Radisson Blu Resort & Thalasso, in Monastir, TunisiaMore Hotels Facing an Uncertain Future
Stephen Morton for The New York Times
By MARTHA C. WHITE
Published: April 13, 2009
Hotels have been struggling for months as businesses and individuals cut back on travel. But what was a bad situation is likely to turn worse as a rapidly growing number of hotels — including many high-end and luxury properties — are forced into bankruptcy or foreclosure in coming months.
Jim Butler, a hotel industry lawyer, said those who manage distressed hotel loans have told him that their workloads have jumped tenfold in recent months.
“Things seem to be accelerating,” Mr. Butler said, and predicted that before the recession is over, the number of hotels in bankruptcy or foreclosure could rise above the 2,000 or so reached in the industry’s last big downturn in the 1990s.
The names on the front of the troubled hotels are well-known management companies like Ritz-Carlton and InterContinental. But the owners of the hotels are investment groups, wealthy individuals or companies that specialize in lodging and are generally little-known outside the industry.
Many owners took out loans to finance new construction or renovations when hotel occupancy rates were up and credit was readily available — just the opposite of the situation now, as those short-term loans are coming due.
But it is the management companies that risk damage to their reputations since theirs are the featured names.
Guests, too, can be affected if a hotel is financially troubled. Even at high-end properties, in-room electronics and linens may be older or show more wear, and items like coffee or fresh flowers in the lobby may be eliminated.
“Hotels are doing things like closing the restaurant two nights a week or having the nightclub only open one or two nights a week,” said Molly Vincent, vice president of a destination and event management company in Las Vegas.
In some cases, guests may not even notice what they are lacking. If a hotel stops a project to add flat-screen TVs halfway through installation, for example, a traveler is not likely to know that.
Sometimes, quite literally, travelers can be left out in the cold. Steve Collins, president of a meeting site selection firm, had booked a 30-person leadership retreat at the Daufuskie Island Resort & Spa in South Carolina last November. When his group arrived, unaware of any financial problems faced by the hotel, they found that their reservations for a group of high-end, private condos had been replaced with standard room bookings.
“At that point, there was no option to cancel or move,” Mr. Collins said. His group stayed, but suffered poor housekeeping and food service, effects of the distressed property’s staff cutbacks. Two months later, in January, the hotel’s owners filed for bankruptcy and by March, the property was closed.
Unfortunately, that experience may be repeated, industry experts say, as hotels, especially luxury ones whose numbers grew rapidly, fall behind on their debt payments.
“Luxury is just getting killed,” said Bobby Bowers, senior vice president for operations at STR Global, a company that monitors and researches hotel performance. While occupancy and therefore room rates are down at every level of hotel, the drop is more pronounced at the higher end.
Since these hotels have greater fixed operating costs because of their extra services and larger staffs, they need higher occupancy rates just to break even. This is compounded by what many analysts have called the “A.I.G. effect,” as companies worry about public or regulatory scrutiny if their employees stay at lavish properties or hold events there.
Overseas, the picture is not quite as bleak, but analysts are concerned for what the future holds. In January, Real Hotel Group had its shares suspended on London's secondary stock exchange after revenue dropped by 34 percent. " I think there are certainly some nervous hotel owners, no question," said James Chappell, managing director for STR Global in London. At a recent hotel investment conference, Mr. Chappell said the consensus was that several international hotel owners were likely to become insolvent over the next year or so. He added that while the American hotel owners' woes had not hit their overseas counterparts yet, those companies were bracing for a rough year. "At the moment, I think they're kind of holding their breath," he said.
Although the troubled economy has hit hotels across the United States, some areas have it tougher than others. MGM Mirage and Harrah’s Entertainment own 19 casino hotels on the Las Vegas Strip. Harrah’s delayed construction on a hotel tower and has been able to refinance its debt over a longer period to reduce its payments. MGM recently sunk $200 million into CityCenter, a mixed-use project under construction, after its development partner skipped a payment. Other Las Vegas properties are struggling, too. The Ritz-Carlton, Lake Las Vegas spent much of 2008 in Chapter 11 and was bought last month by its third owner in just over a year.
In Scottsdale, Ariz., two upscale properties entered foreclosure in January after being open for less than six months, and the historic Greenbrier Resort in West Virginia filed for Chapter 11 last month after losing $35 million in 2008. In Chicago, plans for a 200-room Shangri-La hotel were scrapped.
Hotel managers embrace the phrase “business as usual” when talking about operating under the pall of bankruptcy or foreclosure.
Unfortunately, even if travelers paid top dollar in expectation of fine dining, solicitous service and high-end amenities, they have little recourse if their stay does not live up to their expectations. Alexander Anolik, a lawyer and author of “Traveler’s Rights: Your Legal Guide to Fair Treatment and Full Value,” says guests can try bargaining down the room price, but there is no legal or industry standard for reimbursing travelers for curtailed or closed amenities.
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DUBAI HOTELS HIT BY GLOBAL FINANCIAL CRISIS
JLL reports 5 percent drop in hotel occupancy rates in Dubai in 2008 as Europeans cut back travel budgets.
DUBAI - Hotel occupancy rates in Dubai dropped to 79 percent in 2008, the lowest level since 2004, with a decline in demand from Europe due to the financial crisis, a consultancy firm said on Monday.
Hotel occupancy last year was five percent lower than in 2007, which saw rates soar to 84 percent, Jones Lang LaSalle (JLL) said in a report.
"Over the period between July and December 2008, occupancy rates fell by approximately seven percent," JLL said.
"This came as a result of the new supply in the market, as well as the softening in demand from key European source markets brought about by the dollar appreciation and the financial crisis."
Dubai has embarked on extensive construction projects, boasting three palm-shaped islands off its coast as well as what is tagged as the world's tallest tower and the seven-star sail-shaped Burj Al-Arab hotel.
The emirate formerly said it plans to attract 15 million tourists by 2015 but the global economic downturn has forced many tourists around the world to scale back their travel plans.
Several hospitality and leisure companies in Dubai, which has benefited from an oil-fuelled economic boom over the past six years, have put on hold or cancelled many mega projects.
JLL expects the hotel market to perform worse in 2009 than previously forecast and tourist arrivals to be less than Dubai Department of Tourism and Commerce Marketing's (DTCM) goal of 13 percent annual growth.
Upscale hotels would be the most at risk as Europeans cut back travel budgets, it said.
According to DTCM, however, in the last week of February, average hotel occupancy for five-star beach hotels was 95 percent with the average room rate at 1,239 dirhams (337 dollars).
Dubai hotels received 6,996,449 guests in 2008 compared to 6,951,798 visitors the previous year, earning the emirate 15.25 billion dirhams in revenues, an increase of 15 percent over the previous year, the DTCM said.
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TUNISIA HOTEL DEFIES WORLD RECESSION
Radisson Blu Resort & Thalasso announces launch of luxury hotel in Monastir.
6 April 2009
TUNIS - The Rezidor Hotel Group has announced the launch of the Radisson Blu Resort & Thalasso, in Monastir, Tunisia despite the world-wide recession.
The existing 280 room-property will be re-branded and operated under the Radisson Blu brand as of November 2009, Kurt Ritter President and CEO of Rezidor confirmed Monday.
"We are very pleased to add this hotel to our growing resort portfolio", said Ritter.
"The Radisson Blu Resort & Thalasso, Monastir benefits from an excellent location on a five hectare beachfront site and is both a leisure and business destination of highest quality," Ritter added.
Slim Zghal, President and CEO of Thalassa Hotels Tunisia and owner of the prestigious resort said that he was confident "that not only our chain but also the city of Monastir will benefit from the resort".
The Tunisian economy, despite its dependence on tourism, seemed robust enough to allow such a venture.
The newly refurbished, redesigned and re-branded unit, features 280 airy and top of the range rooms and include private balconies or terraces with garden, pool or sea view.
A number of bars, cafes and restaurants serve Tunisian, oriental and international specialities.
At the private beach, around the pools, on tennis, golf practice and beach volleyball courts, options for land and water activities are plentiful.
The resort also boasts conference and meeting facilities as well as a business centre. Three golf courses are located close to the resort.
One of its main assets however are the two brand new spas, powered by sea water, which are set to offer the best conditions for body wellness.
The spa facilities will spread over 14,000 square meters and feature pools, saunas, hammams, massage and treatment parlors.
"Monastir itself is an emerging oasis along one of North Africa's most beautiful coastlines, and is easily reachable thanks to an International Airport. Tourist and historical attractions include a city centre with traditional shops and cafes, the Marina port, shopping and entertainment as well as a Mosque from the IX century and one of the region’s best preserved 'Ribats' – a fortification built to protect the city", writes Business Wire, a specialised news service.
The Rezidor Group operates 370 hotels in 58 countries, throughout the world.
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