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New Orleans: Getting its head above water
March 4 2010

After being dealt a double whammy by Hurricane Katrina and the downturn, the New Orleans market is showing signs of life once again.

NEW ORLEANS, Louisiana—Images of New Orleans in the wake of Katrina are indelible: a packed Superdome, shattered homes in the Lower Ninth Ward, Federal Emergency Management Act boats rescuing victims of a Category 3 hurricane that flooded 80 percent of the area in August 2005.

Hotels in this slowly reviving market are doing their best to change that image, but it’s difficult.

New Orleans, Louisiana

“(People) still have the crazy perception we’re still flooded,” said Tod Chambers, GM of the Roosevelt New Orleans, a Waldorf=Astoria Collection landmark on the edge of the French Quarter. Chambers oversaw a US$170-million renovation of the 504-room Roosevelt, a legacy hotel closed from 30 August 2005 (the day after Katrina) to 1 July 2009. Guestrooms go for US$199-US$499; the Teddy Roosevelt Presidential Suite costs US$4,000 a night.

“Katrina brought this city down,” said Chambers, who expects the Roosevelt to post occupancy in the 60-percent range this year. “We’re still growing back into what we used to have, but we haven’t felt the economy as negatively.”

In an interview there 16 January, the day the New Orleans Saints beat the Arizona Cardinals in the NFC divisional playoffs, Chambers and Sales and Marketing Director Mark Wilson indicated things are improving.

The hotel, its storied Sazerac Bar, and Domenica, an exceptional restaurant run by New Orleans food guru John Besh, were packed. The place felt prosperous.

By contrast, September 2005 was horrendous: Market demand plunged 69.5 percent, revenue 68.8 percent and supply 68.9 percent, according to Smith Travel Research. Such drops persisted through 2006, but 2007 began to show improvement. Meanwhile, occupancy dropped from 67.4 percent in 2005 to 57.7 percent in 2007. ADR edged up, from US$115.28 in 2005 to US$116.56 two years later. In 2008, occupancy was 62.9 percent and ADR US$118.23.

The Sazerac Bar in the Roosevelt New Orleans is a swank meeting place.
According to December 2009 STR figures, New Orleans occupancy for last year was 57.7 percent, ADR US$113.52; demand was down 6.2 percent, revenue down 10 percent. But that month, RevPAR was US$65.50, up from US$49.60 the year earlier.

The NFC playoff was a mere prelude: The Saints won the Super Bowl, jump-starting a very good spring, suggested Jeff Anding, director of convention marketing for the New Orleans Convention & Visitors Bureau.

“We definitely had a better-than-expected January, and Mardi Gras was stronger than expected. The growing interest in the city in January with the playoff games and the NFC championship game leading up to the Super Bowl” persuaded many tourists to party in New Orleans rather than Miami, he said. “Mardi Gras (11 to 16 February) was unbelievable. This year, we had either sellouts or near sellouts on Thursday, Friday, Saturday, Sunday and Monday—with occupancy in the high 90s, if not sold out.”

This Mardi Gras had an estimated economic impact of US$300 million to US$400 million, which is 20 percent to 25 percent higher than usual, Anding said.

A national marathon kept momentum going when it made its New Orleans debut 28 February, bringing 13,000 runners into the city, 72 percent of them non-Louisiana residents. Also adding to business was a medium-sized convention of the American Academy of Allergy, Asthma and Immunology, and next week, the American Academy of Orthopedic Surgeons is expected to draw about 35,000.

“We’re having a very good spring so far,” Anding said. “It doesn’t happen on the short-term basis; these two conventions were booked several years ago, so we knew they were in the works. What we didn’t know was all these other elements would fall into place and create such a robust spring around them.”

Looking up

Gary Gutierrez is president of HRI Properties, which owns six hotels, half of them in New Orleans: The 251-room Chateau Bourbon, a Wyndham historic hotel; a 284-room Hilton Garden Inn at the Convention Center; and a 155-room Hilton Garden Inn in the French Quarter. The fourth quarter of 2008 was “really tough,” he said in a recent telephone interview, but 2009 began to pick up, and “we’re pacing well for January.”

Mardi Gras is a sellout, and “then you start tapping into different festivals,” like the Jazz & Heritage Festival in late April, the Essence Music Festival in July, and Voodoo 2010, in early October.

“Depending on what expert you speak to, we are still expecting a decline in RevPAR for 2010,” Gutierrez said. But by the third quarter, stability is expected to take hold, and in the fourth quarter, he predicted, there will be “some signs of growth.”

“There are no new hotels slated for the market, which in this economic period is a good thing,” he said. “We obviously have the bandwidth to absorb more occupancy.”

HRI exceeded its budget expectations in January, and February, “with a better-than-expected Mardi Gras” and the triumphant Saints, was “very strong,” he said in early March.

Corporate sales

Gary Gutierrez, president, HRI Properties

Corporate business “had its budgets busted” in late 2008, said CVB marketing head Anding, dashing hopes for 2009, when convention business fell about 60 percent. “We expected coming into 2010 over 2009 that we would be down about 5 percent in gross numbers, but since December we’ve been seeing corporate bookings happening in the short term, which have been very unexpected.” Thirty-three conventions of more than 2,000 rooms have been booked versus 31 in 2009, “suggesting that quote-unquote pent-up demand really is coming to fruition.”

The sources of corporate business this year and last are, in order, health and medical; trade, business and commercial; and corporate automotive, oil and gas; retail and telecommunications, Anding said. The association segment feeder markets are greater Washington, D.C. and Chicago.

“2009 ended with 57.7 percent occupancy versus 62.9 percent from 2008,” he said. “Contrast that with the fact that New Orleans was the only city in the 25 competitor destinations that posted a positive RevPAR number in December 2009.”

The market “has really picked up a lot since October,” said Andrea Thornton, sales and marketing director for the 600-room Hotel Monteleone, a French Quarter landmark and that area’s largest; rates are US$169 for a double to US$3,500 for the Monteleone Suite. “It’s coming back very strong,” she said, citing occupancy in the mid-60s in November and December.

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