There Goes The Neighborhood – Hoteliers and Business Loss
Location, location, location – those are the top three attributes of good real estate. The same is true for your hotel business. If you’ve got the location, you’ve got a head start. But what if that location changes – namely what if the neighbors move out?
Such is the case for hotel owners in and around Texas Stadium. Within walking distance of the complex, hotel owners relished the game-day business surges for decades. Then with the decision to build a new stadium in a different location, the same owners are now looking for ways to make up for a major loss.
Plenty of outside factors determine the occupancy levels in your hotel – the neighbors being just one of those. Popular locations can become unpopular rather quickly because of a rise in crime rates, a threat to public safety, or changes in the landscape that impact the hotel’s operations, such as high rise buildings blocking out views, too much construction affecting the environment, or heavy traffic.
No one needed to tell those of us in the hotel insurance industry that insurance rates were increasing steadily. So it comes as no surprise that an August 2009 study by PKF Hospitality Research reports that insurance costs are the fastest growing expense for hoteliers. Over the last ten years, rates have gone up 4.4% annually. From an average $265 per room in 1999 to $558 in 2004 (the latest PKF Hospitality study examined today’s recessionary period with that of the 2001-2003 period). It’s not likely to get better, either. PKF also predicted an estimated 5.3% drop in net operating income and a 1.1% decline in RevPAR for 2010.
No doubt about it – 2009 was full of the bizarre news involving hotels. From peeping Tom perps to hotel-based drug operations, hoteliers faced a overabundance of risks well beyond the predictable. With hope of putting the weirdness behind them, hotel owners are looking at 2010 with a slightly jaundiced eye, not sure what risks are still lurking. How has your 2010 been so far?
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.