Deeper Analysis Required - Stability Likely

Implications: On the surface, statements seem valid and perhaps are for individual properties and new construction plans. The structured financings inside management contracts and leases provide relatively stable cash flow for the real property owners and lenders that are the underlying financiers of the hotel industry. Hotel management companies that are the "Names" on the hotel will suffer reduced net income, but flat or slightly shrinking GDP should not cause major hotel real estate defaults. There are even one or two new hotel "Names" entering the U.S. market.

Analysis: Properly structured real estate finance components married to hotel management and lease contracts are designed to address top line revenue declines of 10% or even 20%. Therefore, a projected drop in occupancy or a leveling of room rate increases should not disrupt the market, but will likely remove the shine from projected performance.

New builds will of course slow, and conversions will have a reduced supply of construction financing sources, but this is a far cry from a crisis.

Active lenders will have the pick of prime construction transactions from which to select and rates will increase to make these loans more profitable and secure.

Real estate equity investors will be able to cut attractive deals in line with a reduction of competing sources of funds.

The prudent real estate investors and lenders should find hotel transactions inside structured leases and management contracts attractive now, if they know where to look.

This is more of an opportunistic market than most think.