The news of the recession has permeated hotel and lodging news for months. National numbers are given – but what is happening regionally? Are some regions doing better than others? What can we expect? Industry heavyweights report on their corners of the country…

How is business in your region performing now compared to 2008 and 2009?
 
My regions are the Southwest states encompassing Utah, Colorado, New Mexico and Arizona. The overall markets are down anywhere from 5 per cent to 40 per cent top line revenue. These states -- all being tourism driven -- have been hit hard, Arizona being the worst with Phoenix as the 6th largest city in the union leading the nation in the housing market collapse. Discretionary income is not there and topping it with business travel decline is a double whammy to the industry. However, just like most markets there are small pockets that are doing well and are actually doing better than the last two years. These are far and few to find.
 
Has the industry hit the bottom of the downturn yet?
 
I do not think so. Although I would like to remain optimistic, we have to look at the reality of the business and the environment we are experiencing. The housing market -- which has led this economic collapse -- has many issues as the government stimulus plan has not helped and more problems are yet to surface, which continues to put pressure on jobs and income. Add the CMBS meltdown that is projected to come in the near future along with the commercial distress also projected to hit us this coming year we are far from the bottom.
 
When do you see things transitioning out?
 
Every now and then I see hints of some recovery, but as days and weeks pass the bad news does not seem to end and more and more negative pressure seems to be hitting our industry from all angles, more so from government interference than anything else. The feeling I have from assessing my region is that until the job creation grows and unemployment rate goes below 8 per cent we will continue to struggle.
 
What is the status of defaults, receiverships and foreclosures in your area?
 
The default rates per industry research have the Southwest with Arizona leading as one of the worst-hit markets after Michigan, Florida and Nevada. A lot of hotels have fallen in receiverships and are being managed by them. However, the resale of these assets are slow and few. This is due to the lack of liquidity in the marketplace and also lenders not willing to write down their balance sheets. With pressure increasing day by day I feel these assets at some point are going to have transition and go through a cleansing. What the losses are going to the lender and taxpayers is something I don’t even want to think about! To be serious, it’s not something to laugh about. Many business owners have lost not just generational wealth with this downturn but everything they own.
 
How has the economy affected hotel sales in your area?
 
There are 20 hotels I can count for each of my fingers and have not touched the tip of the iceberg that are in Phoenix and are in some phases or default and foreclosed on. Many are not selling as the lender perception of value and the reality of the market values are too far apart and the hotels are not transacting. Secondly, even if there are some that sell, the existing lender has to participate to make the transaction happen as new financing is just not there. Lodging being one of the hardest hit businesses has been red flagged by both the FDIC and lenders across the country and are just not lending towards hotel loans of any kind.
 
How has the downturn affected franchisor/franchisee relationships?
 
There is tremendous tension between franchisors and franchisees. There is just enough revenue and funds to go around satisfying either party. Some franchisors have done a good job in managing the relationships by helping franchisees reduce costs; bring efficiencies in the business model and in many cases working with franchisees during defaults of many kinds. And, of course, there are some franchisors doing the absolute opposite and are worried about their stock values and expectations form their stockholders. In this case the relationships are very combative, tense and in many cases becoming litigious. No one wins in this scenario.
 
How has it affected hotelier/vendor relationships?
 
I think the vendor relationships with the hotelier are ever stronger. Both have come together realizing they both need each other. However, liquidity issues have brought stress in the relationship. Vendors’ sales are down as renovations volume is not there. Many cases due to the lack of business vendors have to close doors and if any advance deposits are paid, hoteliers need to be ready for that to happen and in order to protect themselves do a lot of research on a vendor before giving advance money out. Similarly, vendors also have to do their homework to make sure that the hotelier is not going defunct. Many vendors have changed their models of doing business and it has affected the hoteliers in some cases negatively and in some positively. One thing for sure we need each other.
 
Additional comments:
 
I believe the quickest way for us to come out of this downturn is to let the cleansing of toxic assets happen. We need to ask our government to stay out of the free market system. The initial pain felt may seem bad but if we do not let this happen then all we are doing is delaying the inevitable. While we delay, it’s costing the taxpayers dearly as our debt levels are highest in history: now over $100,000 for each and every individual in the USA.
 
The USA is the greatest country in the world and have always provided for opportunities even during a downturn and we seem to always come out stronger. I believe that once we come through this downturn we will be much stronger than before. We are a resilient people and we shall overcome.