Business Travel Demand

Our properties derive most of their revenues from transient business travelers and group meeting attendees. The demand for each of these types of travel is affected by the state of the economy. Businesses alter travel plans according to their expected changes in future profitability and the perceived efficacy of travel increasing the demand for their products or services.

The group meeting business is closely tied to the economy because it is dominated by sales meetings, new product introductions, and training meetings. These activities fall off sharply in a recession and typically only recover after corporate profits have rebounded. We believe that such a recovery will begin within the next 12-18 months, fueled primarily by new product innovation and development resulting from university research and business development incentives provided by federal, state, and local governments.

Portfolio Diversification

Our strategy for coping with changes in the economic environment is to diversify our holdings by economic regions or "belts".  Each region exhibits desirable characteristics that make our hotel investments attractive.  The purpose of diversifying by this method is to benefit from the long-accepted theory that the economic ebb and flow of the various regions are not correlated, thereby reducing the portfolio’s volatility.

Asset Sales

Finally, our portfolio divestiture strategy is for our Investment Committee to continually monitor and review each asset on a semi-annual basis to determine if it continues to meet our objectives with regard to cash distributions, growth in funds from operations, and increases in net asset value.  If the Investment Committee determines that it is appropriate and market conditions are favorable, we sell each asset and distribute its net proceeds to our investors.