IE 11 is not supported. For an optimal experience visit our site on another browser.

Hurricane evacuees boost hotels’ profits

For the hotel industry across the country, Hurricanes Katrina and Rita are proving to be something of a windfall, with hotel vacancy rates decreasing, room prices on the rise and profits growing.
/ Source: a href="" linktype="External" resizable="true" status="true" scrollbars="true">The Washington Post</a

At this time of year, Jay Poole's two low-budget hotels along the Florida Panhandle are usually about half full. But with hundreds of thousands of Hurricane Katrina evacuees needing shelter in recent weeks and possibly for months to come, his hotels have been nearly sold out.

"We like the business, but from a personal side we'd like to see [the evacuees] return to the normalcy of their lives," said Poole, who runs the 120-room Comfort Inn in Niceville and the 100-room Quality Inn Bayside in Fort Walton Beach. "We don't know when people will be leaving."

For the hotel industry across the country, Hurricanes Katrina and Rita are proving to be something of a windfall, with hotel vacancy rates decreasing, room prices on the rise and profits growing.

The Red Cross and the Federal Emergency Management Agency said this week that they would pay the hotel bills indefinitely for the approximately 400,000 evacuees still homeless. Thus far they have paid $112 million to hotels nationwide, according to the Red Cross.

The few hotels open in downtown New Orleans are mainly housing cleanup contractors, private security guards, journalists and hotel workers. However, outside the city and across the country, more than 8,000 hotels are being paid to house evacuees. And large chains such as Hilton Hotels Corp. have had to juggle their regularly scheduled business in New Orleans, moving clients to hotels in places such as Atlanta, Houston and Las Vegas.

Even so, some evacuees are having trouble finding a place to stay.

"There's no rooms between New Orleans and Baton Rouge available," said Mona Hedrick, an evacuee who has been staying at a Best Western in Laplace, La., with her daughter. She said they will have to leave their hotel room soon because a friend who lent them the room will soon be returning.

Surging demand is expected to increase the average daily room rates across the country by 5 percent, to $90.52, and hotel occupancy will be up 3 percent, to 63.3 percent for the year, according to Smith Travel Research, a Hendersonville, Tenn.-based research firm.

In Houston, for example, the original destination for thousands of Katrina evacuees, occupancy rates jumped to 83 percent last week, compared with 58 percent during the same period a year ago. The average price for a room spiked to $81.78, up from $76.44.

Poole expects his 2005 profit to be up about 10 percent because of Hurricane Rita -- even though he has dropped his regular room rate from between $89 and $99 a night to $70 a night for evacuees.

"September would have been a profitable month for us, but with the added revenue from the Red Cross paying for evacuees it was a more profitable month," said Poole, who said he has been paid $23,000 by federal agencies since the storm.

"Ninety percent of the people staying at my hotel don't have flood insurance, unfortunately, so they're not getting reimbursed," Poole said. "They want to go home but they're waiting on FEMA trailers and have no other place to go."

How long will they stay? "That's the magic question," he said.

Nancy Johnson, an executive vice president with Carlson Hotels Worldwide, said about 30 percent of the 320 hotel rooms her company has in Houston are filled with evacuees. Her company anticipates that they will move to permanent housing in the next 10 days, but assures that their hotels will continue to house evacuees as long as necessary.

"FEMA is paying for them so there's no reason for us not to do that," Johnson said. "We pretty much anticipate that between the relief workers and the displaced persons, the hotels, especially those in the Gulf Coast area, will be occupied through the end of the year."

At two Holiday Inn hotels in Atlanta, some 200 rooms of about 750 are being rented to evacuees for $69 per night, and occupancy rates have jumped to 80 percent from 70 percent last year, said Arthur Holst, who oversees the two hotels. "We anticipate that they'll be here for another month," he said, adding that he has received about $45,000 to date from FEMA and the Red Cross.

In Metairie, La., about 10 miles from downtown New Orleans, a manager at the Sleep Inn and Suites said the 70-room hotel is booked through January, with its guests made up entirely of FEMA staff, insurance adjusters and evacuees.

FEMA and the Red Cross have hired Wichita-based Corporate Lodging Consultants to manage the housing program that places evacuees in hotels. The company has set up an online system through which they can monitor and place evacuees and pay hoteliers. In most cases, hotels filing their invoices online can receive payment within four to seven days, said George Hansen, the firm's chief executive.

But not everyone finds the payment system so simple.

Vince Patel, general manager of the Hampton Inn in Laplace, said he is owed $23,000 from federal officials for the 28 rooms he rented to evacuees during the past month. He said he submitted the online form three times and called to follow up. He was told his application was "being processed." For now, he is accepting only state troopers and workers from the local utility company at his 80-room hotel.

"We have just stopped doing that," Patel said of taking in evacuees. "We're not taking anyone new coming in."