♪ [THEME MUSIC] ♪>> 67 MILLION VISITORS! WOW! PEOPLE WANT TO BE IN NEW YORK CITY. THEY WANNA BE AT MY APPLE. REALLY, WHAT IS HAPPENING ON THE MARKET? WHERE DO WE SEE THE MARKETPLACE? WHERE DO WE SEE NEW DEVELOPMENTS? BROOKLYN, QUEENS, LONG ISLAND, EVEN STATEN ISLAND? I HAVE ASSEMBLED A GROUP OF LEADING HOSPITALITY EXPERTS TO PROVIDE THEIR INPUT ON THE HOTEL MARKET. MY GUESTS INCLUDE ADAM HOCHFELDER, WHO IS THE PRINCIPAL AT MERCHANTS HOSPITALITY, SEAN HENNESSEY, FOUNDER AND CEO OF LODGING ADVISORS, BRENNAN KEATING, WHO IS THE HEAD OF SPECIAL LENDING FROM M & T BANK AND ASHISH LALL, WHO IS A DIRECTOR AT FORTUNA REALTY GROUP. YOU OPERATE HOTELS, YOU OPERATE HOTELS, YOU LEND MONEY AND YOU ADVISE PEOPLE WHAT TO DO ON THIS. WE DO NOT HAVE ENOUGH ROOMS FOR 67 MILLION VISITORS, DO WE? OR DO WE HAVE A PROBLEM, WHAT ARE YOU SEEING?>> I WOULD SAY OVERALL, THE MARKET IS THE HIGHEST OCCUPANCY MARKET IN THE UNITED STATES. WE RUN ABOUT 86 PERCENT. WE WENT INTO THE START OF 2019 WE HAD THE HIGHEST OCCUPANCY, HIGHEST ROOM RATE, HIGHEST GROWTH AND DEMAND OF THE TOP 25 MARKETS IN THE CITY. WE STARTED OFF 2019 PRETTY WEAK BECAUSE OF THE FEDERAL GOVERNMENT SHUT DOWN. THAT SORT OF SET THE STAGE FOR WHAT HAS BEEN FRANKLY, A PRETTY WEAK YEAR. SO IT IS A LITTLE CLOUDY AS TO MY CRYSTAL BALL WHERE WE ARE HEADING BECAUSE LAST YEAR IN 2018 WE HAD PRETTY GOOD ROOM RATE GROWTH, ROUGHLY 3 1/2 PERCENT. IT LOOKED LIKE WE FINALLY TURNED THE CORNER. THIS YEAR ROOM RATES ARE DOWN ABOUT TWO PERCENT FOR THE YEAR. OCCUPANCY IS DOWN 1.0 WE ARE DOWN THREE PERCENT OR SO. IT HAS BEEN A TOUGH YEAR. A LOT OF NEW HOTELS CONTINUING TO OPEN BUT AS YOU SAID, THE DEMAND CONTINUES TO BE THERE, NEW YORK CONTINUES TO BE THE MARKET PEOPLE WANT TO TRAVEL TO.>> RIGHT NOW THE PIPELINE IN NEW YORK, 7000 HOTEL ROOMS UNDER DEVELOPMENT?>>15,000 UNDER CONSTRUCTION AND ANOTHER 10 BEYOND. ON A BASE OF 125,000. ROOMS.>>WE HAVE A NEW HOTEL OPERATOR. YOU WERE INVOLVED WITH HYATT. HOW DO YOU SEE THE MARKET TODAY?>> IT WAS A TOUGH YEAR. WHAT WE HAVE SEEN IS TRAVEL FROM NEW AREAS. AS UNCERTAINTY HAPPENS AND WHAT’S HAPPENING IN EUROPE AND ASIA, HONG KONG — THE LAST FEW MONTHS WE’VE SEEN A LOT MORE TRAVEL HERE THAN WE EXPECTED BECAUSE A LOT OF THE OTHER DESTINATIONS WERE EITHER GOING TO CANCEL, DUE TO UNREST AND IN AN INTERESTING WAY, YOU DON’T WANT TO DANCE ON SOMEBODY ELSE’S GRAVE BUT BECAUSE OF THE UNCERTAINTY AND ALL OF THE TRAVEL THAT’S BEEN CANCELED OVER TO HONG KONG, NEW YORK IS THE RECIPIENT OF A LOT OF THAT TRAVEL. THEY SEE THAT AS A SIMILAR COSMOPOLITAN MARKET. WITH GDP GOING WHERE IT IS GOING AND TRAVEL INCREASING A LITTLE BIT WE THINK 2020 WILL HAVE SOME GROWTH THAT IS BETTER THAN WE’VE SEEN IN THE PAST.>> I LIKE SOME OF THE SENTIMENTS MADE. IT HAS BEEN A CHALLENGING MARKET. I THINK WE FARED WELL WITH OUR HOTELS. WE HAVE A COLLECTION OF BOUTIQUE, LIFESTYLE HOTELS IN THE CITY. ONE HOTEL OPENED A COUPLE MONTHS AGO 176 ROOM HOTEL WITH RESTAURANT, ROOFTOP AND THREE OTHERS, TWO IN CHELSEA AND ONE IN SOHO. I THINK WHAT’S ALLOWED US TO FAREWELL IN THIS MARKET IS BECAUSE THE PRODUCT, WHAT WE HAVE IS MORE DIFFERENTIATED THAN SOME OF THE OTHER HOTELS SUCH AS HYATT OR HILTON, BECAUSE WE HAVE SOME OTHER ELEMENTS. WE ARE ALLOWED TO OR ARE ABLE TO OFFER A HAPPY HOUR DRINK WHEN SOMEONE COMES TO CHECK IN. WE ARE ABLE TO OFFER CONTINENTAL BREAKFAST IN OUR RESTAURANT, COCKTAILS ON ROOFTOP, PROVIDE HEALTH AND WELLNESS ACTIVITIES, PEOPLE LIKE YOGA THESE DAYS IT’S A CRAZE. ON THE ROOFTOP WE HAVE YOGA, OR JUST NORMAL PARTNERSHIPS WITH AMERICAN EXPRESS, CORPORATE CLIENTS OR SOME LIFESTYLE THEATER DISTRICT TICKETS.>> A LOT OF PEOPLE COME TO NEW YORK AND WANT TO BE HILTON POINTS, MARRIOTT POINT, THEY ARE POINT CRAZY. THERE IS A SITE CALLED THE POINT MAN. PEOPLE LOVE IT THEY COUNT POINTS, YOU DO NOT HAVE POINTS, YOU ARE INDEPENDENT HOTEL. CERTAIN PEOPLE ARE VERY LOYAL TO THE MARRIOTT BRAND OR HILTON BRAND OR SO ON. WHAT EFFECT IS THAT YOU DON’T HAVE THESE LOYALTY PROGRAMS?>> CORRECT.>> ALSO YOU, ADAM.>> SOMEONE LOYAL TO HILTON OR STARWOOD OR MARRIOTT, IT WILL BE DIFFICULT BUT WE HAVE SEEN AN EVER INCREASING TREND FOR GUESTS THAT WANT THAT BOUTIQUE STYLE HOTEL. WE HAVE SEEN A LOT OF THESE BRANDED HOTELS ACTUALLY OFFER INDEPENDENT BOUTIQUE SOFT BRANDS. THEY HAVE GOTTEN AWAY FROM — >> YOU MEAN THE AUTOGRAPH — >> YES THEY’VE GOTTEN AWAY FROM I.E. A HILTON, HALLWAYS, THEN NOW HAVE CANOPY AND CURIO. MARRIOTT HAS AUTOGRAPH. THERE HAS BEEN A TREND EVEN WITH THE BRANDS BECAUSE OF THE CUSTOMER GOING TO THEM SAYING THEY WANT TO HAVE A DIFFERENT PRODUCT AND I THINK MORE HAS GONE TOWARDS SEEN HOTEL A LITTLE BIT DIFFERENT AND IT OFFERS MORE THAN JUST POINTS. IN TERMS OF WHAT THEY HAVE DONE AND WHAT WE HAVE DONE.>> AS A BANKER, HOW DO YOU LOOK AT A BRAND THAT IS, HOTEL CHAIN THAT DOES NOT HAVE THE BRAND?>> I FEEL IN A MARKET LIKE NEW YORK IT IS NOT AS IMPORTANT TO HAVE THAT FLAG THAT YOU MIGHT NEED MAYBE IN A MORE SECONDARY MARKET. YOU HAVE SUBURBAN ENVIRONMENT WHERE PEOPLE WILL BE LOOKING FOR THAT. IN NEW YORK, I THINK A SIMILAR PRODUCT, YOU HAVE A CEILING FOR WHAT YOU CAN CHARGE, YOU HAVE LIMITED SERVICE BRAND HOTEL BUT IF YOU’RE COMING IN AS A BOUTIQUE PROPERTY, PEOPLE DON’T HAVE MAYBE A PRECONCEIVED NOTION OF WHAT THAT MIGHT BE. MAYBE A LITTLE BIT MORE PRICING POWER ON THAT SIDE.>> SINCE YOU ARE NOT BRANDED HOW DO YOU DO THAT?>> I THINK THE SMALLER HOTELS ACTUALLY BENEFIT FROM NOT BEING BRANDED. PEOPLE ARE LOOKING TODAY AS YOU WERE SAYING, FOR EXPERIENTIAL TRAVEL IN THE OLD DAYS, PEOPLE WOULD JUST PICK A HYATT OR MARRIOTT OR STARWOOD AND JUST GO THERE AND KNOW WHAT TO EXPECT. TODAY PEOPLE ARE LOOKING FOR AN EXPERIENCE, A RESTAURANT, ENTERTAINMENT CENTER, A CONCERT. WHEN YOU PAIR UP A BRANDED HOTEL, IT ALMOST DILUTES EXPERIENCE AND IT LOOKS LIKE IT IS JUST DRESSING. BUT WHEN YOU HAVE AN UNBRANDED HOTEL, OR A CACHET HOTEL, LIKE ONE IN LONG ISLAND CITY, PEOPLE ARE EXPECTING AN ENTERTAINMENT EXPERIENCE AS OPPOSED TO A HEAVILY BRANDED EXPERIENCE WHERE EVERY NAPKIN AND COASTER LOOKS THE SAME AS YOUR HOTEL IN ATLANTA.>> EVERYONE KNOWS THERE IS AIRBNB, THERE ARE OTHER — WHAT EFFECT HAS THAT HAD ON YOUR BUSINESS SINCE YOU HAVE BEEN IN THIS MARKET QUITE A LONG TIME?>> I THINK IT HAS A LARGER IMPACT ON THE HOTEL BUSINESS DURING THE WEAKER PERIODS WHEN YOU SEE THE SEASONS OF NEW YORK CITY, YOU’LL SEE FOUR SEASONS. YOU SEE WINTER, SPRING, SUMMER AND FALL. THE WINTER SEASON, JANUARY AND FEBRUARY QUARTER ONE AND THEN I THINK THE SUMMER YOU’LL SEE AIRBNB TAKE MORE OF AN IMPACT ON SOME OF THE HOTELS BECAUSE DEMAND IS NOT AS GREAT. I THINK WE FEEL THAT LATELY IN TERMS OF THERE IS MORE COMPETITION FOR A LESSER DEMAND PERIOD OF ROOMS. FROM OUR PERSPECTIVE, WE HAVE TO DO MORE ON OUR SIDE TO — CUSTOMERS TO COME BACK TO US.>> SEAN, HOW DO YOU SEE AIRBNB AND OTHER SHARING COMPANIES? THERE IS NO QUESTION THAT THEY HAVE AN EFFECT.>> CERTAINLY. AIRBNB HAS BEEN RECEDING, IF YOU WILL, IN NEW YORK CITY. ITS HEYDAY WAS PROBABLY SEVERAL YEARS AGO. SINCE THE MAYOR’S OFFICE HAS INCREASED — STEPPED UP THE CRACKDOWN ON AIRBNB. I THINK THAT’S HAD THE EFFECT OF MINIMIZING THE INVENTORY AS WELL AS THE COMFORT LEVEL OF PEOPLE CHOOSING TO BOOK ROOMS IN NEW YORK CITY IF THEY KNOW IT IS NOT LEGAL OR YOU KNOW, UNCLEAR WHAT LEGALITY IS. AIRBNB, EVEN AT ITS HEIGHT, IT WAS MAYBE THREE OR FOUR PERCENT OF THE TRANSIENT ROOM REVENUE IN NEW YORK CITY IF YOU ADDED THAT INTO THE HOTEL MARKET. SO IT HAS AN EFFECT. I THINK WHAT IT REALLY HURT A LOT OF HOTELS WAS IN WHAT WE CALL THE COMPRESSION NIGHTS WHERE OCCUPANCY GETS TOWARDS 100 PERCENT AND HOTEL MANAGERS EMBOLDENED TO CHARGE EXTRA BUCKS OVER THE TIMES WE LOST THAT AND THERE IS A LOT OF REVENUE BUT A LOT OF PROFITS COME FROM THE HIGH DEMAND PERIODS.>>ONE THING PEOPLE DON’T UNDERSTAND, THE OTA, THEY BOOK THROUGH EXPEDIA — WHILE IN REALITY IF THEY REACH OUT TO YOU THEY’LL GET A BETTER DEAL. WHAT PERCENTAGE DO THEY TAKE AWAY TODAY?>> THEY TAKE ON AVERAGE 15 TO 22 PERCENT — OUR VIEWPOINT IS, IT IS NOT NECESSARILY A BAD THING. WE DON’T WANT TO PAY THESE COMMISSIONS TO ANYBODY, REALLY. IT IS AN EXPOSURE I THINK THE HOTEL MAY BE THE FIRST OPENING OR STILL IN THE RAMP UP PERIOD. IT IS A WAY FOR THE CUSTOMER TO COME IN, THROUGHOUT COMMISSION SOURCE BUT ONCE THEY ARE IN YOU CAN ALLOW THEM TO THEN BOOK NEXT TIME DIRECTLY.>> I AGREE. IT IS IMPORTANT TO HAVE THE OTA BECAUSE IT IS A SOURCE OF BUSINESS. ONE OF THE THINGS THAT WE HAVE DONE AT OUR MERCHANT HOSPITALITY PROPERTIES IS, WE’VE ONLY CONTRIBUTED A CERTAIN AMOUNT OF OUR ROOMS AVAILABLE TO THE OTA. WE HAVE CREATED THIS ANALYSIS ON WHAT NIGHTS WE SHOULD HAND OFF MORE INVENTORY TO AN OTA VERSUS CONTROLLING THAT. SO, ON A TUESDAY, WEDNESDAY, THURSDAY NIGHT IN MANHATTAN, FOR BUSINESS TRAVEL WE HAVE VERY LITTLE AVAILABLE ON THE OTA. BUT OUR ALGORITHM IS TELLING US THAT ON A SUNDAY NIGHT OR MONDAY NIGHT SOMEONE LOOKING FOR A DEAL, WE SHOULD PROBABLY HAVE MORE INVENTORY AVAILABLE THROUGH THE OTA. IF YOU CAN SAVE THE 18 OR 20 PERCENT, IT GOES A LONG WAY. SOMETIMES IT EVEN MAKES SENSE TO HOLD A ROOM OFF THE MARKET AND NOT BOOK IT. REPUTATION — YOU DO NOT WANT TO BE KNOWN AS THE HOTEL BOUGHT ON PRICELINE FOR $99.>> TRIP ADVISOR AND OTHER THINGS CAN MAKE OR BREAK. HOW DO YOU CLEAN UP A TRIP ADVISOR COMMENT THAT IS POOR?>>JUST REACHING OUT TO THE CLIENT. IF THEY REALLY HAD A FORGETTABLE STAY IS REACHING OUT TO THEM, TO SEE WHAT YOU CAN DO TO RECTIFY THAT AND TO BE HONEST, WE WOULD LIKE TO MAYBE PREVENT THAT REVIEW FROM INITIALLY GOING OUT. HAVING INITIATIVES IN PLACE AT THE HOTEL, WHILE THE PERSON IS STAYING, THE FEEDBACK, ONGOING WHILE THEY CHECK IN, PRESENTING WHAT THE HOTEL OFFERS THROUGHOUT THEIR STAY. YOU KNOW THE NEXT MORNING WHEN HAVE BREAKFAST, KEEP ENGAGED WITH THE CLIENT — THE GUEST — IT ALLOWS YOU TO PREVENT MAYBE THAT REVIEW HAPPENING AFTER THEY LEAVE BECAUSE YOU CAN PREVENT IT.>>IT IS INTERESTING THAT THERE IS A PHENOMENON CALLED SERVICE RECOVERY WHERE IF A GUEST HAS A PROBLEM DURING THE STAY AND HE SOLVES IT FOR THE GUEST, THAT GUEST WILL HAVE A BETTER IMPRESSION OF THE HOTEL THAN IF THEY HAD NO PROBLEM AT ALL. BY BEING ATTUNED TO WHAT THE GUESTS ARE LOOKING FOR AND ADDRESSING THEIR NEEDS, IT HELPS THE REPUTATION AND THE ENJOYABLE FACTOR FOR THE GUEST.>>WHEN WE WERE IN THE GREEN ROOM WE WERE TALKING ABOUT THE BOROUGHS. HOW HAVE YOU AS A BANKER BEEN INVOLVED WITH FINANCING BOROUGH HOTELS?>>WE HAVEN’T DONE TOO MANY OF THEM BECAUSE MOST OF OUR CLIENTS HAVE BEEN IN THE MANHATTAN MARKET. WE ARE RELATIONSHIP LENDER. WE TYPICALLY FOLLOW OUR CLIENTS WHERE THEY GO. I LOOK WHERE WE KIND OF ARE IN THE MARKET AND THE CHALLENGES WE HAD IN 2019, THE REAL WAY YOU WILL DIFFERENTIATE YOURSELF IS THROUGH THAT MANAGEMENT TEAM. SO WE TRY TO MAKE SURE WE ARE DOING DEALS NOW WITH PEOPLE WE KNOW AND HAVE A TRACK RECORD WITH. AND A LOT OF THEM JUST HAVE NOT BEEN MOVING INTO THE BOROUGHS AS MUCH.>> HOW MUCH LEVERAGE ARE YOU OFFERING?>>65 PERCENT IS THE NUMBER, IT WILL VARY A BIT DEPENDING ON WHERE WE ARE WHEN YOU START LOOKING AT A LOAN. IT’S BASICALLY A CEILING WHERE WE WILL WANT TO BE COMFORTABLE WITH GETTING TO AND THE LEVERAGE MAY COME DOWN A BIT IF WE’RE LOOKING AT A HIGHER PRICED, LOWER PER COST BASIS. THEN DEPENDING ON IF IT’S CONSTRUCTION OR A STABILIZED PROPERTY. IF IT IS A STABILIZED PROPERTY WE MIGHT HAVE A LITTLE BIT OF ROOM ABOVE THAT. IF IT IS CONSTRUCTION, IT MAY COME DOWN A BIT FROM THERE.>>I NOTICED THAT ADAM — MERCHANTS HAS REALLY TAKEN TWO RECENT FINANCINGS FROM AN ALTERNATIVE LENDER. [LAUGHTER] >>NO, I MEAN ALTERNATIVE LENDERS ARE THE MAJOR LENDERS TODAY IN THE HOSPITALITY MARKET. THEY’RE PROVIDING A HIGHER LEVERAGE AND SO ON. HOW DO YOU DECIDE ON GOING TO DO ALTERNATIVE ROUTE?>>THE RECENT FINANCING WE JUST DID AT Z HOTEL, WE DID IT WITH A $6 BILLION FUND AND WE ARE FINDING THAT THAT TODAY IS MORE ALONG THE LINES OF A TRADITIONAL LENDER. BECAUSE THEY HAVE CAPITOL AND THEIR CREDIT CAPITAL IS SET UP A LITTLE DIFFERENT, IT ACTUALLY SOMETIMES COULD BE MORE COST-EFFECTIVE THAN GOING TO A CITIBANK OR J.P. MORGAN. IT IS THE WAY THEY ARE SET UP, IT IS AN EASIER PROCESS THAN SOME OF THE BANKS. M & T — THEY’RE GREAT TO DO BUSINESS WITH. BUT SOME OF THE BANKS MAKE IT VERY DIFFICULT TO GET THROUGH, EVEN ON A STABILIZED LOW LEVERAGE LOAN.>>HOW DO YOU SEE THE FINANCING FOR YOUR CLIENTS?>>WELL, I MEAN THE HOTEL SECTOR IS ALWAYS HARDER THAN THE OTHER SECTORS BECAUSE IT HAS MORE NATURAL VOLATILITY TO THE BUSINESS. LENDERS ARE ALWAYS A LITTLE MORE CAUTIOUS. WE HAVE CERTAINLY SEEN A LITTLE MORE CAUTION RECENTLY AS THE MARKET HAS BEEN TREADING WATER FOR A COUPLE OF YEARS BUT THERE’S STILL A LOT OF PROJECTS IN THE PIPELINE. A LOT OF THEM ARE NOT YET FINANCED SO IT’S UNCLEAR HOW THAT WILL PLAY OUT.>>LET’S DISCUSS THE BOROUGHS HOW DO YOU SEE THEM AS AN OPPORTUNITY AND ALSO, YOU ARE NOT IN THE BOROUGHS BUT YOU ARE IN GARDEN CITY, WHICH IS THE SUBURBS AS OPPOSED TO THE BOROUGHS.>>WE TALKED EARLIER THAT THE BOROUGHS HAVE BEEN HAVING A GOOD YEAR COMPARED TO MANHATTAN IN 2019 BUT THEY STILL HAVE A WAYS TO GO IN TERMS OF PARITY, COMPARABLY, QUALITY HOTEL IN THE BOROUGHS WILL BE PRICED WITH A GOOD DEAL AS OPPOSED TO MANHATTAN. IT HAS TO CATCH UP BUT THE LAND COST IS LOWER, SO OVERALL, THEY CAN PRESENT A FAIRLY ATTRACTIVE INVESTMENT OPPORTUNITY, PARTICULARLY SOMETHING LIKE Z HOTEL OR, SOMETHING IN WILLIAMSBURG, THAT’S IN A NEIGHBORHOOD WHERE YOU CAN GET A BIT OF A PRICE PREMIUM IN A PROJECT.>>BEFORE THE SHOW I SEARCHED ON THE INTERNET, HOTELS IN BROOKLYN. SOME OF THE NEWEST HOTELS ARE TALKING ABOUT, THESE SMALL HOTELS, THE MORGAN HOTEL IN GREENPOINT, AND SOME OTHER MARKETS, I WAS TOTALLY SURPRISED. IN MANY ASPECTS THERE ARE SEMI-BOUTIQUE HOTELS, NOT YOUR BOUTIQUE TYPE OF HOTEL BUT THEY ARE A BOUTIQUE AS OPPOSED TO THE RED ROOF INN OR SOMETHING LIKE THE HAMPTON INN THAT WAS BUILT A COUPLE OF YEARS AGO. WHERE DO YOU SEE THE GREATEST OPPORTUNITIES FOR YOUR FIRM?>>WE ARE MANHATTAN SPECIFICALLY. I THINK THERE ARE OPPORTUNITIES IN THE BOROUGHS, AS WELL AS OTHER CITIES. WE LOOK AT THE ASSET ITSELF FIRST. IF THERE IS A UNIQUE PLAY SUCH AS GARDEN CITY HOTEL THAT YOU MENTIONED, WE WILL SPEND MORE TIME ON IT. FROM THE MARKET PERSPECTIVE WE ARE MORE COMFORTABLE WITH MANHATTAN AND BEING CENTRAL THERE. BUT IF THERE IS AN OPPORTUNITY, WE WILL TAKE A LOOK. WE HAVE THE ADVANTAGE OF HAVING HANDS ON MANAGEMENT AS WELL AS DEVELOPMENT. YOU KNOW THE EXPERTISE TO LOOK AT A PROJECT AND SEE IF IT NEEDS RENOVATION OR OPERATIONAL EFFICIENCIES.>>HOW DO WE LOOK AT THE LIMITED SERVICE, LIMITED SIZE ROOMS LIKE THE POD HOTELS? ARE WE SEEING MORE BEING BUILT?>>I MEAN, ABSOLUTELY. WE HAVE BEEN A LENDER — NOT IN NEW YORK BUT WE FOLLOWED THEM TO BOSTON WHICH RECENTLY OPENED, WE ARE IN CONSTRUCTION FOR ONE IN WASHINGTON D.C. AND ALSO IN MIAMI. SO I THINK THOSE PRODUCTS DO WELL IN URBAN SETTINGS. IN METROPOLITAN AREAS AND THEY ALSO DO WELL AT AIRPORTS. I DO NOT KNOW IF THE MODEL WOULD WORK OBVIOUSLY, IN MORE OF A SUBURBAN MARKET BUT IN THESE MARKETS THEY HAVE DONE WELL. YOU HAVE TO CREATE A COMMON AREA, VIBE AND EXCITEMENT AROUND THAT. REALLY, IT DRAWS PEOPLE FROM THE ROOM INTO THE COMMON AREA.>>DO YOU SEE THIS TAKING PLACE IN NEW YORK?>>ABSOLUTELY. THE DEMAND HAS BEEN THERE. MANY OF THE CUSTOMERS DO NOT HAVE — THEY’RE STAYING A SHORT PERIOD OF TIME SO ROOM SIZES NOT THAT BIG OF A DEAL. THEY ARE NOT STAYING IN THE ROOM THAT MUCH. THEY ARE EITHER IN THE COMMON AREAS WHICH ARE USUALLY PRETTY EXPANSIVE AND THE HOTEL YEARS INCLUDING THE HOTEL THEY HAVE LEARNED HOW TO MONETIZE THOSE PUBLIC SPACES SO THAT IT HELPS THE PROJECT OVERALL. WHILE THEY ARE OUTSIDE THE HOTEL EXPLORING THE CITY. THE ECONOMICS ARE SUCH THAT IF YOU CAN BUILD A SMALL ROOM AND MAKE IT COMFORTABLE, THAT IS GOING TO CONTINUE. EVEN, YOU SEE HIGHER QUALITY HOTELS, IN NEW YORK CITY. THEY ARE MUCH SMALLER ROOMS THAN THE SAME HOTELS IN SUBURBAN MARKETS.>>SO LET’S GO THE OPPOSITE EXTREME. FIVE AND SIX STAR HOTELS.>>THE FIVE AND SIX STAR HOTELS TODAY, THEY TALK ABOUT THE ROOM SIZE AND WHAT IT LOOKS LIKE AND THE SERVICE. BUT WHAT’S HAPPENING TODAY IS THAT IT IS REALLY THE EXPERIENCE AND FIVE AND SIX STAR EXPERIENCES ARE NOW BEING RANKED WHERE YOU HAVE FOOD AND BEVERAGE OPPORTUNITIES AND RESTAURANTS AND FIVE-STAR HOTELS. SO TODAY AND ESPECIALLY IN OUR HOTELS, IT MIGHT BE IN THE OLD DAYS, A FOUR-STAR HOTEL BUT WE MIGHT HAVE A FIVE-STAR RESTAURANT OR A THREE-STAR MICHELIN CHEF. YOU MIGHT HAVE A FELIP WHICH IS IN ONE OF OUR HOTELS. WE MEASURE ON A METRIC THAT WE CREATED CALLED ADRP IT IS REALLY THE ADR PLUS. IT IS THE GUEST SPENDING FOR THE FOOD AND BEVERAGE AND ALL THAT STUFF AND WE’RE ABLE TO CALCULATE WHETHER THAT IS A GOOD GUEST FOR THE ROOM OR NOT. AND SO, CREATING THESE FIVE-STAR, MY PARTNER HAS CREATED 21 RESTAURANT BRANDS AND WE PUT THEM IN OUR HOTELS AND OUR ADRP GOES UP SOMETIMES AT A GREATER PERCENTAGE THAN — >> BUT YOU ARE DIFFERENT THAN THE NORM. BECAUSE AS AN ADVISOR TO BANKS, I DO NOT LIKE TO DEPEND ON THE RESTAURANT BILL. I LIKE TO MAKE SURE THAT THE ROOMS ARE OVER THERE. AND I DISCOUNT THE RESTAURANT BILLS IN MANY CASES.>>I MEAN IT IS JUST A MORE VOLATILE BUSINESS. BECAUSE YOU MAY HAVE A STAR CHEF THAT COMES IN FOR A PERIOD OF TIME AND THE ADRP WILL BE HIGH FOR THAT PERIOD OF TIME BUT LOOKING AT A FIVE YEAR LOAN, WE NEED TO MAKE SURE THAT IT WILL BE AROUND FOR 5+ YEARS. AND SO THE CONSUMER IS FINICKY. THERE MAY BE A NEW PLACE THAT OPENS UP AND WE DON’T WANT TO WORRY ABOUT THAT.>>DO YOU SEE MORE FIVE AND SIX STAR HOTELS OPENING UP HERE?>>I DON’T THINK TRADITIONAL FIVE-STAR LUXURIES ARE GOING AWAY ANYTIME SOON BUT I CERTAINLY THINK THAT AS A NEW GENERATION OF TRAVELERS EMERGE THE TRADITIONAL LUXURY IS LESS APPEALING THAN IT USED TO BE. SOME OF THE NEWER FIVE-STAR HOTELS IN THE CITY I WOULD CONSIDER THINGS LIKE CROSBY OR GREENWICH, THEY DON’T LOOK AT ALL LIKE A FOUR SEASONS OR RITZ-CARLTON. BUT THEIR CUSTOMERS ARE JUST AS LOYAL AND PAY JUST AS MUCH.>>BUT I THINK PEOPLE HAVE DONE THE SAME THING, FORTUNA’S LIMITED NUMBER OF HOTELS, THE LUXURY BOUTIQUE HOTEL, PEOPLE LIKE IT. THEY LIKE THE CACHET, WHICH I HATE TO SAY WHICH IS YOUR HOTEL BUT IT HAS A CACHET FOR WHAT PEOPLE WANT. AND PEOPLE KNOW THAT YOU BUILT THAT BRAND AND THAT BRAND IS REALLY IMPORTANT. WHAT NEW AMENITIES DO YOU SEE WERE NEW FEATURES COMING INTO THE HOSPITALITY MARKET? BECAUSE CERTAIN PEOPLE HAVE BEEN A LITTLE UPSET ABOUT THE RESORT FEE AND SO ON.>>I THINK, SOME THE ITEMS I MENTIONED, SUCH AS FOOD AND BEVERAGE ELEMENT, WE HAVE DOUBLE DECK ROOFTOP ON SOME OF THE HOTELS WHICH IS USUALLY HIP WITH LIFESTYLE AND THE YOUNGER CROWD BUT I THINK TECHNOLOGY IS A BIGGER PLAY TODAY WITH HOTELS, USING VARIOUS DIFFERENT APPS ON YOUR PHONE — AS I MENTIONED WE TALKED ABOUT RELATED TO REVIEWS THERE IS APPS NOW WHERE YOU CAN GET REAL-TIME GUEST REVIEWS FROM A GUEST ON AN APP SO THEY CAN GO RIGHT TO THE FRONT DESK AND TO HOUSEKEEPING, SO KEEPS PEOPLE INFORMED. I THINK CHECK IN AND CHECK OUT, IT IS A LOT SMOOTHER FOR GUESTS SO THEY DON’T HAVE TO WAIT BEHIND THE FRONT DESK. WE’VE INSTITUTED SOME NEW INITIATIVE WITH RESTAURANTS WHERE SOMEONE WANTS TO GO TO BED AT NIGHT, HE’S GOTTEN IN REAL LATE, HE CAN ORDER BREAKFAST TO GO THE NIGHT BEFORE ON AN APP AND PICK IT UP AND GO NEXT MORNING. I THINK TECHNOLOGY HAS REALLY BEEN A WAY TO ENHANCE.>>EVEN THOUGH 2019 HAS BEEN A LITTLE DIFFICULT, I THINK MY APPLE OVER THERE SEEMS TO BE RELATIVELY SHINY FOR THE HOSPITALITY MARKET. ESPECIALLY WITH 67 MILLION VISITORS. I THINK WELL-PLACED, WELL-DESIGNED HOTELS WITH THE RIGHT OPERATOR ARE GOING TO DO WELL. AND I WOULD LIKE TO THANK ADAM, SEAN, BRENDAN AND ASHISH. I WILL SEE YOU NEXT WEEK ♪ [THEME MUSIC] ♪