Deflated & Deflation

That hotels around the world are suffering escalating losses is no longer news. But when the US government imparts a seal of odium to staying in hotels, perhaps it is time for the industry to band together in an attempt to revive fortunes. That effort has attracted newsprint in some leading publications such as the Washington Post and the Wall Street Journal (subscription required).  The Post article notes that "Washington's attacks on corporate excess — the private jets and trips
to Vegas — are prompting a backlash from the travel industry" and notes that "Hilton Hotels chief executive Christopher Nassetta has also said he is alarmed by events in Washington".  The Journal article headlined "Hotels Say, We're Businesses, Too" details how "a number of hotel executives who (have) grown frustrated with the public perception of the industry". Further, the paper points out that "companies like Marriott International Inc. and Starwood Hotels & Resorts Worldwide
Inc. have seen big drops in corporate business in recent months as
companies — even those not receiving government aid — have canceled
meetings, fearing public outrage over what may appear to be lavish

While the government must react to the populace's outrage about Wall Street excesses it is clearly missing the forest for the trees in penalizing, if inadvertently, an industry that surely did little, if anything, to bring about the mess on Wall & Main Street. Indeed Federal reaction to the crisis is reminiscent of the, in retrospect, absurd measures instituted by the Carter administration in 1980 when, the President effectively controlled what banks could or could not do by way of putting out credit lines to consumers – the latter merely stopped spending and sent the economy into a deeper abyss. In the current crisis, it would behoove the government to urge banks to adopt all requisite risk measures but telling them how to spend money is eerily reminiscent of socialist if not communist regimes likely to result in (among other things) price deflation.

Evidence of that deflation can be seen in these hotels selling rooms for less than two dollars! That is true price deflation for an already deflated industry.

Published by

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.