The recent U.S. banking crisis became a focal point of conversation at the Hunter Hotel Investment Conference as industry leaders tried to put the situation in context and share their overall outlook on the industry in the wake of such economic challenges.
During a panel discussion entitled “Wall Street Talks,” several prominent owners and publicly traded company CEOs weighed in with their thoughts following the much-publicized closures of Silicon Valley Bank and Signature Bank.
“The banks and the industry as a whole have struggled with the confidence issue. What happens with banks in that type of situation is people pull their money out and that exacerbates issues that may not have been a problem otherwise,” said Justin Knight, CEO & Director, Apple Hospitality REIT.
Jonathan Stanner, President/CEO, Summit Hotel Properties, maintained the banks “are in a much better position” financially speaking than when the last banking crisis occurred.
“The reality is no bank can withstand all the deposits coming out overnight. So it doesn’t matter how well-capitalized the bank is. I think everyone is trying to create the confidence,” he said.
Marcel Verbaas, Chairman and CEO, Xenia Hotels & Resorts, also noted it’s a tenuous situation.
“I think it just shows the tight rope the Federal [Reserve] has been walking in trying to balance this and get to a soft-landing, which may or may not be achievable,” he said.
Stanner further pointed out some of the differences from the last banking crisis.
“I think there’s still some scars from 2008/2009, the last time we went through a banking crisis. I think it’s important to draw this distinction around the fact that what we don’t have today is a creditworthiness, credit quality issue. Generally, within the banks this is much more driven by asset and liability duration mismatches,” he said.
Stanner did add there would likely be some changes from the Federal Reserve going forward as a result of the recent closings.
“I think anytime you have this type of banking failure there almost has to be some sort of regulatory response and that regulatory response is likely to be something that restricts capital,” he said.
Meanwhile, a number of brand leaders offered their outlook on the industry amid the aforementioned economic challenges during a session entitled “A View From The Top.”
Larry Cucilic, President/CEO, Best Western Hotels & Resorts, coined a new term in “cautiously bullish.” He noted there were five things worth watching: inflation, interest rates, banking stability, geopolitical actions and unemployment.
“I was going to use ‘cautious optimism,’ but we keep getting this bad news. But honestly we’re continuing to see investment interest and we’re still seeing growth, so it’s just this dichotomy. I think being in economy lodging we’ve got a little bit of a cushion there as we tend to perform well, but I also think we’ve got some tough waters ahead,” said Julie Arrowsmith, President and interim CEO, G6 Hospitality.
John Murray, President/CEO, Sonesta, was a bit more optimistic.
“I say ‘throw caution to the wind,’ I’m bullish. I think the industry is headed in the right direction. The pandemic showed everybody how important travel is to their life and I think people feel it’s one of their rights to get out and travel. If times get tough economically that will show to businesspeople and people attending conferences like this the importance of personal interaction and getting out to meet your customer. It will actually more beneficial to us in a lot of ways versus where we’ve been for the past few years. I’m looking forward to ’23, ’24 and ’25,” he said.
Geoff Ballotti, President/CEO, Wyndham Hotels & Resorts, generally agreed noting he was “cautiously optimistic” for ’23 and that the outlook was “much brighter for ’24 and ’25.”