Hotels Filling, but Cutbacks Proceed
Despite a rebound in occupancy in recent days, the nation’s hoteliers have continued to slash staffs, postpone expansion plans and cancel property sales in the aftermath of terrorist attacks.
Occupancy rates still remain well below the levels recorded before the Sept. 11 attacks on the World Trade Center and the Pentagon, and the industry still faces the prospect of additional meeting cancellations and falling room rates, according to industry observers.
New York-based Starwood Hotels & Resorts, which owns the Sheraton, Westin and other hotel chains, began laying off the first of an estimated 10,000 employees this week--more than 20% of its work force. The companywide occupancy rate rose to 57% last weekend after sinking to as low as 30%. Starwood’s occupancy rate when the attacks occurred was in the mid-70% range.
Layoffs will take place across all the company’s chains, which include St. Regis and W Hotels, said Starwood spokeswoman Nadeen N. Ayala.
Starwood is one of the few major hotel chains to announce outright layoffs. Most companies, such as Marriott International and Beverly Hills-based Hilton Hotels Corp., have reduced employee schedules, sometimes sharply.
“We’re adjusting staffing levels to match up with slower business demand,” said Marriott spokesman Roger Conner, whose firm reports about half its rooms are empty. “Our people might be working two or three days a week instead of five.”
Marriott has not postponed or adjusted its expansion plans, but, like most other lodging firms, he said, “we have all development under review.”
Hilton has not scaled back plans to spend $235 million next year on improvements, renovations and expansion of company-owned hotels. But the company did delay for six months plans to build time-share properties in Las Vegas and Orlando.
“While we believe that it is prudent at this time to postpone these two projects for a short time, we are hopeful that business conditions in the U.S. will improve and that it will make sense to continue development,” said a statement issued by Hilton Hotels President Stephen F. Bollenbach.
Industry observers say that the list of postponed and canceled projects will grow as already jittery investors and lenders try to shield themselves from further turmoil. Hotel construction became difficult to finance earlier this year as the economy slowed and business travel dropped.
“The brakes were already being applied over the past year,” said industry consultant Eric Belfrage at Integra Realty Resources.
Many buyers have taken advantage of contract escape clauses to get out of hotel purchases, said Jim Butler, head of the hospitality group at Los Angeles law firm Jeffer, Mangels, Butler & Marmaro. One of his clients in Chicago saw two sales fall through after the buyers walked away.
“The buyers say ‘we’re interested,’ but want to wait and see what’s going to happen,” said Butler.
Hotel broker Alan Reay of the Atlas Hospitality Group said one buyer gave up a deposit and walked away from the $8-million purchase of an Anaheim hotel.
