Infotheque Network

Interesting reading, in particular when considering the blown out of proportion "lifestyle" area around Loscabos. We all see how the recession did affect that area and the people living and working there. (Yeah, the editor does know: we just see things NOT the right way and without having a vision..... sure...!!) Luxury hotels with $1,000-a-night room rates and extravagant resorts may face a tougher recovery than the rest of the industry. "The most over-the-top excesses will probably be a long time -- if ever-- coming back," Marriott President Arne Sorenson told the Reuters Travel and Leisure Summit. He drew a distinction between these hotels and the typical Ritz-Carlton luxury hotels the company operates. Marriott's other brands include its namesake properties and Courtyards. Sorenson added that some projects in the Caribbean, which tend to be smaller and partly rely on residences, "may never come back" because they rely on the kind of lavish spending that has gone out of vogue with travelers. "They require really that conspicuous consumption to support their entire business model," Sorenson told reporters in a telephone interview. Of all hotels, luxury properties were the hardest hit last year. While rates sank nearly 9 percent for the U.S. hotel industry, luxury hotels saw their rates tumble more than 16 percent, according to PricewaterhouseCoopers.
Many hotels across the spectrum have buckled under their debt loads in this downturn, as lower room rates constrain cash flow used to service these payments. The Renaissance Mayflower Hotel indicated last year that it would no longer be able to meet debt service, Fitch Ratings said last month.
Ritz-Carlton Hotel Co, a division of Marriott, will close its Lake Las Vegas property this year. Some distressed properties have bristled against standards set by companies like Marriott. Sorenson said the company is working with some hotels to manage their payments, and has extended the deadline for hotels to put flat-screen television sets in rooms.
"We've also got some one-off owners who just don't have two nickels to rub together," Sorenson said. "If it goes too long or if it is too severe, that is a place where the response is really to pull the flag." Chief Financial Officer Carl Berquist and Sorenson said typically 5,000 rooms leave the Marriott system each year, but this year a few thousand more rooms could be shown the door.
These properties would largely fall in the limited-service category in tertiary markets. In the event that a hotel goes into foreclosure, Marriott has "non-disturbance agreements" on many hotels, which prevents that hotel from leaving its brand, Berquist said.
Widespread distress in the hotel industry, lower rates and tough economic conditions do not mean all luxury hotels will go belly-up, Sorenson said. Some of these hotels will be able to restructure their debt with their lenders. "There's a whole bunch of hotels that are in established destinations, dealing with meaningfully lower rates," Sorenson said. "Over the next number of years (these hotels) are going to see their owners work with their lenders."
Interesting reading for one living at Baja Sur with all of it's Baja luxury.... Read that and the next post and then go back to our post last year about the 'W" of double-dip and build yourself a opinion....

Economist Nouriel Roubini who rose to prominence for predicting the global credit crisis, tore down the "green shoots" theory that a rebound is imminent, saying there was a significant risk of a "double-dip" recession where the economy expands slightly only to begin contracting again.
There is no real need to discuss the statements made in regards the economy and the publisher here thinks also that at a slow pace the message arrived with the "established elite" at Baja - there is a slight time delay yet predictions made and that proof to be true in the rest of the economic world also arrive at Baja. Just take a day or 2 and drive around. How many of the highly hailed "luxury developments" in the world are on hold or progress at a very slow pace?? How come?? If the crisis has no impact here at Baja and the economic drifts that do touch about almost every person one way or the other don't apply to Baja California why is there struggle??

The U.S. economy appears destined for several years of weak growth and high unemployment that leave it vulnerable to a recession relapse after the massive dose of government stimulus wears off. While tepid growth looks likely to resume late this year and build modestly into 2010, the credit bust has left households and businesses unable or unwilling to borrow and spend as freely as they did before the crisis.

Jeffrey Rosenberg, head of global credit strategy at Banc of America Securities Merrill Lynch in New York. thinks the U.S. economy may trudge along at a sluggish growth rate somewhere in the range of 0.5 percent to 1.5 percent while banks recover from the credit crisis, which could take another three years. "If that's what you're able to generate, that economy is not generating the job growth required to bring the unemployment rate down," Rosenberg said. This is a much darker outlook than the one put forward by President Barack Obama's administration in its latest budget projections, which show economic growth bouncing back to 3.2 percent next year and hitting 4.6 percent by 2012.

The gloomier scenario assumes that banks take years to recover from losses that some economists think could reach $4 trillion; consumers curb borrowing and spending as they repair the $11.2 trillion hole blown through their savings last year; and the explosion in government debt drives up interest rates. If the forecast proves accurate, it would leave the economy susceptible to a shock, such as a big jump in oil prices, and could force the United States to issue even more debt than investors expect. That would likely increase borrowing costs, both for the government and the private sector.

read the whole report at Reuters

Mexico's economy shrank 8.2 percent in the first quarter, even before the swine flu stalled commerce, and appears headed for its biggest contraction since the Tequila Crisis stalled growth in 1995. The decline was led by a 13.8 percent plunge in manufacturing activity, followed by a 7.7 percent drop in construction compared to the same quarter of 2008, the national statistics agency announced Wednesday. Economists at Grupo Financiero Banamex, one of Mexico's biggest banks, had predicted a 7.7 percent contraction overall.

Finance Minister Agustin Carstens declared Mexico in recession on May 7, predicting its economy would shrink by 4.1 percent this year.The Central Bank forecasts a 4.8 percent contraction, while Banamex expects negative growth of 5.2 percent. Mexico has been pummeled as U.S. economic woes drive down exports, foreign investment, tourism and money sent home by migrants, four main pillars of Mexico's $1 trillion economy.

The global economic crisis has also choked credit for Mexican companies and consumers, all but ending a half-decade explosion in lending. And the crisis weakened currencies across emerging markets, sending Mexico's peso tumbling by as much as a third against the U.S. dollar and costing local companies steep losses on derivatives bets on the peso.

Read more on this report here...