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CEO Spotlight: Barnello Says Market Still Favorable for Lodging

12/12/2013 | By Mitch Irzinski

Michael Barnello, president and CEO of LaSalle Hotel Properties (NYSE: LHO), joined REIT.com for a CEO Spotlight video interview at REITWorld 2013: NAREIT’s Annual Convention for All Things REIT at the San Francisco Marriott Marquis.

Barnello was asked if he expects the current strength of the lodging sector to hold up in 2014.

“We think so,” he said. “The supply-and-demand dynamics set up very favorably for owners and operators. We’re in an environment right now where supply is lower than the historical averages, and demand has been higher than historical averages. Things are setting up to continue on that track for 2014, so we feel like we’re in a sturdy part of the cycle.”

Barnello discussed the areas where he sees the best return on investment when redeveloping properties and how often he feels that his company’s properties need to undergo a significant renovation.

“We do spend a lot of time working on renovating our properties,” he said. “When you talk about how often a renovation needs to occur, the general cycle is five to seven years. There are some properties that can go a little longer, depending on the condition, and there are some properties that, because of the design, the design might be a little more susceptible to being beat up. Then, we’d have to renovate a little earlier.”

Barnello talked about appeal markets for potential expansion.

“We did three deals in San Francisco in August, and, hands down, San Francisco is one of the best markets in the country,” he said. “Demand continues to be very strong, and supply is almost negligible for the next couple of years. So, we love a market like San Francisco. The other place we just did a deal was in Key West, and that has really fantastic supply-and-demand characteristics as well. The supply is, again, almost nothing over the next couple of years, and the demand continues to be strong. So, those are the kind of markets that we try and look for across the country.”