Chains Extend Waivers: Gulf Coast Meeting Relocations To Cause Availability 'Ripple Effect'

Hotel chains last week extended cancellation fee waivers at properties in the Gulf Coast that were affected by Hurricane Katrina and said the rush to relocate events may cause a "ripple effect" by tightening availability in major cities across the country.

Even after the floodwaters of New Orleans are pumped out and hotels are reopened, affected properties may not be able to accommodate corporate meetings and events for months, warned consultants. In addition, some properties may be used for long-term housing for relief workers or evacuees, hoteliers said.

As meetings and conventions originally scheduled for New Orleans are relocated, availability will tighten in major U.S. cities, said Bob McCarthy, executive vice president of North American lodging operations for Marriott International Inc. in a conference call. This ripple effect will be felt in New York, Washington D.C., and other major cities, he said. "We've been working, as have our competitors, to relocate meetings around the country," Marriott's McCarthy said.

In addition to the ripple effect of relocated meetings, Marriott also has begun to benefit from new demand coming into New Orleans from "FEMA, insurance adjusters and related organizations," he said. "From a financial perspective, it is positive, as unfortunate as the tragedy is."

"What we're seeing is a whole new group of customers come into New Orleans and the customers that were going to go into New Orleans are going to other cities," added Marriott chairman and CEO J.W. "Bill" Marriott, Jr. The chain announced on Sept. 8 that 14 of its affected properties remained closed for business and it has waived cancellation fees for groups through at least Nov. 15.

Bjorn Hanson, head of the hospitality and leisure practice at PricewaterhouseCoopers, said "Many meetings and conventions need to be placed somewhere else in what already is a peak period, so it is having both occupancy and rate effects in other markets." He noted spring and fall are the two peak periods for convention activity and that New Orleans is one of the 10 largest convention markets.

Hyatt Hotels Corp. has waived cancellation fees through Nov. 30 at affected hotels in the Gulf Coast area and waived cancellation fees at the Hyatt Regency New Orleans through March 31, 2006, said Fred Shea, vice president of sales operations. Shea said Hyatt will attempt to relocate groups to other chain properties if possible, but said it is too early to determine how successful rebooking will be.

"All the local business we assume will cancel and not rebook," he said.

Hilton Hotels Corp. has waived group cancellation fees at affected properties through Nov. 30, according to company representatives.

"Meeting planners have to understand that we're still assessing the situation. While our hotels could be up and running fairly soon and the staff are eager to go back to work, it's the city and the functioning areas that we're having difficulties predicting how long this will go on," said Hilton spokesperson Lisa Cole.

Starwood Hotels & Resorts Worldwide announced that approximately 75 Starwood associates have returned to work at the chain's three New Orleans properties. Group cancellation fees have been waived through at least Nov. 2.

InterContinental Hotel Group has waived group cancellation fees at properties in New Orleans through Dec. 31. The chain also announced that evacuees would have "top priority" in case properties are needed for housing.

New Orleans' Ernest N. Morial Convention Center has been closed through March 31, 2006, said J. Stephen Perry, president and CEO of the city's convention and visitors bureau.

"Small and midsize meetings scheduled after Jan. 1, 2006,that do not utilize the center and that are self-contained in hotels are not cancelled. Each will be dependent on the status of the individual property and the preparedness of the city at that time," Perry said on the CVB Web site. Many properties will be committed to servicing recovery workers this fall, he said.

A number of CVBs have stepped forward to offer meeting and convention space for affected groups. The San Antonio CVB already has taken 10 corporate group events previously scheduled for New Orleans, according to John Solis, the bureau's vice president of sales and services. Large conventions that relocate to San Antonio also may be given reduced rates, he said.

In the days following Hurricane Katrina, Solis said he lost count of the huge volume of inquiries on relocating events to San Antonio. "It was getting up to about 10 an hour," he said.

The number of events originally scheduled for New Orleans in the next few months would have been "manageable," but it has become clear that group business will be affected in the area for a longer period of time, Solis said

"We're seeing leads through 2007 right now," he said. "We're getting all kinds of inquiries."

Solis added that he will aim to work closely with his New Orleans counterparts. "I don't think they understand the magnitude and the decisions a lot of these organizations are having to make."

Some consultants said that the response of hotels has been inadequate and shortsighted. Joan Eisenstodt, president of independent meeting management firm Eisenstodt Associates, said Gulf Coast properties should extend cancellation fee waivers through February. Hotels waived cancellation fees after the terrorist attacks of Sept. 11, 2001, for four months in New York City, she said, and the damage in the Gulf Coast affects a larger area.

"I'm angry at our industry. I'm angry at the lack of response," she said. The majority of hotel staff workers come from lower-income households that were the most affected by the hurricane, she said, and they may not be able to return to work as soon as properties reopen.

"If they came back to work, where would they live?" Eisenstodt said. Even if properties transfer staff from other areas, those employees must be provided housing, she said.