Marriott's decision at the start of June to lower revpar guidance for its US hotels down to 2% growth for 2008 started the New York University International Hospitality Investment Conference on a downbeat note.
But in reality, most had expected the numbers to come in at that level and the conference was marked more by uncertainty about whether the recession had actually arrived in the US yet.
What was not under discussion was that a marked slowdown is underway. Even the optimists accepted that this year would finish with revpar significantly down on recent years and below the 20-year average of a 3.4% rise.
It is not all gloom, however, and the decline needs to be put in context. Smith Travel Research's Mark Lomanno said: "ADR is not declining as fast as in previous downturns. The last four months have seen stable ADR."
He does not expect room rate to go negative and is forecasting a revpar growth of 2.6% for this year, compared to 5.2% last year and 9.7% in 2006. The proviso is that the industry maintains rates in the face of declining occupancy.
The main business that has been impacted is leisure with weekend demand down substantially. In contrast, weekday demand remains robust. And this allows for tactical price promotions rather than wholesale price slashing.
In addition, the outlook is particularly benign on the supply side. Lomanno was one of many speakers who pointed to a supply increase that is below previous cycles. And although there is accelerating supply growth, there has been attrition in the pipeline, down from 650,000 rooms a year ago to 550,000 rooms for the whole US today.
The difficult climate for getting hotel projects financed was emphasised by Steve Rushmore of HVS and he predicted this would last for the next 12 months.
In addition, it is a difficult climate in which to be a broker. Rushmore said that the number of major hotel transactions in the year to April 2008 was just 20, against 105 in the same period in 2007 and 96 in 2006.
Again, Rushmore did not expect this to change for 12 months. He explained this as the ongoing gap between bid and ask with sellers not believing that their hotels have declined in value.
However, values in the US have declined, according to HVS data, down 5% in 2007 and they would be down a further 4% in 2008. But this should be contrasted with the 24% drop in 2001 followed by two year of no change. By 2009, HVS is predicting values will be rising again, up 8%. And by 2010 they will be up 17%.
Driving this decline in values had been the credit crunch. Higher mortgage costs had pushed capitalisation (yield) rates out by 130 BPS to 8.6% during 2007, on a typical US hotel despite that same hotel enjoying an 11% hike in net income. Loan to values had declined from 80% in 2006 to 65% in 2007.
Bill Marriott, of course, is much less concerned with where property values are headed. From the stage he said that the Marriott model, that eschews real estate ownership, was "designed to take care of the rough stuff" thanks to its reliance on management and franchise fees.
"I have been through six of these things and this is number seven. But this business has tremendous long-term potential," said Marriott. But in the Q&A session he warned: "Nobody can tell you if this is a quick up and down or a saucer that goes down and stays down before coming up."
Barry Sternlicht, head of Starwood Capital, was more pessimistic about the outlook in the US. "The US consumer is stretched," he warned, adding that occupancy had been dropping for the last two years and rates were already being cut in Las Vegas even though the new supply had yet to come on stream. "There are huge problems ahead," he said.
Sternlicht, who was widely admired as the CEO who did most to push forward design within corporate chain hotels during his time at the helm of Starwood Hotels, said he would "change the operating model" of hotels now he is once again boss of a private company.
"I was told I couldn't take design in-house but I just did it," said Sternlicht. Looking ahead to current plans, he said: "There is no need for another hotel brand in the world but there is a need for another experience."
No specifics were revealed by Sternlicht other than that his company had the resources to finance the changes at Louvre itself thanks to the completion of fundraising for Starwood Capital's second hotel fund.
While keeping mum on the mechanics of his plans other than to state that "it is so hard to do in public markets", Sternlicht was willing to flag-up the aims for the hotel businesses.
Franchising will be a focus for Louvre, thanks to the hiring of Pierre-Frédéric Roulot, previously head of McDonald's France, as president in November last year, according to Sternlicht.
Concorde is set to slug it out against "other big box brands" such as Sheraton; Crillon is to remain a little business "like Peninsula"; while Baccarat is viewed by Sternlicht as having more roll-out potential, of 15-20 units.
The "green" brand one is going to be a "pure-bred" new-build brand that Sternlicht said he wants to do "for my kids". Leading Starwood Capital's global hotel operations is Neil Jacobs, hired at the start of this year from his post as head of Four Seasons in Asia Pacific.
The East, via joint ventures, will be a key geographic expansion target for both the upscale hotels and Louvre. Almost half of Starwood Capital's total investments last year were in India alone. But Sternlicht cautioned that emerging countries needed to offer a risk premium and many investors had overlooked the importance of governments for which even local partners were no panacea.
Blackstone's Jonathan Gray was less pessimistic about the state of the capital markets than Sternlicht, arguing that the worst was behind. But he agreed that the "economy was facing headwinds".
The LXR Resorts within Blackstone's portfolio are to be tagged with various Hilton brands but the limited service La Quinta chain is to be kept a separate unit, suggesting a divestment of this latter portfolio of 650 properties is planned sooner rather than later.
Hilton's big news at the start of June, though, was the hiring of Ross Klein and Amar Lalvani from Starwood Hotels. Klein had overseen the introduction of Aloft brand, amongst others, while president of the luxury brand group. Lalvani had the more junior role of overseeing the roll-out of W.
The hiring of both men was linked to an impending announcement about Hilton's entry into boutique or lifestyle hotels. "I'd agree that you don't think of Hilton and hip," said Gray. He promised "exciting" announcements, including possibly working with outside parties in a push to improve what he perceives as Hilton's under penetration on the luxury side.
Also, Hilton's big push is to be international. Gray wants to make the same move as Marriott in pushing the US to overseas ratio of Hilton's hotel business from 80:20 to more like 50:50.