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FelCor CEO Says Group Travel Slow to Recover

06/27/2013 | By Carisa Chappell

Rick Smith, president and CEO of FelCor Lodging Trust Inc. (NYSE: FCH), joined REIT.com for a CEO Spotlight video interview in Chicago at REITWeek 2013: NAREIT's Investor Forum.

FelCor Lodging Trust is a hotel REIT that went public in 1994 and today owns 66 primarily upper-upscale and luxury hotels located throughout the United States.

The company’s St. Petersburg property was recently named the top Renaissance brand hotel of all the hotels in that company’s U.S. portfolio. Smith discussed the key differentiator that separates a top hotel from one that is recognized as being great.

“I think that it starts with partnership. We have a very strong partnership with Marriott from the top down, both on the corporate level and on the ground in [St. Petersburg]. That partnership works very well to build a great hotel,” he said. “In fact, in 2012 our Marriott Square Hotel won the best hotel in the Americas for the Marriot system.”

In terms of the recovery of the business and leisure travel segments, Smith pointed out that there’s a distinction on the business side.

“Leisure travel and corporate transient travel are both very strong. What hasn’t come back as strong as what typically would have in this part of the cycle is corporate group,” he said.

Smith attributed that weakness in corporate group travel to “less non-essential spending happening.” He said companies want to have more cash on their balance sheets, meaning less spending on non-essential travel, including group meetings.

“Because of that, you’re seeing corporate group moderately pick up versus where it would typically be the cycle,” he said. “If that does come back, you‘ll see more compression, which will result in a spike in rates.”

According to Smith, while market fundamentals are strong and employment growth seems to be moving in the right direction, FelCor is working to make sure that its balance sheet is in a position that would enable the company to ride out all of the real estate cycles.

“I think we’ve done the things to mitigate a demand shock,” he said.