Q & A with hotel consultant Roland de Milleret

The credit crunch has hit commercial appraisal firms hard. Hotel consultant Roland de Milleret, of the international hospitality consulting firm HVS, said the lack of financing has reduced his firm’s assignments in New York City from several dozen in the fourth quarter of 2007 to only a handful this quarter. De Milleret, a senior vice president of consulting and valuation at the firm’s Mineola, NY, office, specializes in the Manhattan market, where he has worked on more than 130 projects, and has worked on hotel projects such as the Four Seasons, the London NYC and Trump Soho. He spoke, in an interview with The Real Deal, about the current state of the valuation business and what he expects to see in the future.

How do you put a value on a hotel when so little is being bought and sold, creating very few comparables?

In terms of valuation there is very little activity. It is a kind of period when no one is really busy, nothing really is happening, but when things turn around, definitely developers will call us again and banks will call us again.

Were the valuations in 2006 and 2007 too high?

No. They were just reflecting the market at that time. Financing was readily available, and … [the] increases in average rate and revpar [revenue per room], were huge. Definitely that drives [up] the value.

Between the appraisal and consulting work, how much has volume slid this quarter compared to the fourth quarter of 2007 at your firm’s New York office?

It is about 20 to 25 percent of prior volume in a period when nothing really happens.  Where we might have done 40 projects in a quarter, now we are doing a handful [of projects].

Are you working on appraisals now?

At the moment we are not doing anything because it would be useless to the developers because nobody is looking at anything these days.

In 2006 and 2007 you provided valuations or consulting services for several high-profile projects, including the Four Seasons at 99 Church, and Shangri-la at 108 East 53rd Street, which are now delayed. If you did the analysis today, would your financial expectations be lower?

Those numbers would be down. It would be hard to say by how much they would be down, but … it would probably be 10 to 15 percent down.

Will the 7,000 hotel rooms PKF Consulting anticipates coming online in 2009, plus the approximately 66,000 rooms already in existence, harm valuations for new and existing hotels?

I don’t think the new supply is going to have a dramatic impact on the performance of the existing hotels. I don’t mean to say it won’t have an impact, but I don’t think the impact will be dramatic, and I don’t think it will be long-lived.