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Can Hotels Survive the Convention Crisis?
As hoteliers put to rest a year of upheaval, uncertainty, and financial strain, the predictions are already in for 2010. A PKF Hospitality Research study shows that despite the industry facing an uphill battle, occupancy rates are expected to rise 0.4 percent in 2010. Okay, not great news – occupancy levels fell an average of 8.9 percent in 2009. But the ever-so-slight increase means one thing for anxious hoteliers – the modest increase is the first year-over-year increase in the last eight quarters.
That may be too little too late for many hotel owners facing foreclosure. Although hotels slashed prices and threw in slews of amenities, occupancy levels continued to decline and hotels faced mounting unpaid bills. In fact, hotel business loans became the most delinquent commercial loan segment in the real estate debt market.
The largest drop in business? Conventions. Companies cutting back, employers unwilling to sink profits into face-to-face networking events have cut a wide swath through the industry. With the intense scrutiny on corporations posting losses while hosting lavish events, companies are opting for a more frugal public face.
Right now, about 1,231 hotels and casinos are in financial deficit. Banks are unwilling to call the loans thanks to the intricacies of running a hotel. So for now, hotel owners are keeping their doors open and working to bring back the guests. Resort areas are feeling a little less financial pressure, but are eager to increase their own flagging occupancy numbers.
With all best efforts falling short, hotels are at risk in more than just financial ways. Occupancy minimums for your hotel on your existing hotel insurance policy could dip below the acceptable threshold, which could leave your business exposed to otherwise covered risks. If your hotel is experiencing lower than expected occupancy levels, talk to a hotel insurance specialist to see how that affects your coverage. With record deficits and mounting costs, it’s crucial that you understand where your insurance program fits in to the recessionary climate.
Flickr photo credit: Zach K
