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Now Is The Time to Buy New Orleans Hotel

CANADIAN LODGING OUTLOOK
September  2005 Year-to-Date


The Canadian Lodging Outlook is a joint monthly publication 
of Smith Travel Research and HVS International, 
Vancouver and Toronto, Canada
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By: Stephen Rushmore, MAI, CHA - HVS International - New York

The recent tragic hurricane that devastated New Orleans and the Gulf states raises the issue of hotel disasters and poses questions concerning the prognosis for a rapid and complete recovery. Since travel is largely discretionary, any type of disaster that adversely affects a traveler’s perception of safety or comfort will impact the selection of a particular hotel or visitation to affected country or region.  This column focuses on noted hotel disasters, identifying solutions to minimize the long-term consequences, as well as identifying investment opportunities for those who understand the potential windfall that often accrues to hotels that quickly repair or rebuild.

The Florida hurricanes of 2004, the Asian tsunami and hurricane Katrina are examples of external, area-specific disasters. The immediate impact of these events is a brief (usually one to two week) suspension of travel to the area while authorities rescue survivors, begin relief efforts and start repairing the infrastructure. What follows is a recovery and building boom of massive proportions with government agencies, insurance adjusters, contractors, construction workers flooding into the area.  All these individuals require temporary accommodations for up to three years and hotels are the logical beneficiaries.

While recovering from an external disaster is usually beyond hoteliers’ control, history shows that recovery occurs rapidly once a solution to the disaster is implemented or becomes apparent. Tourist travel to Florida resumed fully once the cleanup was completed and hurricane season passed.  Many of the tourist areas affected by the Asian tsunami are now back to normal because countries have installed early warning systems and the rebuilt hotels now provide quick and easy access to either higher ground or water-tight shelters.  Hong Kong quickly recovered from SARS once the disease was contained and eradicated. The attack on the World trade Center adversely impacted New York City hotels for only three months.

Internal, property-specific disasters include hotel fires, structural defects and poisonings. In the 1980’s, the MGM Grand in Las Vegas suffered a devastating fire that killed more than 80 people and injured an additional 650. Banner headlines alerted travelers to the potential danger of hotel fires, which sensitized guests to reject hotel without sprinklers, investigate fire exit routes and request rooms on lower floors. After the fire, the MGM Grand repaired the damage and installed a state of the art fire detection and sprinkler system, thus becoming the industry standard for fire safety. Because this hotel faced its problem, implemented an identifiable solution and publicized the safety benefits of this solution, the market rapidly returned and the MGM Grand quickly regained its prominence in the Las Vegas market.

However, not all hotel disasters have an identifiable total solution. For example, the Belleview Stratford hotel in Philadelphia was found to harbor the infamous Legionnaires Disease, a deadly bacteria living in the hotel’s air-conditioning system. A renovation of all guestrooms and air handling systems failed to convince travelers the reconstruction and sanitizing had completely removed all objectionable organisms. Several operators, including Fairmont and Western International, were unable to overcome the negative stigma because an identifiable, total solution to the problem never could be proven. While this type of uncorrectable stigma also attaches to hotels with severe mold infestations, incidences of food poisonings rarely involve a long-term stigma.

The structural failure and collapse of a sky bridge at the Hyatt in Kansas City, Missouri, which killed a number of people, is another example of a disaster without an identifiable total solution. Naturally, the integrity of the property’s other structural components were questioned following this incident. These uncertainties pertaining to important safety issues significantly prolonged the recovery period for this hotel.

Travelers are a resilient lot. Fortunately they quickly forget tragedies and readily accept identifiable solutions. Based on the history of hotel disasters, I have no doubt that tourists and conventioneers will rapidly return to New Orleans and the Gulf states once the area hotels and tourist infrastructure is cleaned up and reopened.  Add to this billions of dollars of recovery money the federal, state and local municipalities will pump into the area. I predict a boom time for local New Orleans hotels for the foreseeable future.

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CANADIAN LODGING OUTLOOK
HVS INTERNATIONAL - CANADA
September 2005

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© Smith Travel Research, 2005. Reproduction or quotation in whole or in part
without permission is forbidden. *INS - Insufficient Data
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Contact:
Selina Lai
HVS International – Canada
2120 Queen St. East, Suite 202
Toronto, ON M42 1E2
(416) 686-2260, ext 21
(416) 686-2264 FAX
slai@hvsinternational.com
www.hvsinternational.com

Also See What Does a Hotel Franchise Cost? / Stephen Rushmore / Canadian Lodging Outlook - August 2005 Year-to-Date
Basic Concepts of Co-Branding, With Examples from the Hospitality Industry Could Co-branding Improve Your Bottomline? / Peggy Yip / Canadian Lodging Outlook - July 2005 Year-to-Date
Brand Equity: Raising the Flag / Theodore Noseworthy / Canadian Lodging Outlook - April 2005 Year-to-Date
Timeshare Cash-Flow Modeling and Market Feasibility / Canadian Lodging Outlook - March 2005 Year-to-Date
Low Interest Rates and High Demand for Hotel Assets Fuels Value Gains / Canadian Lodging Outlook - February 2005 Year-to-Date
A Crash Course In Cap Rates / Canadian Lodging Outlook - January 2005 Year-to-Date
2004 Canadian Hotel Transaction Survey / Canadian Lodging Outlook - November 2004 Year-to-Date
HVS International Hotel Development Cost Survey 2004 / Canadian Lodging Outlook - September 2004 Year-to-Date
Defining a Hotelier; The Hotel Professional Has Gone Through a Major Transition Over the Past 20 Years / Mark Keith / Canadian Lodging Outlook - August 2004 Year-to-Date
Hotel Investments; The Magic, Curse Of Leverage / Canadian Lodging Outlook - July 2004 Year-to-Date / September 2004
June Results Are In And.......We’re Back! / Canadian Lodging Outlook - June 2004 Year-to-Date / Aug 2004
Hotel Life Expectancy / Canadian Lodging Outlook - March 2004 Year-to-Date / May 2004
European Hotel Transactions 2003 - Country Analysis / Canadian Lodging Outlook - February 2004 Year-to-Date / April 2004
2003 an Unbelievably Strong Year for US Hotel Sales / Canadian Lodging Outlook - December 2003 Year-to-Date / February 2004
2003 Canadian Hotel Transaction Survey / Canadian Lodging Outlook / January 2004
2002 Canadian Hotel Transaction Survey / Canadian Lodging Outlook / Feb 2003
How To Get The Best Sales Price; Positioning Your Hotel for Sell / Stephen Rushmore / Canadian Lodging Outlook - July 2003 YTD / September 2003
Lodging Market Impact of Hosting Olympic Winter Games; Will Salt Lake City Experience Apply to Vancouver and Whistler? / Canadian Lodging Outlook - June 2003 YTD / August 2003
Year-to-date Occupancy through April is 50.4% for all of Canada / Canadian Lodging Outlook - April 2003 YTD / June 2003
SARS and Its Impact on Tourism in Toronto / Canadian Lodging Outlook - March 2003 YTD / May 2003
Hotel Values in Europe - Current Trends / Canadian Lodging Outlook - December 2002 Year-to-Date / Feb 2003
2002 Canadian Hotel Transaction Survey / Canadian Lodging Outlook / Feb 2003
Performance Clauses Essential In Hotel Management Contract / Stephen Rushmore / Canadian Lodging Outlook / Dec 2002
Separating the Hotel Looker From the Hotel Buyer / Stephen Rushmore / Canadian Lodging Outlook / Sept 2002
Making The Ideal Hotel Investment / Stephen Rushmore / Canadian Lodging Outlook / Aug 2002
Reporting In at Six Months..../ Canadian Lodging Outlook / July 2002
The Global Approach To Hotel Valuations / Canadian Lodging Outlook / June 2002
Hotel Insurance Premiums on the Rise? / Canadian Lodging Outlook / May 2002 
Hotel Development Cost Can Determine Feasibility / Canadian Lodging Outlook / May 2002 
Hotel Internet Distribution Channels / January 2002 Month-to-Date Results / Canadian Lodging Outlook / April 2002 
2001 Was a Great Year If You Were in Edmonton! / December 2001 Year-to-Date Results / Canadian Lodging Outlook / Feb 2002 
2001 Canadian Hotel Sales / Canadian Lodging Outlook / Jan 2002 
The Effect on Capitalization Rates and Discount Factors After September 11 / Canadian Lodging Outlook / Dec 2001 
So How Bad Was September for Canadian Hotels.. Pretty Bad! / Nov 2001
So How Bad Was September for Canadian Hotels.. Pretty Bad! / The Canadian Lodging Outlook / September 2001 
Have Hotel Values in Canada Declined Since September 11th? You Bet They Have / The Canadian Lodging Outlook / August 2001 
The Popularity of Boutique Hotels / The Canadian Lodging Outlook / July 2001 
Rising Energy Costs Cause Concern in the Lodging Industry / The Canadian Lodging Outlook / June 2001 
Niagara Falls: With Supply Comes Demand / The Canadian Lodging Outlook / May 2001
Does Supply Generate Demand? / The Canadian Lodging Outlook / May 2001 
Optimism With a Hint of Caution, As Analysts Predict a Softer Year for the Canadian Hotel Industry / Mar 2001 
Limited-Service Growth in Canada - Where’s it Going? / The Canadian Lodging Outlook / January 2001 
HVS Canada in Review - Year End 2000 / The Canadian Lodging Outlook / March 2001 
Canadian Lodging Outlook / May 2000 Year to Date Statistics / HVS International - Canada / July 2000 
The Rule of Thumb Method...Does It Still Hold Weight? / Elaine Sahlins - HVS / Oct 2000
What’s Hot and What’s Not in Western Canadian Hotel Markets / Mar 2000


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