Michael Barnello, president and CEO of LaSalle Hotel Properties (NYSE: LHO), joined REIT.com for a CEO Spotlight video interview at the St. Regis Hotel in Washington, D.C. during NAREIT’s 2014 Washington Leadership Forum.
Barnello discussed the company’s strong results in 2013 and offered a perspective on developments in 2014.
Barnello attributed gains in 2013 to the ability of hotel operators to increase rates as well as actions taken by the company’s asset management team. “Between the two of those… we had fantastic margins,” he said.
Turning to current market conditions, Barnello remarked that LaSalle is positioned to continue to raise rates.
“When we think about where we are in the cycle, we’re really in a great position from a supply-and-demand perspective, which really favors the owners and the operators, and as such, we’re able to… push rates as much as we can,” Barnello said. Most of LaSalle’s markets are actually at peak demand level, Barnello observed, while several markets have very little supply coming along.
Barnello noted that LaSalle hit the highest average daily rate in 2013. However, if rates were adjusted for the hotels that the company owns today and also adjusted for inflation, “our rate would be significantly above where we reported,” he said.
Meanwhile, Barnello underscored that the company’s historic pro-forma peak margins are almost 400 basis points higher than those achieved in 2013. “Despite the fact that 2013 was a record, we have a ways to go to get to our peak margins, and that’s what we’re striving to achieve in 2014 and beyond,” he said.
Turning to LaSalle’s balance sheet, Barnello said the company is in “great shape.” The balance sheet has a very low leverage level of 3.9 times debt to earnings before interest, taxes, depreciation and amortization (EBITDA), and “we’re very comfortable with that,” he noted.
In terms of the outlook for acquisitions, Barnello observed that the competition for assets has always been “pretty stiff.” He emphasized that while LaSalle is open to considering new markets, “we like the performance in our current markets.”