John R. Thompson
This week, the Baker Program concluded its Distinguished Speaker Series through an insightful conversation with JLL’s Arthur Adler. Art is a distinguished alumnus from the Hotel School and has four decades of experience in American real estate, specifically in the hospitality industry. He has been with Jones Lang Lasalle for 18 years, and currently serves as the Chairman of the company’s Americas Division for Hotels and Hospitality. In addition to his leadership role at JLL, Mr. Adler has been a long-time supporter and advisor to Cornell’s Hotel School, and currently sits on the Dean’s Advisory Board.
JLL is the second largest real estate brokerage in the world, and as the head of American hospitality, Adler is responsible for the oversight of over $10 billion dollars in hotel transactions per year. Adler expressed the complexity of his role by highlighting the industry’s constantly changing landscape. JLL’s hospitality division was affected by the Global Financial Crisis significantly more than its other asset classes, having experienced a decline in revenue of over 90 percent during this period. This was due primarily to the massive decline in transactions, where JLL derives most of its income. Since then, Adler has had to reinvent the department by substantially increasing the advisory services arm he views as a more stable revenue source.
Adler also cited dis-intermediation as one of the largest challenges for the industry moving forward. Hotel owners and operators are forfeiting an increasing share of their revenues to online booking platforms rather than travel agents. Booking platforms take 15-20 percent of room rates in addition to the 10 percent in added management fees paid to their operating partners. Contrary to popular buzz, however, Adler is not concerned about technological disruption in the industry. Hospitality is too experiential, he contends, to replace that physical experience with a virtual one.
Overall, Mr. Adler is optimistic about the hotel industry. US RevPAR, a popular indicator of hotel performance, remains strong in 2018 at 3.5 percent growth, and demand continues to outpace supply. He also remarked that this recovery was the longest and most subdued he has ever experienced, indicating that the economy is poised for a soft landing sometime within the next two years. In the meantime, hotels continue to be an attractive vehicle for global investment because of their historically high returns. Investors are increasingly looking to deploy capital in real estate not only because assets are physical, but also because the U.S. market is a uniquely powerful tool for capital preservation.
Our guest departed with a final token of wisdom: the Cornell network will be a powerful tool throughout our careers. Art has worked with numerous members of the Cornell alumni over the years, and he could not stress enough the importance of building close relationships. He maintains that, in real estate and hospitality, the most capable leaders come out of Ithaca.