Loews Hotels Chairman Jonathan Tisch tells FOX Business Network’s (FBN) Maria Bartiromo on Opening Bell with Maria Bartiromo about the hotel and luxury property market. Tisch says “business is pretty good” and that “we’re starting to see the travel group come back” which “makes a big difference for the business.” In terms of increasing property acquisition, Tisch said, “we are at the top of a cycle. And the sellers are smart. They are holding back a little bit” and “things are starting to get very expensive.”
Excerpts from the interview are below:
On the travel industry:
“Business is pretty good, Maria. We're starting to see the group travel come back. That's been a new development. It was down for a while since '08. Companies were worried about their executives attending meetings, going to conventions; that's coming back. Transient travel is strong; obviously a very difficult winter in terms of the weather. That put some pressure, downward pressure on our business when you had 75,000 flights canceled through the winter. That was a big issue, especially for here in New York. Room supply is creeping up in some markets, in New York City we're going to hit 101,000 rooms this year. That's in addition to 15,000 rooms in the last three years with another 6,000 or 7,000 under construction. So I think we have to watch that and be aware that a lot of rooms are starting to come into markets. But in general, business is strong.”
On business travel increasing:
“Well, I think when CEOs look at their bottom lines, whether it's big businesses, mom-and-pops, they're feeling better about the economy in general. So they're letting their executives, their salespeople, their marketing people go on the road and that makes a big difference for the business of travel.”
On the opening of Cabana Bay Beach Resort in Orlando, Florida:
“As you noted, it's the largest hotel to be built in the world outside of China. Phase one opened, 600 rooms about a month ago; the rest will open when Harry Potter II opens mid-June. It is a big structure so that then will give us 4,200 rooms at Universal Studios Orlando and business is very strong there.”
On growth:
“So we're excited. And then we reopened our Loews Regency hotel, $100 million renovation. That building was closed right here in New York City…And we're thrilled with the response. So we're pleased. We have been buying hotels. We've been building hotels. We have another hotel under construction in Chicago, 400 rooms that'll open on February 1. So if it's any indication that we believe in the economy, Loews Hotels and Loews Corporation, very committed. We have $1 billion worth of projects between acquisitions, new construction and renovation projects. That's a real commitment to the Loews Hotels subsidiary.”
On the property market:
“Well, that's a very good question because what we're seeing is that business is strong. So when we are looking at acquisition possibilities, we are at the top of a cycle. And the sellers are smart. They're holding back a little bit. They're not putting their properties up because they think that if they wait a little bit, they can get a little bit more down the road. So, it's hard to find properties. You've really got to pick through a lot and then there are a lot of people looking at deals, private equity, the REITs. So, we have to compete with them in terms of what they're looking for to fill their portfolio and what works for us as a Loews hotel.”
On pricing in the market:
“Things are expensive. The pricing is running ahead of what these assets can -- what you can look for a suitable return on investments, things are starting to get very expensive.”
On whether the New York City market has been affected by taxes:
“We're not really seeing that. New York City in terms of our industry, in terms of the hotel business, still is a top destination; if you want to be a worldwide player in the hospitality industry, you want a place in New York. And I'm not just talking about the big hotels, the 1,000-room hotels, 800 rooms. You're seeing so many boutique hotels get built. People love the New York market. It's energetic. It's growing. There will be 54 million visitors in New York City in 2014, another record, but we'll probably get to 55 million next year. And that shows you the strength of the New York market. On the heels of the Super Bowl, got through a tough winter and now we're starting to see the numbers pick up.”
On the impact interest rates has had on the business:
“Well, it means that you can finance hotels. You can -- which, in '07, '08, it was very tough to finance anything. Now there's more financing, if you want to acquire a hotel. The equity to debt ratios are changing in terms of more debt is available. So, it is making more capital available for people who want to acquire and people who want to build. On the building front, it's still kind of difficult to get some financing. So, what you're seeing is, at our end, the four-star, the five-star property, most hotels that are being built are part of a mixed-use project. So you've got the support of possibly office, retail or residential. Our hotel in Chicago, 400 rooms with 400 residential rental units above it. That helps the financing of these projects. Still a little bit tough to finance stand-alone luxury hotels.”
On the upcoming year:
“We're expecting a good year. Our first quarter was spot on in terms of our budgets. We're excited about the summer; all of our hotels that have gone through renovations are now done. So we're opening new bars and new restaurants; Boston; Washington; Hollywood, California. So we think that this is going to be a good year for Loews Hotels 2014 and we're positive.”
**CREDIT: FOX BUSINESS NETWORK**
