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We watched the final Presidential debate last night and we won’t bore you with our interpretation, but the facts suggest that Obama increased his lead this morning as he is now trading at 84.6 on Intrade (www.intrade.com) versus McCain at 15.3. As we hammered home in some detail yesterday, it is likely the Obama and the Democrats will win on November 4th and win big. As part of our Obamerica theme, Tood Jordan posted yesterday on his portal about the potential union and wage implications of an Obama presidency, which we have reprinted below. This is a key theme that you should be focused on going into the next four years of Obamerica.


Every consumer analyst needs to start preparing for a pro-union Senate, House, and President. Start by analyzing HOT’s margins.
“We will pass the Employee Free Choice Act. It’s not a matter of if, it’s a matter of when.” – Barack Obama

“Madam Speaker, I rise today in support of the Employee Free Choice Act, because the right to organize is essential to the path to prosperity for all Americans.” – Speaker of the House Nancy Pelosi

“Every single Senator ought to support this bill.” – Senate Majority Leader Harry Reid

These quotes should remove any doubt. If Obama is elected President, the Employee Free Choice Act will become law. Whether or not the removal of secret ballots in deciding union elections makes employees more free is not important. Since 1989, unions have contributed almost $500 million to political campaigns. Over 90% of that cash has gone to Democrats. The favor will be paid back by an Obama administration and a Democratic congress.

So what does this mean? The elimination of secret ballots will make it much easier to unionize. Secret ballots are the cornerstone of any modern democracy for a reason. People can vote without the pressure that an open petition would apply. More unions = higher wages and benefits for hotel, casino, and leisure companies to name just a few.

Margins are going down over the next few years and not just because the top line is under pressure. Sorry to pick on Starwood but the hotel industry is pretty easy to analyze in this regard. The consensus EBITDA margin estimate for HOT declines only 80 basis points in 2009. With likely RevPAR declines of at least low to mid single digits, this projection is laughable.

A note to analysts: labor costs are going up not down.

Daryl G. Jones
Managing Director