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Supply worries will continue for years, LaSalle execs say


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Supply worries will continue for years, LaSalle execs say

LaSalle Hotel Propertiesremains concerned about new lodging supply through 2018, despite some indicationsthat hotel financing has tightened,President and CEO Mike Barnello said in an earnings conference call.

Supply in most of the company's markets, largely coastal urbancenters, is expected to accelerate in 2017, with continued growth in the followingyear, Barnello said.

"We've heard anecdotally that it is tougher to get dealsdone that have not been announced," Barnello said, asked about reports of aconstruction lending slowdown. "But as far as us looking at our supply study,and taking deals off of that supply study for any of our markets, we have not seenthat."

Demand growth was also uninspiring in the second quarter, measuring3.7% year over year in April, 1.1% in May and 1.9% in June.

LaSalle's quarterly results are of keen interest to the company'shospitality REIT peers, partly because it is among the first members of the groupto report earnings, and in part because the company's management team has been pessimistic about the state of the lodging cycle in recentmonths.

Total second-quarter RevPAR growth was 3.5%, with the overalldemand trend and rising supply keeping the company's leaders cautious on industryfundamentals, Barnello said. Despite the negative trends, he added, pricing on acquisitionshas not appeared to decline, making the company reluctant to acquire new properties.

Similarly, the company is waiting for industry fundamentals tostabilize before moving to buy back stock, though it has a repurchase authorizationin place, Barnello said.

Only the timing of the Easter holiday kept RevPAR from decliningin the second quarter, averting the seventh straight quarterly decline, he said.

"When we think about that relative to buybacks, and wherewe're going to end up, we'd just like to see some bottoming of that, and perhapsan uptick, before we would do something," he said.