Housing Needs Offset
Katrina Hotel Losses

The temporary housing needs of relief workers and displaced residents could help offset hotel-industry losses from Hurricane Katrina in the region devastated by the storm, according to a new forecast to be released today.

The fierce winds and flooding in parts of Louisiana and Mississippi have taken as many as 40,000 rooms out of service for weeks, if not months, according to the report prepared by the hospitality consulting group at PricewaterhouseCoopers in New York. Those losses, however, could mean record occupancies for surviving hotels in the region.

In the aftermath of Katrina, the firm forecasts only a slight impact on occupancy rates nationwide. The new forecast is for rates of 62.8% for all of 2005, still well ahead of last year. The growth in revenue per available room, an important indicator of industry strength, is still expected to be a robust 7.5%, down slightly from the firm's earlier forecast of 7.8%.

"There's going to be an odd effect because despite the reduced number of rooms, whatever is available will likely be filled," said Bjorn Hanson, head of the firm's hospitality group. Thousands of relief workers, insurance adjusters, engineers, contractors, architects and homeowners with short-term hotel coverage included in their insurance will need every available room, he said.

Many rooms will likely be offered at a discount, so the revenue generated won't be as strong as during normal times. Hotels outside the disaster area are already cutting prices to help people in need. For example, eight AmeriSuites hotels in the Atlanta area are offering deep discounts for displaced residents through a joint program with the American Red Cross.

Best Western International Inc. said its hotels as far north as Branson, Mo., are offering reduced rates to evacuees. That company has about 45 hotels in the affected areas and expects an influx of relief workers to occupy rooms in the coming weeks.

Even before Katrina hit, hotels nationwide were beginning to feel the adverse effects of soaring gas prices. In August, gas prices spiked about 14%, according to the Department of Energy. With gasoline supplies strained by the hurricane, prices moving up and President Bush urging Americans to curb their purchases, tourism is expected to suffer in the remaining months of the year.

To recoup some of their own higher electricity and other energy costs, Mr. Hanson expects some hotels to start charging a nightly energy surcharge. The move could be unpopular with guests, unless the amounts are held to reasonable levels. "The last time -- in the late 1990s -- these surcharges were sometimes as high as $5.95 a night, and didn't sit well," he said.

Conventions and meetings scheduled to be held in the hurricane zone in coming months may never be rescheduled. In New Orleans, ranked fifth last year in convention business, such business contributed about $1 billion to the total of $4.9 billion in visitor spending. Meeting planners with events booked in the Big Easy are scrambling to find alternative sites in Atlanta, Orlando, Fla., Houston, Dallas and other cities.

Space and availability are tight, however, so that business may be lost to the lodging industry this year. "October and November are two of the peak months for conventions, so there will be some shifting but consumers are going to have a hard time finding availability," said Mr. Hanson.

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