Really interesting article in the Los Angeles Times about a hotel in Koreatown that owed the city of Los Angeles about $3.5 million for unpaid occupancy taxes. The hotel did not pay so the city had the Sheriff’s Department sit in the hotel lobby around the clock and seize all of the cash that flowed into the hotel. From the article:
“Since Tuesday, several plainclothes sheriff’s contract employees have been stationed at the hotel round the clock. Their orders: seize the cash that flows into hotel coffers. Sheriff’s spokesman Steve Whitmore said the department has already collected $40,000, which will be handed over to the city. An employee at the hotel, who would speak only if not identified because she fears retribution from her bosses, said the keepers are “nice guys” who sit around the hotel lobby all day and night. At the end of each of her shifts, she hands them a record of how much money she has collected and puts it into a vault, from which the keepers later collect it. Some money is left so the hotel can pay its staff. The employee said guests have been less happy about the arrangement. As part of the debt collection, she noted, the staff at the front desk, bar, restaurant and coffee shop have been instructed to take cash only.”
Wow. What a mess. Don’t get behind on your occupancy taxes!
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 irrational 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?
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 Florida’s Attorney General over adding mandatory surcharges. The Florida AG also has six ongoing investigations. Undisclosed energy surcharges (we all remember those) and in-room safe fees are among the issues being investigated.
Just a sign of the tough times the hotel business is facing. The LA Times is reporting that the owner of the Downtown L.A. Marriott has filed for bankruptcy in an attempt to keep the hotel open for business.
The hotel has been owned by Ezri Namvar since 2007.
The hotel is located in the heart of downtown Los Angeles’ financial district and is very close the LA Live.
It is a great hotel and we wish them luck.