All posts by Keith Thompson

Knowing the sales pitch in advance

Life

When you have been selling as long as I have you learn a few things. I play this game when we are looking at buying something for the company or personally. I try to figure out the sales pitch before it even happens and see how close I come to it. Last night was a perfect example.

The garage door opener where I park my car had broken a month ago. I have been parking in the driveway for the last month and my beautiful and patient wife told me the other day, either you get it fixed or I will. So here we go.

I called the garage door repair company yesterday and they sent this guy out who I liked instantly because he used to be in the Marine Corp. Great guy. So before he got there, I told Elaine, “he will say that the existing opener is too old to order replacement parts, I can replace it with a new one, it will cost $589.00 and I happen to have one on my truck and can do the work right now.”

The guy gets to the house and within 7 minutes he says to me “the existing opener is too old to order replacement parts, I can replace it with a new one, it will cost $599.00 and I happen to have one on my truck and can do the work right now.” Ha. Was I right or was I right?

This ex-Marine who is my newest bud, reaches in the sales bag and pulls out an even better doozy. He says “since you have three garage doors I can replace all three for $450 each including all the taxes and installation and they will all match.

I bought three garage door openers last night. I just love a real salesman. Can’t help myself. KT

Rebuking the devourer

Life

Two of the most important passages of scripture to me is Malachi 3:10 and 3:11. The first versus speaks about being a tither and the second verse states what God will do on your behalf if you are a tither. What verse 11 says is “I will rebuke the devourer for your sake and he will not destroy the fruits of your ground neither shall your vine cast her fruit before the time in the field, saith the Lord of Hosts.” The devourer is the devil or others that are trying to harm you and the fruit and vine represent your life, your work and your family. It means what you are working toward will not be like a piece of fruit that falls from its vine and rots on the ground. He will see to it that your fruit stays on the vine until it is fully ripe and ready for harvest.

A good writer could talk about this passage of scripture for 20 pages. I will just use use a couple of paragraphs.

What this scripture means is that if you are a tither, God will fight the fight for you against the one or ones trying to hurt you. It says he will rebuke the devourer or in other words he will handle the people trying to harm you. He says “I have it handled,” and if he has it handled it means I don’t have to carry envy, anger and strife and jealousy against my enemies. The 23rd psalm says he will prepare a table before you in the presence of your enemies. So I ask you, where are your enemies? Are they in heaven or here on the earth? Yea, mine are here on earth too.

I didn’t do what I am about to say but I almost did. I have this past friend that was really trying to harm me professionally. He doesn’t know to this day that I know what he did. I almost called him, not to raise my voice to him but to tell him as a friend, don’t try to harm me because I am a tither and you need to be careful. Again, I didn’t do that but you can sense from the idea how much I believe in this passage of scripture.

If you are a tither, when people try to harm or hurt you with actions and or words just go tell God on them. Do like you used to do with your brother or your sister when you went and told your mom or dad what they did. When you tell him, he already knows what you are going to say. Just leave the retribution to him instead of letting yourself get all out of sorts over the issue. If there is anything true about God, he is exact, perfect, timely and never fails to do what he says he will do. KT

Last look

Career, Family, Life

In the movie Mr. Holland’s Opus, Richard Dreyfuss had been a band teacher for some 30-35 years in the same band room at the same high school. The movie has him being downsized after a long career. On his last day he was cleaning out all his personal effects and putting it all in boxes. After all the boxes had been packed and carried to the car he is leaving his band room for the last time. It shows him walking to the door and reaching to turn off the light and he pauses and looks back at the band room with what I call the “last look.” He is remembering all the times and all the memories of his life that were captured in that room. It is that last look that I want to talk about.

When I think of retiring, its scares me. I mean it really scares me. The idea that one day I will have aged beyond being effective is an idea that is very humbling. We all know that day is coming and there isn’t any way to go around it. One day it will be that day. I have watched many older folks in my line of work force themselves to stay longer than they are effective and I refuse to be one of those people.

This last week I was going into a presentation in Dallas and had some time before the meeting began so I was sitting there drinking some coffee and thinking about these things. All the people in the office were early 20’s to late 30’s. As I watched them all go about their work I knew that one day, it won’t be me in that meeting. It will be the generation behind mine.

A smart young lady (my daughter) once told me that before you retire from the main thing, you need to have already started the next thing. She said don’t wait till you leave one phase to begin the next phase. Pretty smart right?

A few weeks ago we sold our lake house that we have owned for 13 years. We bought the house when my oldest daughter (now 32) was a freshman in college and our youngest daughter (now 28) was still in high school. There were many many lake trips, dinners, fireside chats, events and even a few hammerhead boys my daughters brought to the lake. All those events formed our memories at that house. All those memories are precious to me as I look at the pictures that captured the moments through the years. When we sold the house and moved all the stuff out, I did one “last look” at the inside of the house where we have all good memories.

So what am I saying here? Don’t wait till the “Last Look” to start on the next venture of your life because it will keep you alive, alert, fresh and full of hope for the future. KT

Being good at something

Family, Life

In life I think we all need something that we are good at. You don’t have to be the founder of the world to know in your heart that you are good at something. It could be you care for others, you help others, you give to others, you sing, you write, you are good at your work, your yard is the best in the neighborhood, you speak well, you teach well and the list could go on for page after page.

I was thinking about this very thing this week before a meeting. For some reason I love selling hotels and have been doing an ok job at it for 25 years. There are so many areas of my life where I am not so good like skiing, basketball, speaking, writing, and teaching and of course that list could also go on for page after page.

While I was sitting there before that meeting, I wondered what it would be like to be to any specialty what Michael Jordan was to basketball, Roger Federer is to Tennis, Bill Gates is to technology, Billy Graham was to the gospel, Jack Nicklaus was to Golf, Steve Jobs was to inventions, Frankie Valli was to music, Warren Buffett is to investing, and Hershel Walker was to UGA football? I am talking about being the “Market Maker” at a specialty that becomes the bench mark for everyone else. In all the above examples, these people came on the scene and changed the future of their specialty. I think of Roger Bannister when he broke the 4 minute mile in 1954. Before him it was not thought possible because many had tried and no one had succeeded in breaking the 4 minute mark. Here is the interesting part, within one year after Roger Bannister broke the 4 min record, there were 24 other runners that broke the 4 min mark. Sometimes we just need to see someone else prove it can be done.

These people listed above are in such rare company because through history there are only a very few that ever come along. Being the best at something should never be our goal. I think our goal should be being the best WE can be at something. That’s really all you can do. Once you have done your best, that is all there is. I think that should be our objective. It is not inventing something that will change the world, rather it could be you are a good listener and friend to others or you excel at your job. Whatever it is, I believe a sense of accomplishment happens when you try your best and become proficient at something.

The term “one thing” is a very common theme through religion and history. I think it can also apply to being good at something. Pick one thing and make up your mind that you will do the best you can. While I don’t this to be true, I don’t know of an athlete that is the very best in two sports. Many gifted athletes are good in many sports but they usually are only great at one. All we need is the one thing that we are good at that challenges us to really try. It’s the really trying part that I believe everyone needs to have in their life. So go be good at something. KT

Where Are We in the Current Market Cycle?

Career

This blog post is for any hotel real estate folks that may read this blog.

 

I am often asked where I believe we are in the current market cycle. If we were in a boxing match, I believe we just heard the bell ring to start the last round. If we were at a baseball game, I believe we are in the bottom of the eighth inning. If we were slalom water skiing, we just cleared the 2nd buoy at 43’ off. Note; only a water skier will understand that last one.

So to answer the question, in my opinion, we are close to the next market cycle change.

Last week, I heard hotel debt being quoted as an interest only loan. It took me back to January 2007. That was the last time I remember anyone seriously pitching an interest only loan as the way to make a deal underwrite. If an interest only loan is the way you make your deal pencil, my suggestion is to put your hands in the air and back away slowly.

Let’s cover a little history. There were 11 recessions from 1948 to 2010. They all varied in length, severity and duration. During that 62-year period and covering 11 recessions, it took on average 10 months for the market to fall to its low point. It took on average 57 months for the market to reach stability. If that is correct, on average it took six times longer for recovery than for the recession.

When 911 happened, I remember we had 10 to 15 hotels under contract and within a couple of weeks we had zero under contract. That cycle was very different from any past downturn. The market had already begun to fall sharply in the 1st quarter of 2001 with RevPAR off double digits in most of the top 10 markets. By summer 2001, things were in steep decline and concern was everywhere. When 911 happened in September, the bottom fell out of all economic measuring data and the decline was instant. The decline was so steep and deep, it actually bottomed out the economy much quicker than expected which allowed for a shorter recover time. In most cycles a slow decline manifests itself in an even slower recovery. During 911, the decline was almost instant and looking back in retrospect, that quick decline allowed the market to bounce back somewhat quicker than expected.

Let’s look at the last economic cycle as an example. The fall began in October 2007 when the CMBS hotel debt market faltered. Make no mistake, the catalyst that started the last hotel real estate recession was the failure of the secondary debt market and that began in October 2007.

During the ALIS conference in January 2008, we began to see the raw data pointing to a down cycle. The opinions at the time were that the cycle would be short, shallow and quick. No one saw it lasting very long and certainly no one thought it would be that deep. By March 2008, slight concern was replaced by real concern. By May, concern was replaced with denial. By July, denial was replaced with anxiety, and then in September, anxiety was replaced with real fear.

In September 2008, the hotel real estate market fell over the ledge and didn’t begin to stabilize until March 2010. It was an 18-month freefall in RevPAR, EBITDA, NOI and real estate value.

So here we sit in the 3rd quarter of 2015 watching LTV’s rise, DCR’s fall, yields constricting, PPR’s escalating, replacement values exceeded, interest only loans and today’s values based on unpredictable IRR rather than actual return. Couple all these factors with the growing risk in the current securitized hotel debt pools along with the plethora of older securitized hotel debt coming to term over the next 12 months, and it should give all of us some pause. So, yes, I am concerned that we are nearing a cycle change.