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Nobody Asked Me, But… No. 69:

Large Banks Creating Crisis For Hoteliers; New York Leads the Way;
Are Room Telephones Obsolete?; Quote of the Month


By Stanley Turkel, MHS, ISHC, October 5, 2010

1.  Large Banks Creating Crisis For Hoteliers

Almost 100 Asian American hotel owners held an emergency meeting in Atlanta in late August 2010 to discuss strategy for addressing the financial crisis being created by the lending and foreclosure practices of large multi-state banks.

The session was convened at the urging of former AAHOA chairman Mukesh “Mike” Patel along with several leading hoteliers and community bankers.

According to Patel, mega-banks, many of which remained in business by benefiting from the Troubled Asset Relief Program (TARP), are now refusing to extend or restructure the terms of commercial loans to permit small companies, including hoteliers, to stay in business. “The result is that owners across the country are suffering unprecedented property foreclosures, bankruptcy filings, and loss of life savings,” said Patel.

A hotel owner who has to file for bankruptcy is ineligible for credit for seven years which deprives American business of a hard-working, free- thinking entrepreneur who is typically a catalyst for economic growth and job creation.  Consider that when a typical hotel shuts down, a minimum of 20 to 25 employees lose their jobs- which adds to the country’s already high unemployment.

Patel explained that Asian American hoteliers have a proud history of paying their debts in full.  “Yet too many mega-banks- instead of being open to reasonable workout arrangements, loan modification, or troubled debt restructuring that would ensure loan repayment- are apparently more interested in improving their balance sheet by getting certain commercial loans off their books,” he added.

On the other hand, small community banks are demonstrating a strong willingness to arrive at mutually acceptable workout arrangements with commercial borrowers like hotel owners. “So we have to ask if small banks can re-structure loans, why can’t large banks,” said Patel.

The answer is in part that large national or regional banks are flush with TARP capital or may be under a time limit for receiving loan loss funds from the FDIC, so they have no incentive to come to a mutually acceptable solution with the borrower.

“In short, a bank has nothing to lose even if the borrower stands to lose everything,” said Patel.  “The situation is indeed desperate because some large banks, instead of facilitating an economic rebound, are actually creating a dangerous new phase of economic hardship for small business owners.”

Without prompt and dramatic action- by Congress, by the Federal Reserve, by the OCC and state regulators, by the FDIC, by the Administration, or by some combination of these entities- America’s economy will suffer significant additional unintended and unnecessary casualties through a new round of closings and unemployment among small business owners.

Hoteliers from the August meeting in Atlanta and from similar sessions around the country, are urging the leadership of AAHOA to work aggressively with legislators, regulators, and lenders to encourage work-outs through three specific initiatives:

  • revision of the TARP regulations
  • revision of the FDIC loan loss provisions and procedures
  • passage of legislation pending in Congress to raise the limit on SBA loans to $5 million and increase the guarantee to 90%
 2. New York Leads the Way

Through July 2010, according to Smith Travel Research, the city’s occupancy increased 4.3% to 83.4% and average daily rate increased 11.6% to $204.68 which caused the revenue per available room to increase 16.3% to $170.67.

Sean Hennessey of Lodging Advisors reports that the city’s recovery is unusually rapid and matches the steepness of the earlier decline.  This quick recovery is different from the previous two down cycles- in the early 1990s and post 9/11 when there was a year’s worth of bumps and delays until recovery occurred.

3. Are Room Telephones Obsolete?

When was the last time you used a hotel room telephone?  If you’re like me, it was either to 1) leave a wake up call 2) order room service. Now, USA Today (8/31/10 by Barbara De Lollis) asks the same question and quotes the well-known hotel technology consultant Jon Inge who says that the biggest sticking point has to do with safety.  Hotels face a legal requirement that if a guest calls 911 for help, the hotel must be able to tell which room is calling and a traditional phone is the cheapest and most reliable method.

As cell phones are becoming more common among travelers, Inge believes that it is possible that hotels can replace the guestroom telephone with a red “panic” button which could connect the guest to the front desk. Inge says that hotels still can’t guarantee wi-fi or cell signal coverage in all rooms or public spaces which means that even if everyone did have a cell phone, they won’t be 100% reliable.

Inge believes that improvements in technology should eventually change the equation.  Cell phone makers are working on barometric pressure change-sensing capability that can estimate on which floor a guest is located.  Hotels that want to offer tech-savvy guests the latest features “will have no option but to provide much more consistent and reliable signal coverage throughout their buildings”, Inge says.

4.  Quote of the Month
Edwin Newman, journalist, died at age 91 in Oxford, England.  Mr. Newman, recognizable for his balding head and fierce dark eyebrows, was known to three decades of postwar television viewers for his erudition, droll wit and seemingly limitless penchant for puns.  There was, for example, the one about the man who blotted his wet shoes with newspapers, explaining, “These are The Times that dry men’s soles.”

Stanley Turkel, MHS, ISHC has just published “Great American Hoteliers: Pioneers of the Hotel Industry.” It contains 359 pages, 25 illustrations and 16 chapters devoted to each of the following pioneers: John McEntee Bowman, Carl Graham Fisher, Henry Morrison Flagler, John Q. Hammons, Frederick Henry Harvey, Ernest Henderson, Conrad Nicholson Hilton, Howard Dearing Johnson, J. Willard Marriott, Kanjibhai Patel, Henry Bradley Plant, George Mortimer Pullman, A.M. Sonnabend, Ellsworth Milton Statler, Juan Terry Trippe and Kemmons Wilson.  It also has a foreword by Stephen Rushmore, preface, introduction, bibliography and index. Visit to order the book at reduced rates:
• Electronic Book   $  4.95
• Paperback (6x9)   $25.00
• Dust Jacket Hardcover (6x9)  $35.00

Stanley Turkel, MHS, ISHC

Also See: Impertinent Questions in Search of Pertinent Answers; The Best Franchise Website; Free Wi-Fi at Top of Amenity List / Stanley Turkel / September 2010
Nobody Asked Me, But… No. 67 : Stanley Turkel's Review of Budget/Economy Hotels Following a Three Week Pennsylvania Road Odyssey / Stanley Turkel / August 2010
Nobody Asked Me, But… No. 66 : Recognizing Three Hotel Industry Experts Whose Accomplishments Are Unique - Bjorn Hanson, Peter Greenberg and Richard Warnick / Stanley Turkel / July 2010
Nobody Asked Me, But… No. 65: A Well-Deserved Compliment for Steve Rushmore; Impertinent Questions in Search of Pertinent Answers / Stanley Turkel / June 2010
Nobody Asked Me, But… No. 64: Best Western Finally Makes a Move; Cuba, The Caribbean’s Hottest Destination / Stanley Turkel / May 2010
Nobody Asked Me, But - No. 63: Can Airlines Learn From Hotels?; Memo to Ian Schrager / Stanley Turkel / April 2010
Nobody Asked Me, But No. 62 / Do the Radisson Franchisees Agree with Carlson's billion-dollar Makeover Program? At Last: A Win-Win Victory for Tourism; Congratulations to the Harris Rosen Foundation / Stanley Turkel / March 2010

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