Tumultuous times

Tumultuous times

In addition to writing and editing HOTELS Magazine for 18 years, I have been doing the same with HOTELS’ Investment Outlook for 15 years. The latest issue of the latter printed late last week and is due to mail any day now containing a first in its history: a story that has changed so much that the printed news analysis will read as embarrassingly obsolete. Any guesses?

Of course, it is the Innkeepers USA Trust deal. I interviewed Jeff Fisher, Chatman Lodging Trust’s CEO, about a month ago, after the deal appeared to be done. In fact, Chatman kept me waiting on the interview, ostensibly until they crossed all the t’s and dotted the i’s on the deal. All that can be standard operating procedure, especially for a listed company.

Turns out, the weak economy became even weaker than anyone expected, as just yesterday Cerberus Capital Management LP and Chatham terminated their US$1.1 billion agreement to buy 64 hotels from Innkeepers USA Trust, citing an adverse change in business conditions as the reason for backing out of the June transaction. It signals ongoing uncertainty about the supposed economic recovery and what must be a jittery private equity market. Chatham’s separate purchase of five Innkeepers hotels, which closed on July 14, 2011, is not affected by the decision.

Innkeepers responded to the announced termination by saying Cerberus and Chatman acted “inappropriately” and that it plans to evaluate all its legal options. So, story to be continued.

In my 18 years covering the hotel business, I have never witnessed such uncertainty and wild fluctuations in expectations. If I asked almost anyone a month ago about the fortunes of the hotel business looking ahead, at least through 2012, they would have been bullish. Now, it once again appears to be anyone’s guess as to how the industry and its real estate will perform. While I am relatively sure no one expects a serious collapse of business or much further deterioration in asset values, there is obvious uncertainty in the marketplace.

Lenders and investors are quickly stepping back to reconsider their positions in this see-sawing economy. When they will have a better feel and more certainty about their convictions, I am not sure. I only hope they will stick to their guns, as I don’t want to be put in this situation again.

For now, I fall on the sword — hopefully for a one-of-a-kind collector’s item of an edition.