I’ve read a lot of press accounts lately of hotels in trouble. In fact, the pace of lodging assets going into distress seems to be quickening. One explanation of course is the convergence of a depressed hotel market with poor financing and development choices. In other words, some developers overleveraged themselves and opened properties just as the market was turning ugly.
That’s true in many cases, but nearly as often it’s plain bone-headed development decisions—not just the economy or shaky financing—that has doomed some properties. That light bulb turned on for me this morning as I read a press account of the Se San Diego, a boutique property that filed for bankruptcy this week. Reasons cited by the owner were poor timing of the opening (December 2008) and a “crushing debt load.” Those issues are severe, to be sure, but an observation from consultant Robert Rauch really tells the story. He mused that the property’s real problems are more basic:
“It is a property that has an inferior location and no brand and a huge amount of debt in a terrible market,” he said to sum-up the situation.
Rauch provides a valuable lesson that hotel’s developer either forgot or never learned: An ill-conceived hotel will probably never be successful, even in an up market, and it makes no sense to violate the laws of the hotel jungle. Of course, the kicker in this situation is the developer made another dumb mistake in tacking 23 condos—all unsold—onto the project, as though that would have made it a viable proposition.
As Forrest Gump said, “Stupid is as stupid does.”

I recently attended the Elite Meetings Alliance, a gathering of luxury hotels and meeting planners at the new Terranea Resort in Rancho Palos Verdes, CA, and spoke to several directors of sales from luxury resorts in Arizona and every single one said they have had at least one group cancellation because of the state’s stringent law on immigration. They also said several potential bookings were on hold because of the law and boycotts. Early reports indicated backlash from the law could cost the Phoenix area $90 million in revenue.
And now maybe the one place hurting more than Arizona after last year’s recession and industry downturn, Las Vegas is facing similar legislation. Monday the Las Vegas Convention and Visitors Authority and the Nevada Resort Association filed a joint legal challenge to an initiative to enact legislation mirroring Arizona’s, according to this Las Vegas Sun story. The Nevada Immigration Verification Act could be voted on in 2011 and if enacted, could be the knockout punch to Nevada hospitality.
And a city’s recent proclamation nearly cost one of its hotels a convention, according to this LA Times story. After Costa Mesa’s declaration of being a “rule of law” city with regard to immigration, a California association looked into canceling a meeting at the Hilton Orange County in Costa Mesa.

As HITEC, the hotel industry’s top technology event, gets underway today, hotel owners, operators and, of course, technology geeks are in Orlando to find the next big thing in hospitality IT systems. Judging by the avalanche of pre-show press releases by many exhibitors, two trends are emerging for this year’s HITEC: cloud computing, or software as a service; and mobile technology, particularly applications for Apple’s iPad.
While SaaS has been a concept floating through hotel technology for many years, it’s startling how many tech suppliers have so quickly created applications for the iPad, a device that’s been on the market for less than five months. The questions will be how innovative the applications will be versus just being gimmicky and cool and how many vendors will have fully operating, ready-to-go-to-market iPad-based systems as opposed to theoretical mock-ups.
A final word regarding the HITEC venue: While nearly everyone I spoke to leading up to this year’s show expressed aversion to HITEC returning to Orlando (the main complaints are the oppressive heat and the vast distances between the hotels, convention center and the restaurants and other venues where many extra-curricular events are held), early word is that attendance is up, as it usually is when the event in held in central Florida. Go figure. Next year, HITEC returns to Austin, TX, also a hot place but much more fun and manageable. Many veteran HITECers long for the conference to revisit Minneapolis, the consensus all-time best venue for the event.

There wasn’t much major news coming out of the Asian American Hotel Owners Association after day one, but that could change today. Thursday was more about entertainment and style than information and substance–a heated debate between Karl Rove and Terry McAuliffe highlighted the main general session, which also included honoring many of AAHOA’s annual award winners.
The debate was like watching Fox News vs. MSNBC, both sides blaming the other over and over (Bush did this, Clinton/Obama did that), but the two rival strategists did finally agree to a personal $1,000 wager on predicted democratic losses in the next congressional election with the money going to an AAHOA scholarship fund. It was about the only topic the two agreed on, and that was difficult.
AAHOA also released its latest report on fair franchising, which included direct responses from the major hotel franchising companies who were responding to specific questions from the association and its members. Today, at the morning general session, the results of that may heat up as top execs (from Carlson, IHG, Choice, Wyndham, ACCOR and Marriott) face questions from members. More to come on that, and the entire event, Monday. Check back.
President Fred Schwartz said attendance was off 20 to 25 percent, but vendor participation on the trade floor wasn’t down. Although a few I spoke to weren’t thrilled with the traffic they were seeing. It’s the same story I’ve heard at just about every event I’ve attended this year.

Industry experts generally look to January’s Americas Lodging Investment Summit and last week’s New York University International Hospitality Industry Investment Conference to gauge the future direction of the hotel industry. But to get the real story, I can’t imagine a better place than the Navy Pier Convention Center in Chicago later this week. That’s when several thousand members of the Asian American Hotel Owners Association will gather for their annual conference.
The organization topped 10,000 members last November—in just its 20th year—and a recent report from PKF Hospitality Research showed those members own 40 percent of all hotels in the U.S., a whopping 20,156 properties with 1.8 million rooms. They employ almost 600,000 employees, who are paid almost $10 billion a year in salary, and they spend $31 billion a year on operating costs and $900 million on capital improvements. Of those 20,156 hotels, 75.3 percent are limited service and 62.9 percent are branded.
If you want to hear what’s going on at the ground level of the hotel industry, this is the place to be.

A new study from Ypartnership and Harrison Group confirms what most hoteliers have known since the beginning of the recession: no matter what, American consumers are still going to travel. The trick, of course, is to capture more than your fair share of that business. And, according to the study, that’s done through value, deals and, I hate to say it, lower rates.
The survey of 2,500 households with annual incomes of more than $50,000 showed the group averaged four leisure trips in the past 12 months; 16 percent say they’ll take more trips this year than last; and two-thirds will take the same number as last year.
And since most of those surveyed say the economy is forcing them to moderate their shopping and consumption behavior, they’re all looking for deals and special offers or to trade down in their travel choices. More than a third say they’re more interested in coupons of direct offers this year than last. An equal number look for sales. And it logically follows that these travelers turn to the Internet to plan and shop their travel.
However, in what should be a jolting data point for hotel marketers, 66 percent of the group say they use online travel agencies (Expedia, Travelocity, Orbitz) to book travel, versus 48 percent who use branded sites (Hilton.com, Hertz.com). Just a few (15 percent) turn to meta search sites such as Kayak or Dealbase.
The bottom line is that Americans still consider travel a birthright and they’re not willing to give it up. However, at the same time, no one wants to pay retail anymore, so you’d better be creative in your marketing, i.e., produce value as cleverly as you can, in order to beat your competitors.

Schizophrenia reigns at the New York University International Hospitality Industry Investment Conference underway this week at the Marriott Marquis in New York City. On one hand, a lot of speakers and attendees are proclaiming optimism for the short- and medium-term future of the hotel industry. Even Arne Sorenson, president and COO of the typically conservative Marriott International, said he’s “wildly optimistic” about the industry, predicting “rates will come back (rise) soon and, in fact, are already beginning to do so in some markets and segments.”
Predictably, other CEOs at an opening general session before a throng that surely was larger than last year’s crowd were more circumspect. Andy Cosslett of IHG said the “clouds are lifting, but there is still reason to be quite cautious,” citing the fragile economic climate in Europe as example. And Mark Hoplamazian of Hyatt believes we’re at the “very, very early stages of what feels like a recovery.” His concern, however, is the state of the larger economy, especially jobs and housing prices.
Everyone seemed to agree the luxury and, to a lesser extent, upper upscale segments of the market will lead the way to recovery. Mark Lommano’s updated industry forecast shows luxury occupancy rising 8.2 percent this year. And while rates will only be up slightly, RevPAR should increase by 8.5 percent. RevPAR for the whole industry should be up by 3.0 percent this year, said Lommano.
“The death of luxury lodging is poppycock,” said Sorenson, noting that RevPAR for Ritz-Carlson is growing faster than any other Marriott brand. “Even during an economic decline, luxury hotels have distinct advantages in facilities and abilities to provide guests with unique experiences.”
Another divergence of opinion at the conference concerns the transactions market. A report released yesterday by Jones Lang LaSalle Hotels indicates that improving industry fundamentals are driving more buyers and sellers to market.
“The outlook for hotel investors is on the upswing,” said JLL CEO Art Adler in releasing the report. “There is a clear consensus that values of hotel assets—ranging from select-service properties to luxury hotels—firmed during the past three to six months, laying the foundation for a more congruous understanding of value.”
Yet, talk around the halls, bars and cocktail parties during the conference seems to contradict that notion that transactions volumes are about to increase exponentially. Most attendees still say financing is difficult, or nearly impossible, to find for most any kind of lodging deals.
“Private equity is about the only money available for any kind of transactions,” one president of an ownership group told me. “And the untold story still to come is the amount of distressed properties that have yet to boil to the surface.”

A quick follow-up to my earlier news story about the impact of the oil spill on Gulf Coast hotels and resorts…. An updated survey from The Knowland Group reveals 60 percent of surveyed hotels (50 across the Gulf Coast) say they’ve experienced group booking cancellations, an 18-percent increase from the same survey done two weeks ago and 25 percent more than the original one conducted a month ago.
Twenty-eight percent of the surveyed hotels say they’ve had difficulty booking future events. Memorial Day weekend results were mixed; 39 percent said they had cancellations related to the oil, but some hotels said bookings from clean-up workers and responders helped make up the difference.

Today’s launch of Lodging Hospitality’s Hotel Development Center marks the latest chapter in the evolution of LHOnline.com. Now, in addition to daily news, feature and opinion stories brought to you by the Lodging Hospitality editorial team, the Hotel Development Center is the one-stop shop of resources for hotel owners, operators and developers.
Find information, contacts and links to industry events, associations and consultants, as well as to the top management, brand, purchasing and design companies. Try out the Franchise Calculator to compare annual fees from all the major brands, or peruse the Franchise Fact File for a breakdown of what those costs are. All the content is available to download in easy-to-read PDFs, or bookmark LHOnline.com to keep all these resources at your fingertips.
Also check out the new poll question, now in an easier-to-use format at the bottom right of LHOnline.com. The current question, about your company’s use of mobile applications, is a teaser to the June 15 cover story on how hotel companies are using this new technology.
Bookmark LHOnline.com to keep abreast of the hotel industry. Check back every morning for an exclusive story of the day and take a look at the Front-Desk Blog for insight, analysis and wit (or not). Today’s Top Reads are brief descriptions and links to the top hotel-related news from around the country. Read LHOnline to stay informed of issues and news that are important to you, and now use our handy Hotel Development Center as an encyclopedia of resources you need to do your job.
Beginning next week, the LHeReport will broadcast weekly, every Tuesday, from here on out. As always, please email eric.stoessel@penton.com with any comments, suggestions or criticism. Lodging Hospitality is the magazine and website for you, the hotel owner, operator and developer.