As in other segments of the hospitality industry, Black-owned hotels have been struggling against the economic downturn. According to Lodging Hospitality magazine, more hotels have defaulted on mortgage payments and closed than ever before.
The statistics are discouraging. A survey by Smith Travel Research, an independent research company focusing on the U.S. lodging industry, found that American hotels had a record-low 45.1 percent occupancy rate — the lowest for the month of January since 1987. Yet many hotels owned by Blacks have found new ways to attract guests locally and new business opportunities internationally.
“We have found that focused service and limited-service hotels as a whole have faired better due to their lower overhead and pricing flexibility,” explains Kirk Sykes, president of Urban Strategy America Fund at New Boston Fund, a New Boston, N.H., real estate investment fund whose portfolio includes hotel properties. “As the more significantly capitalized luxury hotels have had to drop their rates, focused service properties have had to shift to a strategy geared toward increasing occupancy.”
Urban focused-service prototypes that have performed well include New Boston Fund’s Hampton Inn & Suites at Crosstown Center in Boston, which benefits from its proximity to a number of hospitals and its niche as an affordable boutique property, Sykes says. “I am not sure this has anything to do with the ethnicity of the owners, but more so the strength of the Boston urban market,” he asserts.
Andy Ingraham, president of the National Association of Black Hotel Owners, Operators & Developers (NABHOOD), adds, “The hospitality industry continues to struggle, with the economy still in a tailspin and financing of a new product is still very difficult. We have close to five hundred hotels in the U.S. and the Caribbean and they are suffering some of the same impact that the economy has had on all of the industry; and that is less people traveling and reducing our rates to attract new customers.” While the organization believes that the economic downturn has reached bottom and sees some light at the end of the tunnel, “all of the major brands are spending more time looking at conversions as a way to continue to grow their product line versus their new development pipeline that is still stagnant,” Ingraham says.
To that point, NABHOOD’s 2010 International Investment Summit and Trade Show, scheduled for July 21–24 in Miami, will focus on new business strategies. “The summit theme this year is ‘creating new opportunities’ and will focus on understanding where we are on the economic conditions and focus more with our owners on acquisitions and converting existing properties where we see opportunities,” Ingraham says. The summit will feature major African-Americans and other players in the industry, such as Sheila Johnson, owner of Salamander Hospitality L.L.C. in Middleburg, Va., who is developing a string of upscale boutique hotels.
Partnering is an increasingly popular survival and growth strategy. “We at NABHOOD are working on increasing more awareness among minority travelers and have created some new partnerships with African-American organizations to use our facilities,” Ingraham points out.
They are also going global, not only attracting international guests to their U.S. facilities but also investing in properties overseas. “As a whole, the industry is working to attract both domestic and international visitors by increased advertising, creative promotions and lowering the rate while continuing to show the value in our product,” Ingraham says.
Foreign guests have been a boon to some businesses. “Given our proximity to world-class medical institutions frequented by visitors from around the globe, we work hard to stay very close to the decision makers at these institutions,” notes Sykes. “Our proximity to the Reggie Lewis Track and Athletic Center allows us to access several nationally televised track-and-field events by providing lodging for the spectators, athletes and officials.
Year over year, Boston has improved its stature as a national and international convention destination, and we have been fortunate to work with the Convention Authority to attract a fair share of this business.”
Help is on the way from the federal government for the international front. “Congress just passed a new tourism promotion act by allotting funds that will be used to market the U.S. to international visitors and will drive additional international travelers to U.S.,” says Ingraham.
Real investment opportunities exist abroad, Sykes emphasizes. The key is to get into a market at the right time, he notes.
Ingraham agrees. “Many NABHOOD members continue to look at opportunities domestically as compared with projects overseas because everyone knows that the first recovered market would be the U.S.,” he says.
“However, some of our more savvy investors, like Salamander, continue to explore opportunities in the Caribbean where they are looking to pick up properties at a deep discount that they can reposition and make a success. There will be a number of these types of opportunities that will be available to hotel investors and there may be additional government incentives that many destinations are using to continue to attract new investors.”
Rendezvous Bay Hotel & Villas, currently under construction and set to open 2011 in Anguilla, is one of the latest African-American investments overseas. Hotel construction has declined overall in the United States, according to PKF Hospitality Research, but NABHOOD members are building. On the way are Hotel Indigo Memphis, a 125-room, $15-million property opening this year in Tennessee; Majestic Star Casinos & Hotel in Pittsburgh; and New York Harlem Hotel, a 200-room property opening next year in New York City.
New openings have faired better than expected. “Some of our newest properties continue to be limited-service hotels, including one that just opened in Martinsville, Virginia, late last year. [It] was converted from a Holiday Inn Express to a Comfort Inn and is doing well in terms of occupancy and rate, which are a little lower than ownership would like, but at the same time still able to maintain its market share, ” Ingraham says.
Property owners are also looking at secure niche markets, he adds. “The growth of multicultural travel continues to lead the industry and we certainly hope to take advantage of this opportunity through some of the partnerships that we are creating with many African-American organizations like the National Coalition of Black Meeting Planners and the National Urban League.”
There may be too many empty rooms at the inn right now, but most owners are seeing positive signs for the industry. TripAdvisor’s recent annual family travel survey, for example, found that 92 percent of families plan to take at least one vacation this year, up from 88 percent in 2009. That means more business for hotels and, says Ingraham, NABHOOD member hotels will be in the mix to receive it.