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This page contains a single entry from the blog posted on October 7, 2009 7:04 PM. The previous post in this blog was Give it up to save the planet. The next post in this blog is Another fine moment in world trade. Many more can be found on the main index page or by looking through the archives.

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Wednesday, October 7, 2009

Keep the four houses, skip the hotel

Not just in Monopoly, but in real life. Hotels are bad business these days, not just in Portland, but all over. Forget the Convention Center boondoggle -- we shouldn't even have built the Nines.

Comments (10)

I'm not an economist, but I can tell you that most nights of the week, the Nines is above 90% occupancy, and it's not unusual for Thurs-Sun to be at 99-101%.

I'm not an economist, but I can tell you that most nights of the week, businesses that extract forbearance from their principal creditors via threats to go bankrupt are often able to lower prices enough to claim to be flourishing even as they are essentially bankrupt under the "able to meet their obligations" standard.

The Nines couldn't make its mortgage payment to the PDC on time. When last I looked they were offering rooms for $99. They were supposed to be going for $200 and up. Their business plan is kaput.

I would challenge the accuracy of that occupancy rate. Even at a low taxpayer subsidized rate, which undermines the real private hotels, they are likely to fail.

I believe POVA tracks this..

Just call around and see what other hotel managers think of this unfair competitive rate.

The convention center would no doubt produced that same result.
Mark

"it's not unusual for Thurs-Sun to be at 99-101%"

Joey - Any proof beyond your say-so? I am curious. It seems strange since the Hilton is so slow its closing for 4 weeks.

Considering that it's practically the hotel of choice for people visiting Portland to ransack Powell's, hearing about the Mark Spencer's problems is disturbing. (I lived there for two weeks when I moved to Portland in the late Nineties, and I was actually quite impressed.) If it's having to lower prices, then that definitely means that everyone else is dropping prices even further just to get warm bodies inside. Trust me: nothing kills business faster than visiting an otherwise empty hotel, because then guests start to get paranoid.

Does 101% occupancy constitute some form of illegal activity?

I wonder if the city council stops for a second to consider the people who lost work at the Hilton because of this government-funded tilting of the playing field.
Of course, they don't. They move right onto the next project, oblivious to the wreckage in their wake.
The best thing about free market growth is that its real. This fake vision stuff creates unfair competition that's temporarily propped up long enough to hurt businesses that have made it through effort.
Then the phonies move onto something else, but the damage is done.
The vision isn't real, but the disruption to ordinary workers' lives is.

It is very possible and likely for the Nines to be seeing that kind of occupancy but certainly at lower rates than would be hoped for.

The Hilton is empty BECAUSE of the Nines. Who wants to stay at the musty old Hilton when the Nines is there for the same price? It's a terrific hotel.

Debt payments on new hotel properties everywhere that were funded in 2006/2007 are based on higher "RevPAR" which is revenue per available room. Because rates have dropped this year those debt payments are harder to meet through hotel revenue and ownership groups are too stressed to pay the difference in cash. Going into default is often a tactic to get the bank to re-negotiate the loan.

Current forecasts see a mild uptick through 2010 but no real growth in hotel rates until 2011.

That said, if Sage can't hold onto the NINES expect someone else to swoop in on that property immediately.

Hospitality is inherently cyclical but this cycle is tougher because the heights (and real estate costs) of 2007 were high and the drop-off in late 2008/2009 was so significant. The good news is that new supply has been entirely curtailed and by 2012/2013 the same hotels that are struggling now will be enjoying tremendous success. The question is: by then, who will own them? In the case of a propertly like the Nines, there's really nothing to worry abuot in that respect.

"In the case of a propertly like the Nines, there's really nothing to worry abuot in that respect."

Except for the mortgage payments between now and then. Unless, the guy who takes over demands any previous agreements with CoP be cancelled as a condition of the sale.


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