Resupplying New York City

Stagnant! In describing the current state of the U.S. hotel industry, the word "stagnant" is not the first one that comes to mind. But PKF Consulting points out that the current hotel business cycle is now in its second year of demand stagnation, as measured by occupancy levels in 42 major cities. In spite of the fact that occupancy has remained level, profits continue strong because hotel managers have been able to raise prices while at the same time maintaining the productivity levels achieved as a result of the labor reductions during the recession five years ago. Labor productivity is a mixed picture for hotel operators. The bad news for hoteliers is that wages have risen almost as fast as room rates, unlike wages in most other industries. PKF Consulting reported that wages and salaries, when calculated per available room, rose 6 percent from 1995 to 1996.The good news is that productivity remained high and the total payroll cost (per available room) fell 0.8 percent in the same period.At the same time AD1K grew 7.9 percent.All of that translated into a stunning 17.9-percent increase in operating profits in 1996 over 1995. Occupancy stagnation first appeared in the South Central region in 1995 and spread to the Southeast in 1996. Comparing first-quarter figures only, occupancy in South Atlantic and South Central cities dropped on average between i and 2 percent from 1996 to 1997. Mountain and Pacific cities and North Central cities eked out an average of nearly a 2-percent increase during the period. Variations are substantial within the regions, as illustrated by occupancy averages for four Northeast cities. The average for the "region" (four cities) showed a 3.1-percent increase for the

first quarter of 1997 over 1996's first quarter. However, virtually all that increase stemmed from the strong occupancy jump of 5.6 percent in NewYork City (coupled with an AD1K increase of 9.1 percent). Philadelphia hoteliers scratched out a 1.5percent increase (and raised rates by more than 12 percent). Meantime, occupancy fell in Boston and in the non-casino hotels in Atlantic City. A similar picture emerges in other regions. Occupancy in Orlando andWashington, D.C., grew by better than 3 percent in the first quarter, but those gains were more than offset by drops of 7 to 8 percent in Charlotte and Raleigh, North Carolina. Many cities in Tennessee and Texas saw considerable erosion (e.g., an 8.5-percent drop in Nashville), while New Orleans enjoyed a 5.2-percent occupancy increase and its AD1K zoomed by 14.9 percent. Most markets in the Mountain and Pacific region remained reasonably strong, but the region's overall occupancy performance was flattened by a 10.2-percent drop in Boise and an 8.4-percent falloffin Portland, Oregon.--G. PV.

Resupplying New York City One of the reasons for the stellar performance of NewYork City hotels is that no new hotels have opened there lately. Coopers & Lybrand reports that that's about to end.Accor hopes to open a 400-room Sofitel in 1999, Marriott will open a 320-unit Courtyard in 1998, and the •54room, independent Hotel Grand Central will open in 1998.The 211-room Roger Williams was scheduled to open in June 1997, along with the venerable, 1,000room Roosevelt, which is reopening after a $55-million renovafion.--G. PV.

Bristol Completes Holiday Inn Acquisition In what may be the best news for Holiday Inn in some time, Bristol Hotels & Resorts has completed its $659 million acquisition of 60 Holiday Inn hotels in the United States. The purchase makes Bristol the largest Holiday Inn franchisee in the world, with 98 properties. In June Bristol also completed a secondary public stock offering of 3.16 million shares of common stock, which raised $•08 million. Much of those proceeds will be used to upgrade the newly purchased properties. Bristol CEO Peter Kline told the Dallas BusinessJoin'hal that he sees tremendous potential in these mid-market, full-service properties, because they are in excellent locations. Kline also foresees considerable consolidation ahead for the industry. As a relatively small operator of a portfolio of upscale business-oriented hotels, Bristol might have been a candidate to be scooped up by another firm. Instead, Bristol chose the reverse scenario, first by acquiring 26 properties from Memphis-based United Inns. As with the later Holiday Inn acquisition, the newly purchased properties were in excellent locations, but as a group they needed some $130 million in renovations. Under Kline, Bristol's strategy runs against that of many operators. Kline believes most of the growth in the market will be found in the middle. Another element ofBristol's contrarian strategy is to offer excellent food service at local restaurant prices, rather than running an upscale signature restaurant. Originally known as Harvey Hotels, Bristol changed its name to avoid confusion with the Harvey casino.--G. I/V

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August 1997 , 11