• Being late into an opaque market

Received wisdom has it that the only way to make money in the hotel business is to buy and sell at the right time. Operating hotels is incidental.

For the deal makers who hold true to this maxim, the art of buying is to be last into an opaque market. The game is now on to guess when the opacity ends.

There are certainly buyers around. This week, HEI Hotels said it was looking to spend $1.5bn on hotel deals in 2009 in North America. Similar funds are around in Europe.

At ALIS, the hotel investment conference held in California last week, the consensus seemed to be that debt was where the action will be for this year.

Even distressed owners are not yet selling as lenders are giving them more time rather than take the assets onto their books.

Buyers are scared of entering the market right now in case values have much further to fall. In any case, the lack of debt means few buyers are willing to do deals in any case.

This will change: the question is when and how quickly. As ever, the hinge point is debt, or rather the return of a reasonable level of debt to fund bigger deals.

The banking crisis that started the whole downturn appears to be entering its third and final phase. First we had the panic about whether the banks were sound. This started back in the summer of 2007 and reached its crescendo in September 2008 with the collapse of Lehmans.

It can be argued that the underpinning of the global banking system by the world's governments has ended this episode. A glance at LIBOR rates suggests that there is at least trust now among the banks that they are not going bust.

After September, the financial crisis led onto the economic crisis. This has seen governments respond with a huge monetary and fiscal stimulus. While not preventing a major recession, it seems highly unlikely we will have the depression some feared.

Finally, there is the task of putting more credit back into the economy. This one is still not fixed but there are mechanisms in place to start the fix. And "bad banks" seem the most likely way things will be fixed and lead to a return to something like a functioning banking system.

In terms of hotel deals, values have been impacted first with the tightening of credit conditions which shoved yields out. Currently, EBITDA is taking a pounding which will drive values down further.

The final piece needed for any sizeable transactions is the return of debt. Once banks have cleared out their "toxic assets" their confidence should return and they can begin to feel their way towards lending more.

Most bankers believe that lending will return from the bottom-up, first with more small deals by individual banks and then gradually towards club deals and then on to syndication.

A good example of the issues right now is Le Meridien in London's Piccadilly. This is a big asset that needs a big chunk of transformative capital. The deal has been tantalisingly close to being put away but has fallen due to problems with debt. Once transactions like this are signed-off, the end of the opaque market will be near.

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