but increased uncertainty and concern regarding the banking system are not ideal ways to accomplish that. But if all of this were to bring about a faster end of the tightening cycle, the would be an unambiguous positive for CRE. As we have said many times, the Fed doesn’t need to stop raising rates. It just needs to let everyone know when that is coming. Maybe the Fed arrives at that point faster now, but this is a risky way to go.

“…if all of this were to bring about a faster end of the tightening cycle, the would be an unambiguous positive for CRE.”

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Crisis In Confidence: C-Level Execs Weigh in on Banking Issues During Hunter

Crisis In Confidence: C-Level Execs Weigh in on Banking Issues During Hunter

The recent U.S. banking crisis became a focal point of conversation at the Hunter Hotel Investment Conference as industry leaders tried to put the situation in context and share their overall outlook on the industry in the wake of such economic challenges.

During a panel discussion entitled “Wall Street Talks,” several prominent owners and publicly traded company CEOs weighed in with their thoughts following the much-publicized closures of Silicon Valley Bank and Signature Bank.

“The banks and the industry as a whole have struggled with the confidence issue. What happens with banks in that type of situation is people pull their money out and that exacerbates issues that may not have been a problem otherwise,” said Justin Knight, CEO & Director, Apple Hospitality REIT.

Jonathan Stanner, President/CEO, Summit Hotel Properties, maintained the banks “are in a much better position” financially speaking than when the last banking crisis occurred.

“The reality is no bank can withstand all the deposits coming out overnight. So it doesn’t matter how well-capitalized the bank is. I think everyone is trying to create the confidence,” he said.

Marcel Verbaas, Chairman and CEO, Xenia Hotels & Resorts, also noted it’s a tenuous situation.
“I think it just shows the tight rope the Federal [Reserve] has been walking in trying to balance this and get to a soft-landing, which may or may not be achievable,” he said.

Stanner further pointed out some of the differences from the last banking crisis.
“I think there’s still some scars from 2008/2009, the last time we went through a banking crisis. I think it’s important to draw this distinction around the fact that what we don’t have today is a creditworthiness, credit quality issue. Generally, within the banks this is much more driven by asset and liability duration mismatches,” he said.

Stanner did add there would likely be some changes from the Federal Reserve going forward as a result of the recent closings.

“I think anytime you have this type of banking failure there almost has to be some sort of regulatory response and that regulatory response is likely to be something that restricts capital,” he said.

Meanwhile, a number of brand leaders offered their outlook on the industry amid the aforementioned economic challenges during a session entitled “A View From The Top.”

Larry Cucilic, President/CEO, Best Western Hotels & Resorts, coined a new term in “cautiously bullish.” He noted there were five things worth watching: inflation, interest rates, banking stability, geopolitical actions and unemployment.

“I was going to use ‘cautious optimism,’ but we keep getting this bad news. But honestly we’re continuing to see investment interest and we’re still seeing growth, so it’s just this dichotomy. I think being in economy lodging we’ve got a little bit of a cushion there as we tend to perform well, but I also think we’ve got some tough waters ahead,” said Julie Arrowsmith, President and interim CEO, G6 Hospitality.

John Murray, President/CEO, Sonesta, was a bit more optimistic.
“I say ‘throw caution to the wind,’ I’m bullish. I think the industry is headed in the right direction. The pandemic showed everybody how important travel is to their life and I think people feel it’s one of their rights to get out and travel. If times get tough economically that will show to businesspeople and people attending conferences like this the importance of personal interaction and getting out to meet your customer. It will actually more beneficial to us in a lot of ways versus where we’ve been for the past few years. I’m looking forward to ’23, ’24 and ’25,” he said.

Geoff Ballotti, President/CEO, Wyndham Hotels & Resorts, generally agreed noting he was “cautiously optimistic” for ’23 and that the outlook was “much brighter for ’24 and ’25.”

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Georges Farhat has been appointed as Cluster General Manager of Avani Palm View Dubai Hotel & Suites and La Suite Dubai Hotel & Apartments. With almost 30 years of industry experience and strong operational, interpersonal, and commercial expertise, Farhat is ideally-equipped to continue driving record performance in his new role overseeing the management and operations of these two properties.

Farhat joined Minor Hotels to lead Avani Palm View Dubai Hotel & Suites through pre-opening in the midst of the global pandemic. Since then, he has successfully positioned it as a standout property in the city, delivering record numbers for two consecutive years. During this time, the hotel has earned multiple awards and accolades, including Green Growth 2022 Platinum, World Luxury Hotel Awards for Luxury City Serviced Apartments 2022, Leaders in Hospitality Awards 2023 for Best Hotel Hygiene practices, Hotelier Middle East Award for Hotel Team of the year 2022; achieved HACCP certification within six months of  opening; and contributed to a green initiative that reduced plastic waste by 250,000 bottles a year.

In 2023, the property is poised to open new facilities, including flexible meeting rooms, an exclusive Avani club and a Lebanese-inspired restaurant, La Sirene, reinforcing the brand promise of offering a stylish city destination and contemporary comfort in one of Dubai’s most sought-after areas.

In addition to his role at Avani Palm View Dubai Hotel & Suites, Farhat will also manage the full renovation and conversion of La Suite Dubai Hotel & Apartments, which will become an NH Collection flagged property by the end of the year. This property features 265 keys, including guest rooms, suites, and one-, two-, and three-bedroom apartments. The hotel offers a wide range of facilities, including an all-day dining outlet, lobby lounge, kids’ club, meeting spaces, a gym, tennis court and recreational spaces, as well as leasable retail areas.

“We’re excited to announce Georges Farhat’s new role as Cluster General Manager of Avani Palm View Dubai Hotel & Suites and La Suite Dubai Hotel & Apartments. His impressive knowledge of the hospitality industry and exceptional achievements at Avani Palm View have been significant in establishing Minor Hotels as a market leader in the region. We offer our warmest congratulations to Georges and are confident he will bring even more success to both properties.” says Amir Golbarg, Senior Vice President Operations, Middle East & Africa.

A dedicated hotelier who pours his heart into his craft, Farhat is a passionate all-rounder and seasoned leader with a genuine and open-minded approach to managing his team. He takes a personal interest in the recruitment, growth and development of his team members believing that people are at the heart of the success of any organisation.

To follow more of Farhat’s work, visit and

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Today Dubai Harbour, the city’s extraordinary seafront district, has welcomed its first cruise ship – the AIDAcosma, officially starting its 2022/23 cruise season. Setting sail from Germany on its maiden voyage, AIDAcosma is a first-of-its-kind liquid natural gas (LNG) powered ship with a capacity of over 5,500 passengers. To mark the arrival, DHCT Management along with public and private sector stakeholders will exchange plaques with the Ship Captain, a maritime tradition, to commemorate its maiden call. Throughout the season, more than 300,000 passengers are expected to arrive at the Dubai Harbour Cruise Terminal, marking extraordinary growth for the cruise industry.

Operated by AIDA Cruises, with 20 passenger decks and 2,600 staterooms, the AIDAcosma is one of the largest cruise ships within the AIDA fleet. The ship hosts a range of exciting experiences and features including a Fun Park, children’s pool, water slide, an outdoor sports deck, as well as 17 restaurants and 23 lounges, serving a wide variety of cuisines from around the world. As the homeport for AIDAcosma, Dubai Harbour will pave the way for green cruising by becoming the first to host a brand-new LNG powered cruise ship. LNG is one of the cleanest-burning, non-electric marine fuels in the industry and can reduce emissions by up to 30 per cent.

Alexander Ewig, Senior Vice President Marketing & Sales at AIDA Cruises commented: “We are excited to return to Dubai Harbour – this time round with the maiden call of our youngest fleet member AIDAcosma. Through AIDAcosma, we are continuing on our path to green cruising and are elated to be collaborating with Dubai Harbour to do so. We are sure our guests will have a great time, as they set sail on a tour of the Orient this winter 2022/2023, specifically at Dubai Harbour with its line-up of entertaining events and activities, alongside the magnificent Dubai skyline.”

As the owning-company and curator of Dubai Harbour, the diversified investment firm Shamal Holding is the driving force behind making Dubai Harbour an exceptional seafront district. The cruise terminals, which are part of the incredible Dubai Harbour development, showcase the spectacular and beautiful Dubai Harbour skyline to guests and offer a wide array of amenities and services for passengers and crew – from ample seating areas to washrooms, currency exchange outlets, ATMs, Emirates Airline Check-in facility, cafes, retail outlets, Duty-Free, dedicated parking, taxi stands and much more. All facilities are wheelchair accessible and complimentary WIFI is enabled for passengers and crew to stay connected.

Dubai Harbour is home to a wide range of upscale living, retail and hospitality experiences that combine to form the region’s most vibrant, and comprehensive maritime lifestyle offering. Located at the centre of modern Dubai, Dubai Harbour is within easy reach from the city’s key landmarks – including the Burj Al Arab, Ain Dubai, Bluewaters Island, and Palm Jumeirah, giving cruise passengers easy access to some of the world’s most iconic experiences.

Abdulla Binhabtoor, Chief Portfolio Management Officer, Shamal Holding, the owner and curator of Dubai Harbour said: Today is a very special day for us. This is not only the first time we have an LNG-powered cruise ship making its way to the city, but also a new cruise season that we look forward to with renewed excitement and anticipation. As we get ready to see full fleets get back in service, we believe there is great scope for extraordinary growth in the region. This includes more destinations, enhanced experiences and new types of cruise travellers. After the success of our last cruise season, we have continued to make investments across Dubai Harbour and Dubai Harbour Cruise Terminals and will also be extending our cruise season into the summer months of 2023 for the first time, with ships calling well into the month of June for overnight port stays for passenger turnaround. We look forward to continuing to play our part in welcoming more passengers and ships, as we aim to contribute to the region’s cruise tourism sector.

H.E. Issam Kazim, Chief Executive Officer of Dubai Corporation for Tourism and Commerce Marketing, commented: “As Dubai continues to make waves across global tourism, the arrival of the first cruise travellers at Dubai Harbour for the new season will further reinforce Dubai’s position as a leading cruise tourism hub in line with the vision of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai to make our city the world’s most sought-after and visited destination. The continuous efforts of Shamal Holding to enhance Dubai’s cruise tourism sector by developing world-class projects, infrastructure and facilities such as the Dubai Harbour is a testament to the tireless efforts of our valued stakeholders and partners to expand Dubai’s diverse destination proposition. As sustainability and decarbonisation are crucial elements of Dubai’s tourism strategy, we welcome the arrival of eco-friendly cruise ships like the Aida Cosma, further boosting our efforts to become a major sustainable tourism destination. We are also proud to be consistently included as a key port of call by the world’s largest and most popular ocean liners, highlighting Dubai’s global reputation as the ultimate cruise gateway to the region.”

The infrastructure at the Dubai Harbour Cruise Terminal comprises two terminal buildings that offer passengers and crew a safe, comfortable, and seamless experience. Designed to process over 3,250 passengers per hour, the highly efficient and modern terminals are located on a pier stretch of over 910 meters and can accommodate a complete passenger turnaround of two mega cruise ships simultaneously.

The purpose-built terminals ensure simplified and streamlined immigration, as well as customs screening processes, with the dedicated access routes for passengers and crew, facilitated by Seaport Passenger Boarding Bridges, allowing uninterrupted flow between the ship and the terminal.

AIDA Cruises is the market leader in the German-speaking cruise market and currently operates one of the most modern fleets in the world with 13 cruise ships, including the first-ever LNG propulsion cruise ship built. AIDA Cruises is one of the nine world-leading cruise lines forming part of Carnival Corporation & plc, one of the world’s largest leisure travel companies.

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Travel marketers still seeking higher TikTok profiles

The job? Visiting some of the world’s great cities while posting videos of your travels. The pay? $10,000 a month for three months, plus a $7,500 travel allowance.

“If this sounds like a dream job, that’s because it is,” reads the job posting on LinkedIn by Blueground, which offers furnished apartments to rent for a month or longer around the globe.

A gimmick? While the callout has won an outsized level of publicity for the 10-year-old company, the promotion provides another high-profile example of the travel sector’s efforts to embrace social commerce – both to build brand affinity and, maybe someday, boost bookings and sales.

It’s a move industry experts like Phocuswright researcher Robert Cole believe is overdue. In his recent report Influencers and Social Commerce in Travel, Cole warns of how a changing digital advertising landscape threatens to leave travel behind.

A greater focus on data privacy and increasing restrictions on third-party cookies are making digital advertising more cost prohibitive. Meanwhile, social media’s importance keeps growing, at least for some business sectors. By some projections, U.S. social commerce will more than double from $37 billion in 2021 to $80 billion in 2025.

“The fashion and beauty industries are already far ahead of travel in social commerce, making considerable headway and reaping the benefits,” Cole wrote in the report. “Travel marketers must take note, or risk losing further ground.”

The message is already out. Travel companies have been turning to video-sharing app TikTok to build brand awareness. As the most downloaded app two years in a row, TikTok promises global reach, especially with younger generations of travelers.

“We’re big believers in the platform,” said Matt Clarke, vice president of North America marketing for Kayak. “The numbers don’t lie. It seems like a smart thing to go where [an estimated 138 million U.S. users] are. At Kayak, our goal is always to entertain, to inform, to delight, and TikTok as a platform does that exceptionally well.”,, Airbnb and others have all made social media an integral part of their marketing efforts. Blueground saw the same potential while developing its plan to hire a summer content creator.

“We’ve recently launched our TikTok channel, and we wanted to give it a boost,” said chief marketing officer Yorgos Kleivokiotis. “What better way than reaching out to the experts: creators that have been using the platform for a long time and can produce interesting content that brings our apartments to life.”

TikTok’s pros and cons for travel

A bearded young man in a T-shirt and khaki shorts sits alone in an oversized airline seat. An angelic chorus provides the soundtrack as he looks right, then left, and smiles broadly while settling in. The caption over the seven-second video captures his bliss: “When the plane door closes and the seat next to you is still empty.”

The name of the company behind the video is tucked into a corner, as if an afterthought. Yet it was the first example that came to mind when Kayak’s Clarke was asked to name a favorite video his company had produced.

“I don’t think there are many brands that are doing particularly well by giving the seven reasons why our brand is the one for you,” he explained during a video conference call. “Instead, it’s the human, relatable moments or just trying to connect on a personal level – especially with something like travel, where there’s so many small, little moments of honesty that you can pick up on.”

Helping companies build those connections is the strength of TikTok and social media in general, at least for travel companies, he said. It’s not like fashion or retail, where a celebrity influencer can rave on a favorite eyeliner or pair of shoes.

“We are still honed in on just trying drive affinity on the platform,” he said. “We look at that as a step in the right direction for hopefully what will be a lifetime relationship with a number of different travelers.”

And therein lies the platform’s weakness for travel. Skeptics wonder if it will ever be more than a captivating sideshow, better at enticing engagement than boosting bottom lines. Even if social commerce in travel succeeds in doubling in the next few years, it will account for barely 5% of total e-commerce sales.

Yet boosting brand loyalty through social media may be enough for travel, at least for now. To Phocuswright’s Cole, the travel industry hasn’t done enough to build a meaningful bond with consumers.

“There’s no such thing as loyalty in travel,” Cole said. “Loyalty programs are rewards programs. They have nothing to do with loyalty. An airline or hotel reward program, all it is is converting [the traveler’s] employer’s business travel spend to personal leisure travel benefit. Loyalty doesn’t have much to do with it. It’s a transactional relationship.”


There’s no such thing as loyalty in travel. Loyalty programs are rewards programs. They have nothing to do with loyalty.

Robert Cole – Phocuswright

At their best, social media provides platforms to display an identity that motivates consumers to pay a premium to use a preferred brand. The fragmented market makes it even more important to engage consumers directly on social media, Cole said.

It also creates opportunities for smaller brands – or even individuals – to make an impact. In travel’s social media world, Cole doesn’t expect to see celebrities thriving as influencers but rather “trusted individuals who have specialized expertise.”

Like travel agents? 

“That’s kind of the way I look at it,” he said. “Really good travel agents and destination experts are incredibly valuable. There’s this whole potential ecosystem of people who could really develop inspiration and really activate a lot of people and connect those dots of here’s the experience they’re looking for and here’s how to get it.

“That’s the secret sauce. That’s loyalty.” 

Homegrown influencer?

Headquartered in New York City, Blueground boasts a portfolio of nearly 10,000 properties in 31 cities spanning the globe. They plan expand to more than 50 cities by 2025. 

The company’s followers on TikTok stood just shy of 2,800 this week. By comparison, has nearly 362,000 followers, Taylor Swift 17.4 million, so, yeah, the company has room to grow that number too.

“TikTok has become the most popular social media platform among younger users,” Blueground’s Kleivokiotis said. “It is a great platform for brands to gain higher visibility, and also its algorithm aids new brand discovery.”

But that visibility doesn’t happen without great content. The company’s job listing calls for a “TikTok extraordinaire” with the comedic timing and technical know-how to produce 15 to 20 videos a month of “scroll-stopping” quality. The successful candidate will be showcasing some of the company’s best properties while serving as the face of the brand.

A homegrown influencer, you might say.

“Influencers allow brands to relate with a target audience in a more authentic way, rather than talking at them with nothing but brand and product messaging that won’t resonate,” Kleivokiotis said.

With that in mind, he sees social media as part of an integrated approach that complements the company’s other marketing efforts. Blueground is already basking in the glow of a media spotlight over the job listing. Applications close April 6.

“Seeing the attention and excitement definitely validates the idea, and it has also helped attract some really creative applicants in just the first week since the job was posted,” Kleivokiotis said. “When the content of the ‘Resident TikTok Creator’ goes live, we expect to reach a fresh new audience of guests who would be interested in flexible accommodations like we offer at Blueground.”

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Madrid hotel industry reported higher performance in February

Madrid hotel industry reported higher performance in February

Aligned with historical trends for the market, Madrid’s hotel industry reported higher performance from the month prior, according to preliminary February 2023 data from STR.

  • Occupancy: 64.5%
  • Average daily rate (ADR): EUR127.89
  • Revenue per available room (RevPAR): EUR82.50

The market’s ADR and RevPAR levels surpassed the 2019 comparables, +26.0% and +10.2%, respectively, while occupancy remained lower than the pre-pandemic comparable (-12.5%). 

Daily data shows Wednesday, 22 February (81.7%) and Saturday, 25 February (85.4%) as the only two days of the month with occupancy above the 80% mark, helped by ARCO Madrid (held 22-25 February). The rest of the month saw daily occupancy above 50%, with only two days falling below that levels.

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