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Sunstone CEO Says Hotel Sector Seeing 'Healthy Recovery'

07/11/2013 | By Allen Kenney

Ken Cruse, CEO of Sunstone Hotel Investors, Inc. (NYSE: SHO), joined REIT.com for a CEO Spotlight video interview in Chicago at REITWeek 2013: NAREIT’s Investor Forum.

Sunstone Hotel Investors, Inc. (NYSE:SHO) is a lodging REIT that has interests in 27 hotels with an aggregate of 11,882 rooms primarily in the upper-upscale segment. The properties are operated under brands such as Marriott, Hyatt, Hilton, Starwood and Fairmont. Sunstone Hotel Investors is based out of Aliso Viejo, Calif.

Cruse offered an update on current conditions in the lodging sector.

“Business travelers are hitting the road in record numbers,” Cruse said. “Leisure travelers are coming back very strongly.”

Cruse also noted that while group business has been a “laggard” during the sector’s recovery, that segment of the market is strengthening as well.

“As a result, industry occupancies are at around prior peak levels, close to 80 percent,” he said. “Industry rates are also approaching prior peak levels, although they’re slightly behind there. Thing are generally good. We’re tied up with the broader economy, so, as with any cyclical recovery, you’ve seen fits and starts and little bumps along the way. But, in general, it has been a very healthy recovery. I think we’re entering into what we would characterize as the sweet spot of this recovery, in that now that we’re at peak occupancy levels, we can start to drive more and more of our demand through rate, which translates into much better profitability for our hotels.”

Cruse discussed some of his company’s strategies for attracting customers in light of the upturn. He indicated that Sunstone is looking at aspects of its properties such as fitness facilities and the integrating the layouts of their public areas—lobbies, restaurants, bars and the like.

“It creates a system where customers enjoy spending time—whether it’s socializing, working, interacting, eating, drinking,” Cruse said. “They stay on our property longer. They spend more money in our hotel. Everybody is happy.”

Cruse was asked about the proximity of the hotel sector to reaching a full recovery. That’s a “nebulous concept” in the hotel business, according to Cruse.