Consumer-focused REITs are finding that customers' spending has been steady, according to panelists at a Nov. 14 session during REITWorld 2012: NAREIT's Annual Convention for All Things REIT at the Manchester Grand Hyatt in San Diego. The panel of REIT CEOs also said they're seeing growing benefits from their use of technology.
The panel was moderated by Steven Sakwa, senior managing director with the ISI Group. Panelists included Jon Bortz, chairman and CEO of Pebblebrook Hotel Trust (NYSE: PEB); Daniel Hurwitz, president and CEO of DDR Inc. (NYSE: DDR); Spencer Kirk, chairman and CEO of Extra Space Storage Inc. (NYSE: EXR); and Robert Taubman, chairman, president and CEO of Taubman Centers Inc. (NYSE: TCO).
“Our customer base has an education and no fear of losing their jobs. Consumer spending has continued at extraordinary levels,” said Taubman, referring to his company's retail properties.
In the storage sector, Kirk noted that demand for his company's product is predicated on need, so the consumers will always be there.
“The interesting thing about self-storage is that it is need-based. Storage is recession-resistant because it does well in good times and in not so good times,” Kirk said. “With virtually no new supply coming to the market, it’s been a very good thing for our operators.”
The increased use and dependence on the Internet has meant different things for different sectors, according to the panelists. Yet, all agreed that they’ve been able to leverage the Internet and new technological applications to their advantage.
Kirk said that while the yellow pages phone book was once the main avenue for customers to find his company, it’s now obsolete today. Instead, the bulk of customers come from the Internet. Additionally, he said technology has allowed the company to take advantage of resources that smaller operators don't have.
“The single greatest asset we have today is our data on our customers,” said Kirk, adding that the data allow them to easily communicate with customer and change pricing based on how customers find them.
Bortz said one of the negatives in terms of technology is that various third-party sites have disconnected the hotel REIT from some of its customers.
“To a great extent, it’s taking value away from the brand and moving it to another player in the industry,” he said.
However, Bortz said that roughly 35 percent of his business comes from leisure customers. Most of the company’s customers come from business and group travel.
“What we’ve seen over the last four to six months is that businesses have gotten more concerned about their business and the fiscal cliff,” he said.
Despite what many thought, the Internet is not a threat to retail REITs, according Hurwitz.
“Conventional wisdom wouldn’t be wise if everyone said people shopped online and stopped coming into bricks-and-mortar stores,” he said. “The bottom line is we feel the Internet has been a great distribution channel for multi-channel retailers.”