Bail out for hotels?

The current spate of bailouts first for the financial industry and, soon to be followed, at a minimum, for the auto industry is reminiscent – albeit in a considerably smaller scale – of the bailouts in the immediate aftermath of 9/11. That preview of today's events saw the usual suspects for bailouts – airlines – with the begging bowl at the ready. Their efforts did not go unrewarded as the Federal government rewarded both flying and failing airlines with a bailout to the tune of $20billion. Hotels, as is typical owing, in some measure, to the highly fragmented ownership of the industry did not get even a whiff of that largesse. Others, including a tour operator of trips to the Grand Canyon did see "relief" while bankrupt airlines such as Vanguard, Midway and Reliant saw as much as $20 million come their way.

It is unlikely that the scale of the current bailout is going to make a difference in terms of aid to hotel operators reeling from the financial contraction – unless the hotel is in Buffalo, New York. The Buffalo News reports on a failed yet persistent strategy on the part of the City of Buffalo that has seen more than $65 million poured into downtown Buffalo hotels.  Somewhat expectedly, the paper notes that "some of downtown’s largest hotel operators say the last thing they need is more competition, especially subsidized competitors".

It is hard to rationalize though easier to understand the folly behind the process that has seen the construction of one and the approval of two other subsidized hotels via significant tax breaks all of which would result in an increase the inventory of downtown Buffalo hotel rooms by 22
percent. The Mayor of Buffalo states that "we need more hotel rooms in downtown Buffalo" while the president of the Buffalo Niagara Convention & Visitors Bureau (sensibly) says "more rooms would not help bolster the convention and tourism
business".  The powers that be that run the city of Buffalo would serve their citizens well by reading up a little about the history of subsidized hotels (the few relative to the country's largely privately developed hostelries) and cease pouring good money after bad. The history of efforts to subsidize airlines and their outcome needs no amplification.

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Vijay Dandapani

Co-founder and president of a New York based hotel company for 24 years. Grew the firm to five hotels in Manhattan and also developed a greenfield project at MacArthur airport, New York. Speaker at numerous prestigious forums including Economy Hotels World Asia, Lodging Conference, NYU, Columbia University Real Estate Roundtable, Baruch College's Zicklin School and ALIS. President and ceo of New York City Hotel Association since January 2017.

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