The mood at the International Hotel Investment Forum in Berlin at the start of March was a mixture of denial and frustration.
The denial was in evidence through claims that it is business as usual, the frustration was due to people failing to adjust to the changed circumstances.
The scale of the changes since the summer was laid out by Derek Gammage, managing director of CBRE Hotels, when he said during the closing plenary session of the conference that hotel property prices had moved 20% since the summer.
He said it was absurd to suggest that hotels were somehow a special case and would not be caught in the slump hitting commercial property.
"There is an inability to move things forward as people have a price perception that things how they were nine months ago," said Gammage, articulating his frustration.
What happens going forward depends on how long there is no debt market, said Gammage. At present there are no signs of distress.
The few deals that are happening are smaller than $250m: if the buyer does not have an existing relationship with a debt financier nor is a sovereign wealth fund, then they would not be done, said Gammage.
James Elton, CEO of aAim, said the issue in the current market was less about defaults on existing loans but about how to refinance, particularly if you struck a highly leveraged deal two or three years ago. "You will now have to find real chunks of cash," he said.
KPMG's Neill Thomas concurred that it was a crisis of liquidity not default. "But it depends on how long before the lack of liquidity precipitates defaults. If trading comes off and underlying cash flow cannot service debt then there will be problems," he said.
Thomas was confident that in the end the banks would find a route through the debt issue but the hotel sector would be a follower rather than a leader.
Richard Gomel, a managing director within Starwood Capital Group and CEO of Louvre Hotels, said that there was no capital out there for large transactions. He put the hurdle as low as $200m.
"Banks are open for business but it takes longer, triple or quadruple time to get deals done," said Gomel. And the public equity markets were no healthier than the debt markets. "Pretty much everybody has been slammed," he said, pointing out that some stocks are 50% off their highs.
Gomel drew comfort from the investment by Sam Zell in Starwood Hotels, arguing that this was an indication by a veteran real estate investor that we are near the bottom of the cycle.
During a separate breakout session on the credit crisis, Neill Thomas said that the banks had driven the credit cycle and had created the current situation through their own exuberance.
Charles Human, from HVS Hodges Ward Elliott, said that the current market conditions made it hard to finance a "story" and that the terms of trade had moved. "Very few deals are being done, valuations are lower and loan to value is lower putting pressure on capitalization [yield] rates," he said.
The deals that were done in the second half of 2007 were mostly completed as the parties involved were already committed. He argued that market conditions for financing had returned to normality.
Dr Edward Wojakovski, group chief executive at owner Tonstate, said in a breakout session that it would "take a long, long time before making money from value comes back".
Banks with small balance sheets were out of the market but some were coming up with new structures to replace syndication, he said.
The panel, called New Owners and New Perspectives, suggested that yields even on luxury assets in prime locations had moved out to 6% and possibly 7%.