By Derek Gale, Senior Editor | West Virginia businessman Jim Justice recently acquired The Greenbrier resort and 80% of The Greenbrier Sporting Club through a stock purchase agreement in which CSX Corp., The Greenbrier’s previous owner, transferred 100% ownership of its stock in The Greenbrier Resort and Club Management Co. (The Greenbrier Hotel Corp.’s holding company), to Justice’s company, the Justice Family Group LLC.
When NYLO Hotels unveiled its loft-style hotel brand in 2005, the plan was to have more than 50 properties open by 2010. Ambitions were so high that the company announced another brand, XP by NYLO Hotels, in early 2008. But so far, just two NYLO hotels have opened their doors to guests — in Plano, Tex., and Warwick, R.I. — with a third scheduled to open in a community in Irving, Tex., in late June.
Starwood Hotels & Resorts Worldwide Inc.'s (HOT) first-quarter net income tumbled 82% on shrinking revenue per available room and a drop in timeshare sales. While the quarter's profit topped downbeat expectations, the company projected second-quarter earnings of 14 cents to 20 cents. Analysts' mean estimate, as surveyed by Thomson Reuters, was 23 cents. The weak economy has squeezed the hotel industry for some time, with timeshare businesses also under pressure. The outlook for 2009 is grim, despite efforts by hoteliers, including Starwood, to cut costs. A recent swine flu outbreak could raise cancellations and depress bookings.
Wyndham Worldwide Corp.'s (WYN) first-quarter net income rose 7.1% on lower costs while revenue fell as a result of continued spending declines by consumers and businesses. Still, results for the hotel and vacation timeshare group topped expectations. The hotel industry has been cutting costs after getting hammered last year, and the outlook for 2009 remains dire. Wyndham's expenses dropped 12% from a year earlier.
Fontainebleau Las Vegas LLC filed a $3 billion lawsuit against Bank of America Corp. and other lenders after they declined to provide the hotel operator with $800 million in funding. Fontainebleau, whose corporate parent owns a hotel on 22 acres of Miami Beach, Florida, also named JPMorgan Chase & Co., a unit of Deutsche Bank AG and seven other defendants in its complaint filed yesterday in Nevada state court, Fontainebleau said in an e-mailed statement. The banks pulled out of a written agreement to finance completion of Fontainebleau’s $2.4 billion casino-hotel being built in Las Vegas, according to the statement.
In San Francisco, prices of hotel rooms have “gone off a cliff,” said Karl Hoagland, chairman of Larkspur Hotels and Restaurants. Softening demand has led some luxury hotels to offer rooms for less than $100 a night. “It’s a great windfall for travelers,” said Mr. Hoagland, whose company owns three hotels in the city’s Union Square neighborhood. But it is anything but a windfall for Mr. Hoagland. His company paid about $100 million for the three hotels, in 2006 and 2007. “It was a pretty big bet on San Francisco,” he said.
A few weeks ago, Carlo Wolff wrote an article about the pros and cons associated with developing an independent hotel versus a branded one. It’s a good follow-up to examine the historical performance of independent hotels compared to branded properties throughout the United States. To set the frame of reference for the scope of the segment, independent hotels account for 42.7 percent of the hotel properties in the STR United States hotel census and 31.2 percent of room supply. The aggregate of independent properties has trailed branded hotels in absolute key performance metrics for the total United States during the past 15 years. More specifically, branded hotels have outpaced independents in monthly room rate and occupancy by an average of 3.2 percent and 4.1 percent, respectively. The real story in the numbers, however, is in the raw data behind the performance metrics – supply and demand.
Yesterday, Proskauer Rose LLP and Ernst & Young held a seminar attended by many of the top New York-based people in the industry. Here are the summary results of the panels, which mirrors what I’ve been saying in this column for the past several weeks: 1. Nobody is willing to predict the next year, but the consensus was RevPAR will be down 15 percent to 20 percent, or maybe more than 20 percent, in 2009. 2. 2009 already is a lost year and a wipeout. 3. There’s hope but no conviction 2010 will be better, but nobody is willing to predict.
The tanking economy has taken down many a high-profile business with it, and hotels are no exception. The owner of the historic Greenbrier Hotel in West Virginia announced yesterday that it is filing for bankruptcy and will sell the renowned property to a unit of Marriott International. CSX Corporation, parent company of The Greenbrier Hotel Group, said the sale was necessary because the iconic landmark had fallen victim to the recession and had racked up close to $500 million in debt. The Marriott deal was signed yesterday, though several other potential buyers were reportedly approached prior to that, including Donald Trump.
The nation's time-share industry is starting to find ways around the credit freeze that has cut off its growth for more than the past six months. Two major time-share companies based in Orlando, the nation's time-share capital, recently managed to convert some of their customers' mortgages into cash. It's a hopeful sign for a struggling industry that is largely based in Central Florida, which generates 10 percent of all U.S. time-share sales. Marriott International said it recently sold about a quarter-billion dollars' worth of time-share notes, while Wyndham Worldwide said earlier this week it had just completed a deal for $46 million worth of time-share securities.