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Subject:  Re: LHO: Solid Hotel REIT + Yield Date:  5/17/2015  5:14 PM
Author:  Reitnut Number:  78372 of 86785

One important thing to remember is that lodging/travel is fairly economically sensitive and this coupled with the segments lack of long term leases at least to the end customer makes these REITs economically sensitive in my opinion.

There is no question about that. For this reason, it is unlike virtually any other commercial real estate sector. And supply can creep up on us quickly, although that usually begins with the limited service sector where entitlements are easier to obtain and the building costs are much less. We DO need to watch the supply situation carefully in this sector; right now, there is a bit too much new supply in NYC, for example. But, generally speaking, we are at least a year away from having to worry seriously about this potentially negative force.

For hotels in some of the more tourist areas I wonder is the strong dollar might have an effect on occupancy rates, especially since there are a few minor signs of a possible U.S. economic slow down.

Yes, the strong US dollar is a worry for hotel REIT investors, but it's too early to know how big an impact it will have. LHO's four largest markets are SF, Boston, SD, DC and NYC, so we need to watch this carefully. However, LHO maintained full-year RevPar projections when it released its Q1 results about three weeks ago.

Bottom line: I do like LHO, but like all hotel REITs, we cannot put it on auto-pilot.

Ralph
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