Spokane Journal of Business

Hospitality trade starts to heal

Hoteliers here say occupancies still are down, but improving; convention bookings rebound

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Earlier this year, WestCoast Hospitality Corp. CEO Donald Barbieri described the conditions facing the travel business as perhaps the most difficult economic environment in the recent history of the hospitality industry.

Following the terrorist attacks of Sept. 11, the travel industry bled badly. Nationally and here, occupancy rates plummeted as both business and recreation travel nose-dived. Hospitality-related businesses withstood millions of dollars in losses.

That decline, say those in the Spokane-area hospitality industry, now is beginning to turn around.

Generally speaking, hotel operators here expect the market to improve modestly over the next few months and their results for the year as a whole to surpass 2001.

Were not seeing year-on-year growth yet, but its getting better every day, says Art Coffey, president of WestCoast Hotels, the hotel and restaurant division of WestCoast Hospitality.

Occupancy rates at Spokane and Eastern Washington hotels are below the level they were last year, but appear to be improving, according to a recent survey by Wolfgang Rood Hospitality Consulting, of Bellevue, Wash., which samples a narrow slice of the market here. That survey pegged hotel occupancy rates here at 53 percent in February, down 3 percentage points from a year earlier but better than in January, when they were 4 percentage points below January 2001. Statewide, occupancy rates fell 6.5 percentage points in 2001.

In Spokane and Eastern Washington, average daily room rates fell slightly in February, to $65.51, from $66.73 a year earlier, the report says.

Room-tax revenues collected by the city of Spokane and Spokane County were down 2 percent in January, compared with the year-earlier month, says John Brewer, president of the Spokane Area Convention and Visitors Bureau. February room-tax revenues havent been released yet.

Business could have been worse here. Coffey says second-tier markets like Spokane arent as reliant on air travel as larger markets, like Seattle, and have been somewhat insulated from the huge swings in occupancy rates seen elsewhere.

In the Wolfgang Rood report, occupancy rates for downtown Seattle hotels were 58 percent in February, down a painful 8 percentage points from February 2001, and they were down an even more dramatic 13 percentage points in the Bellevue area, where the average occupancy rate was 55 percent in February. Average daily room rates in those areas also had fallen some, an indicator of hotels ability to fill rooms.

Coffey says that WestCoast, which operates more than 90 hotels in 16 states and two Canadian provinces, expects to see its revenues begin to surpass 2001s results by the end of the second quarter. By year-end, the company is projecting revenue growth of between 1 percent and 4 percent, he says. By comparison, revenues for all of 2001 declined 3 percent from the year earlier.

Coffey says WestCoast plans to release its first-quarter financial results soon, and he cant comment on those figures yet. He says, however, that the companys first-quarter results were boosted somewhat by the performance of a 400-room hotel in Salt Lake City that stayed largely filled during the 2002 Winter Olympics.

Pent-up demand seen

Terry Wynia, president and CEO of Spokane-based Hospitality Associates Inc., expects revenues for that company, which operates 50 hotels in eight states, to follow a similar trend, with slight increases in business in the next few months and a substantial improvement in the second half of the year.

Wynia says occupancy rates fell sharply at many of Hospitality Associates hotels late last year. At the same time, however, the company switched brands, to La Quinta Inns from Best Inn & Suites and Hawthorn Inn franchises, on 30 of its properties, so it expected some losses as it made the transition to new names and reservation systems. As it turned out, Wynia says, the company chose a good time to make that transition, and is now poised to reap the benefits of an improved travel market.

Looking forward, both Wynia and Coffey cite increased business travel and pent-up demand among recreational travelers as reasons for the anticipated upswing.

Thats better than the beating that hospitality businesses endured last year after Sept. 11. That damage was reflected in the four-quarter results, when WestCoast reported a net loss of $553,000, down from a net income of $345,000 during the year-earlier period. Ambassadors International Inc., a Spokane company that promotes international educational travel, wrote off $18.7 million for lost business because of the tragedy during that quarter also.

Now, along with the hoteliers, other hospitality-related businesses are rallying for a turnaround. Rick and Mary Souza, who own Design Events Inc., a Coeur dAlene events-production company, put on a trade show here earlier this week aimed at promoting hospitality-related businesses here. Participating concerns included caterers, decorators, party planners, and entertainment companies, among others.

Meanwhile, the CVBs Brewer contends that his agencys data on bookings for future events include some positive economic indicators.

Through the first two months of the year, the bureau booked $10.3 million in future convention business, up from the $8.9 million it booked during the first two months of last year. The organization also has seen increases in requests for information from travelers and convention planners, and in the number of hits on its Web site.

Brewer says, however, that some hoteliers remain cautious. Several hundred new hotel rooms are scheduled to open in the Spokane area in the coming weeks, including 284 rooms at the renovated, soon-to-reopen 14-story Davenport Hotel downtown, and that new competition could affect other hotels occupancies.

In addition to the Davenport, a 120-room Hilton Garden Inns is scheduled to open later this month on the West Plains, and a 62-room Madison Inn is expected to open later this spring near Sacred Heart Medical Center on Spokanes South Hill.

Spokane has plenty of hotels right now, says Hospitality Associates Wynia, whose company currently operates five hotels in the Spokane-Coeur dAlene area and has no immediate plans to add more.

He says, however, that the company is looking to expand elsewhere. It expects to develop 10 to 12 new hotels this year, mostly in California and Nevada.

Hospitality Associates had delayed plans to develop those hotels last year as the economy began to slow.

New strategies

Since the downturn late last year, Brewer says the convention bureau has pulled back on some of its national advertising campaigns and has targeted its marketing efforts on communities within a days drive of Spokane.

He asserts that the new strategy has been one of the most successful programs the bureau has deployed.

WestCoast Hospitality also is stepping up its efforts in that regard, putting its marketing thrust under closer scrutiny to ensure an emphasis is made to offer packages that link hotel stays with tickets to special events that visitors might drive to in a single day.

In addition, the company has combined the marketing departments of its WestCoast hotels and the former Red Lion Hotels & Inns operation it bought late last year, and has begun cross-marketing the two brands.

WestCoast agreed to buy the Red Lion chain in October, about a month after the terrorist attacks and after the hospitality slump was in full swing. The transaction, which included 45 hotels in all, closed late last year.

Coffey says WestCoast had entered into discussions about buying the chain before the attacks, and saw no reason to change course afterward.

We sat down and said, Life goes on, he says. We believe in our project, we knew they (hotel guests) would come back. We werent going to shy away from a deal that was good for us.

Linn  Parish
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Editor Linn Parish has worked for newspapers and magazines since 1996, with the bulk of that time being at the Journal. A Montana boy who has called Spokane home for some time now, Linn likes Northwest trails, Deep South foods, and lead changes in the ninth inning.

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