Thursday, May 15, 2008

Conference & Meeting Space in a Down Market

The hospitality industry is considered especially vulnerable to market ups and downs, partly because of the short term nature of it’s “leases” – most tenants only stay a few nights. The next step up in terms of lease length would have to be conference and meeting space, which is often contained within and correlated to the performance of hotel properties. However it is not as clear cut how demand for this space reacts to a down market as most events are planned far in advance, and many, such as the annual ICSC convention, are considered an indispensible part of doing business.

When investing in hotels that include meeting space it’s important to consider how it will interplay with the core hotel business, and how market and macroeconomic trends will affect demand for this space differently than for the hotel property as a whole.

For example will the recent trend of including more leasable conference space in new office buildings (see article here) hurt hotels’ business, or will it allow them to focus more capital and square footage on revenue-generating hotel rooms? Thoughts and anecdotes are welcome on this one.

Llenrock Group

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