Good article today in the LA Times titled ‘Hotel defaults, foreclosures rise in California’.  The article says that more than 300 hotels in California were in foreclosure or default as of September 30th, 2009.  In Southern California alone, there are 140 hotels in default or foreclosure.  The main problem is that many hotel loans were expected to be repaid within 5 or 10 years and were financed at the peak of the market.  The author also blames loose lending and irrantional exuberance. 

Smith Travel Research is predicting no significant improvement for the hotel industry until 2011 at the earliest.

A Hilton Hotel in Portland, Oregon is preparing to shut down for 4 weeks to save money.  The hotel is the largest in the state of Oregon.  The hotel consists of two different towers located across the street from each other.  One of the towers will remain open.  The story was originally reported in the Oregonian and can be found here.

Our take:  This story has been picked up by many news outlets and is being used to show how badly hotels are hurting.  The main problem in that area is the 500 new hotel rooms that opened recently.  We think the hotel is just being smart and planning ahead.  Even in good times, many hotels close floors or even entire towers for weeks or months at a time.  Closing floors can save a lot of money on cleaning and energy costs if the demand for the rooms is not there. 

The story does a good job of reminding us all to take a look at our upcoming forecasts.  Do we have an opportunity to close floors and reduce costs?

We have added 3 new October 2009 dates in Los Angeles and Anaheim.  The dates are:

October 7th – Anaheim

October 15th – Los Angeles (LAX Area)

October 20th – Los Angeles (Downtown LA)

The first 10 people to register will save $20.

The Wall Street Journal is reporting that the major time-share developers are scaling back their time-share business as they are going through some pretty tough times.  Investors are demanding higher interest rates and buyers are becoming more and more scarce.  Also, a higher percentage of time-share-backed loan securities are becoming delinquent each month.

Our take:  Good news for hotels.  Time-shares have been popping up everywhere in the last 10 years and have really overbuilt in many vacation destinations causing too much competition.  While customer satisfaction has really improved with time-shares, they are still one of the most expensive ways to take a vacation.  Time-shares tend to lose 80 percent of their value the day you buy one.

Have a time-share and disagree?  Post your comments below.

We have always found that the selling aspects of hotel food and beverage departments are always very difficult to master and acheive consistency from.  Without proper selling and up-selling techniques, your hotel may be missing out on many sales or leaving additional revenues out on the table.  Hotels magazine has a very good article on how to improve your food and beverage revenues in creative ways.  It provides some great examples that range from simple menu additions to complete menu reengineering.  Maybe something a bit more creative will excite your guests and even motivate your employees to sell more; helping you to increase your revenues.

Read the full article here.

According to an article by Alan X. Reay that appears on hotelnewsnow.com, the number of CA hotels in default or foreclosed on jumped 125 percent in the last 60 days and the state now has 31 hotels that have been foreclosed on and 175 in default.  Not suprisingly, about 87 percent of the hotels in default are non-franchised hotels.  Also, 75 percent of the hotels that are in default were either purchased or refinanced between 2005 and 2007. 

The author estimates that hotel values are currently 50-80% lower than the peak as a result of declining revenues.

In a new article posted on the Wall Street Journal’s website, the author catches hotels piling on extra fees to make up for a loss in room revenue.  Some of the fees that they have found are mandatory valet parking fees, increased resort fees, housekeeping and bellman mandatory gratuities, and other fees such as a mandatory fee for in room safes. 

Should you be adding fees like these to make up for a loss in room revenues?  Absolutely not. 

First off, mandatory fees are often illegal.  The article describes how Wyndham Worldwide and Marriott were sued and settled with the Florida’s Attorney General over adding mandatory surcharges.  The Florida AG aslo has six ongoing investigations.  Undisclosed energy surcharges (we all remember those) and in-room safe fees are among the issues being investigated. 

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Extended Stay Hotels has more than 680 properties under brands like Extended Stay America and Homestead Studio Suites. 

Bloomberg is reporting that they filed bankruptcy on June 15th because they are ‘significantly over-leverged and the projected cash flows cannot continue to service over $7 billion in debt’.  Extended Stay Hotels employs about 10,000 people.

One of our favorite finance and economics blog, Calculated Risk, is reporting that hotel’s RevPAR over the last 12 months has sunk 22.9 percent.  Year over year occupancy has shrunk by 13.9 percent. 

Be sure to click on the link to see a great chart that they put together that shows the year over year change in occupancy since 2001.

The W Hotel in San Diego basically foreclosed itself last week, telling their lender to take over as they would no longer be able to pay its mortgage payments.  The hotel owner, Sunstone Hotels, made its decision as their low cash flows were no longer sufficient to continue with the property.

Unfortunately, this may become more common as other companies continue to evaluate their portfolios while they are struggling to get out of this recession.  There is no word on whether the hotel will continue its operations in the hands of the bank.  Read the full article here.