5 years after Katrina, D.C. area hotel firms see gulf business pick up

August 30 2010 | Latest News

Danielle Douglas

Capital Business Staff Writer
August 29, 2010

In the five years since Hurricane Katrina devastated the Gulf Coast, the tourism industry there has struggled to come back. But several Washington area hotel companies are beginning to see a return to profit at their lodgings in the region, after contending with property damage, revenue decline and loss of staff.

At Bethesda-based Marriott International, revenue per available room - a key measure of financial strength in the hospitality industry - was up 25 percent in the second quarter at the company's six full-service hotels in New Orleans. The company's other nine properties in the region are seeing a smaller uptick, the first significant growth after years of sluggish sales.

McLean's Hilton Worldwide, which declined to disclose revenue, did say it has expanded its footprint in Louisiana, Mississippi and Alabama, from 100 hotels at the time of the storm to 170 as of July. Lodging franchiser Choice Hotels International of Silver Spring and Arlington's Interstate Hotels & Resorts have also reported a resurgence in occupancy and revenue at their gulf sites.

Overall room revenue and occupancy in the gulf region has been trending up this year. In New Orleans, one of the hardest hit areas, year-to-date occupancy as of July was 67.5 percent, compared with 66.8 percent for the corresponding period in 2004, according to Smith Travel Research. Room revenue is averaging $81.01 for the first seven months of the year, compared with $75.70 for that period in 2004.

"It's been a very strong year for us at this point," said Gil Zanchi, area general manager of the Marriott New Orleans. "Occupancy started to slowly pick up in 2008, and now it's grown at least 10 percent from 2009."

Zanchi's hotel was one of the lucky ones. Located in the French Quarter, one the city's highest elevation points, it sustained mostly just wind damage, much of which was covered by insurance.

Marriott fared better than some, despite suffering $40 million in damage to its 15 hotels in the gulf region.

The Hilton New Orleans Riverside, where water seeped into the hotel's meeting space, garage and first three floors, had to invest $66 million to renovate the 1,600-key hotel, which reopened last year.

Also hit hard was Choice Hotels. About 20 percent of its 50 franchisee lodgings on the gulf coast never recovered. The remaining 80 percent of properties were restored based on the level of damage, with some starting back up within days or weeks and others taking several months to a year.

Some hotel operators said business would have been worse had they not been able to play host to the legions of emergency and reconstruction workers that descended on the region following the storm.

At Choice's Quality Inn & Suites in New Orleans, general manager Stanley Mascair recalls hunkering down at the hotel with his family, co-workers and hotel guests in anticipation of the storm. They stocked up on peanut butter and bread, confident that Katrina would only keep them there for a day or two. But they were trapped for almost five days, eating the hotel's breakfast bagels, muffins and fruit. As boats floated by looking for survivors, Mascair was able to evacuate those in his charge, waiting until the last person was gone before leaving.

When the Quality Inn reopened that November, only seven of its 28 employees returned. Many of those who were evacuated to neighboring states had nothing to return to. Zanchi of Marriott said about 15 percent of that chain's employees in the region did not come back. Reopening, however, was only half the battle. Images of mold-ravaged homes and desolate neighborhoods - miles away from the core district - have kept many tourists away. The number of visitors to New Orleans fell from 10.1 million in 2004 to 3.7 million in 2006, according to the New Orleans Metropolitan Convention and Visitors Bureau. In the three years following, the number grew to about 7 million. Zanchi estimates his hotel lost about $20 million a year in revenue from 2005 to 2007, before sales began to rebound in 2008.

"We still have people that sometimes ask us, 'Are you still underwater?' " he said.

Big-ticket events, such as the return of the Essence Music Festival, have given the New Orleans tourism industry a shot in the arm, with $4.2 million in visitor spending last year, nearly double that of 2006. Considering that the recession and the oil spill have plagued the region since the storm, Zanchi says hotels are doing "quite well."