Expect a strong second half in the hotel REIT sector, according to Richard Smith, president and CEO of FelCor Lodging Trust (NYSE: FCH).
Smith spoke with REIT.com in a video interview at REITWeek 2012: NAREIT's Investor Forum. He covered both market fundamentals and his outlook for the second half of the year for hotel REITs.
"Fundamentals look very good right now, both from a corporate profit standpoint, which drives a lot of spending, and particular travel with regard to our industry," Smith said. "I anticipate that with supply being very low and demand growing pretty steadily, we will continue to see the second half of 2012 continue to be pretty bullish as far as the growth in the sector."
Smith said the only ominous sign on the horizon is the economic situation in Europe and the possibility of another liquidity crisis. That could result in corporate spending cuts and economic contraction.
Following a top-to-bottom overhaul of FelCor, the company continues to work on upgrading the quality of its portfolio and shoring up its balance sheet. FelCor is currently in the middle of a wave of asset sales, the proceeds from which will be used to pay off the company's debt.
"The great thing for FelCor right now is that while most of our peers are stable, we have the opportunity to move the needle a great deal more than most at this point," Smith said.
Looking at the potential for mergers and acquisitions in the near term, Smith acknowledged that FelCor has "a lot of room for growth," which is driving the company's planning for the time being. He noted that FelCor could serve as either a buyer or a seller of assets right now.
"If we're going to do anything from an M-and-A standpoint right now, then it has to reflect that," he said. Overall, Smith speculated that consolidation will occur in the second half, with FelCor taking part as both a buyer and a seller.
FelCor held its initial public offering in 1994. Today, the company has interests in 70 hotels and resorts spread across major U.S. cities.