The current economic crisis is causing what many believe is the biggest meltdown in the property market since the Second World War.
But even as the decline continues, there is increasing talk that we will shortly have the greatest buying opportunity for hotel assets for a generation.
In the UK, which was the first major European economy to start to feel the impact of the downturn, commercial property prices are now down 39.5% according to monthly figures from Investment Property Databank.
Hotel property has been slower than offices, retail and industrial which comprise the IPD index. Even now, as revpar dips by substantial double figure amounts, some vendors are still basing their asking prices on what was achieved at the height of the boom.
At the International Hotel Investment Conference in Berlin in March this bid-ask spread was widely blamed for the lack of any deals.
But, as Michael Feldman, of law firm Proskauer Rose, said during a breakout session the absence of debt and the inability "see round the corner" were also key.
Charles Human, managing director of HVS Hodges Ward Elliott, said that so far there had been very little distress and this had meant there was little product on the market.
But with revpar dropping by 20% to 30% in some territories "we are on the verge of moving into one of the great buying opportunities," he said, although he warned "we are not there yet".
Up until the end of 2008, banks in the UK were focused on house builders. But now they have cash flow issues with hotels. "In most cases, they will sit tight," predicted Human. "Will the Government want to be seen sitting on hotels?"
The best opportunities will be in the UK, argued Human. While prices have collapsed at Spanish resorts these were not the best value. "Spain and Ireland have the most basket cases but these require longer term recovery."
Human predicted that the recovery might take longer than in previous recessions. "We came out incredibly sharp in 1993," he said.
Accor's Christian Karaoglanian said that there are assets where the debt is greater than what the hotel would realise in a sale. "Only under pressure from the bank will they sell," he said.
The last crisis in the 1990s saw a quick recovery in prices for assets, added Karaoglanian. The UK and the US were first to sell assets at distressed prices in 1991 and then continental Europe in 1993. The prices were attractive at Eu100,000 per room for luxury assets.
When the market comes back it will start with upscale, argued Karaoglanian, "as this is easier to improve performance where it has not been run properly".
In terms of financing, Karaoglanian said LTVs of 55% were achievable and margins were reasonable even at 400 bps. "The problem is amortisation over 15 years," he said.
The changed financing conditions would trigger a change in buyers, predicted Karaoglanian. Seeking 20% to 25% returns is "ridiculous". It was why we had this crisis in the first place, he said.
Patrick Sanville of Atisreal Hotels forecast a quick recovery: "My feeling is that things will move quicker. The crash has been so sudden that the rebound will be quicker."
While he agreed there were no distressed assets yet he said: "We seem to be able to structure deals we could not do even last year."
Ryan Prince, vice chairman of Realstar Group, said: "We won't know we are at the bottom until after the fact." So far, he had not seen assets where he could price risk appropriately given the uncertainty.
A major problem was securitisation, he said. If assets were held by banks, then they would sell but securitisation had created opaqueness. "The system is paralysed. It will come back but it needs to be worked out."
On the main stage, CBRE Hotels' Derek Gammage said that to get deals done requires debt and equity working together. He predicted that banks would hang in there: "I don't see any deal activity."
Securitised debt has added a new dimension. "Private equity believes there will be a train crash so bidding is on the floor."
Majid Mangalji, president of Westmont Hospitality, said that the pressure on a lot of borrowers had reduced due to the low interest rates. "Until somebody suffers pain there won't be any transaction activity. The dance will continue this year," he said.
The debt panel at Berlin supported the widely held view that banks were not in the mood to seize assets for covenant breaches.
Barclays' Tim Helliwell said that the focus was on cashflow covenants with interest service the most important. "If these are met then falling values are not a trigger for defaulting deals," he said.
If the business was struggling with cashflow then it became "more complicated", he said, although it was possible that the bank would support a restructuring opportunity.
Lot sizes of up to Eu100m were possible, said Helliwell, although Eu30m to Eu50m was more realistic. Existing lenders needed to be persuaded to stay, where possible, and deals had to be reduced to bite sized chunks.
Syndication was closed and even club deals were difficult. "Banks want to be in control of their own destiny," said Helliwell.
Peter Anscomb, the head of hotel finance at Royal Bank of Scotland, said: "Valuation won't be used as a pure means of default."
The panel agreed that there are a growing number of valuations being asked for and this was an attempt by the banks trying to make people start talking about deals.
In particular, valuations might be used as a way of repricing. Where deals had been struck at margins of 150 BPs or lower, then the bank was losing money.
Concern was also expressed about previous transactions, particularly opco – propco structures which used the liquidity available in the market to persuade naïve investors.
Complex structure like this will still be funded but only on a more conservative basis.
In particular, some deals were stalling because the structures behind them were unrealistic. "They are so complex that no one can realise cash if they go wrong," said one banker.
The availability of debt created "artificial" deals in the recent past. Transactions done at 80% or more LTV cannot be restructured, it was warned.
However, even with the tightened conditions, the combined cost of funds was still less than a few years back.
And further reassurance was given in that banks had to be careful in using market disruption clauses in their loan agreements or they would risk further damage to their reputations.
It was hard to offer guidance on where lending was heading at the wider level. "It's strategic. We don't know. Individuals at sector levels can't have that knowledge," explained one banker.