Hotels Hope to Capitalize on City’s Stability to Keep Conventions Coming

Hector Torres can pinpoint the “aha” moment when he realized the hotel business had changed.

It was this past September, at the onset of the nationwide economic breakdown, and D.C. officials were readying for a massive convention bringing together thousands of African American MBAs from across the nation.

Unexpectedly — and uncomfortably close to the big day — Pepsi pulled 450 delegates from the event, reportedly losing a massive amount of money for the hotels where their staff would have been staying.

“If you could imagine being hit by a bath of ice water, that was the effect,” said Torres, vice president of Capital Hotels & Suites, which owns two hotels in Washington. “All of a sudden you had this real, daunting realization. Sometimes companies will pull their people from events but they do it discretely. But this was not like that at all. It was a very personal revelation for me.”

Across the country, the meeting industry has been met with scorn by politicians and others criticizing what they see as wasteful corporate get-togethers — especially if those corporations have relied on taxpayer bailout money. The travel industry has fought back, arguing that meetings translate into business that keeps hotels going. According to the U.S. Travel Association, an industry lobbying nonprofit, meetings and events are responsible for nearly 15 percent of all travel in the United States and generate around 0 billion in spending, along with some 1 million jobs.

But that hasn’t stopped Washington from rallying against perceived excess. “You can’t go take a trip to Las Vegas or go down to the Super Bowl on the taxpayer’s dime,” President Barack Obama declared at a recent town meeting.

The days of that extravagant Las Vegas junket may be over — or at least on hold — but the Washington area has always been unique to other destinations given its steady clientele base of government officials and foreign delegations. After all, politics doesn’t take a holiday or stop because of a recession.

Although cushioned from some of the blow that the tourism industry is facing nationwide, many hotels in the region are nevertheless having to alter the way they do business because of the economic downturn.

For instance, like Hector Torres’s properties — the Beacon Hotel and St. Gregory — other local hotels are seeing a surge in last-minute booking, which makes it incredibly difficult to market and plan the way they have in the past.

“It’s definitely changed our culture in this business,” said Ben Timashenka, general manager of Kimpton’s Hotel Palomar Arlington in Virginia and previously an executive at other hotel corporations like Sheraton and Hyatt. “Stimulus packages are becoming a big factor. As [industries and companies] get money all of a sudden, ‘We can have this meeting,’ and the phone’s off the hook,” he explained. “We’re not waiting four hours to get back to customers now; we have to call back immediately.”

Before, the lead time for large companies to reserve a block of rooms was 36 months to 48 months out, according to Torres. Now it’s as little as six months ahead in some cases, he estimated.

Interestingly, those who are benefiting most from this last-minute meeting trend are leisure travelers, who can now find stellar deals less than two weeks before their trips to D.C. Timashenka said he sees this as an opportunity to build customer loyalty among families as they shop around for the best hotel offerings.

It’s difficult to say what the current state of the hotel industry is here, given that January included the Presidential Inauguration, which provided a 0 million boost to area hotels. As of press time, February figures also weren’t available. But according to Destination DC, which tracks tourism in the city, the end-of-year data shows that hotel business was pretty much flat. So far this year, based on their calculations, rates have experienced no growth and occupancy is down slightly. Even before the economic spiral, it was predicted that 2009 and 2010 would be slower years for hotels and conventions because less sizeable meetings were scheduled, which only added to the grim forecasts.

Across the country, however, conditions are still much worse. So why is D.C. able to dodge the hit?

Put simply, it’s the nation’s capital, so there will always be interest in visiting, whether for work or play, experts told The Washington Diplomat.

Even now, the incredible excitement of the inauguration is still carrying over, months after the president’s swearing-in, Torres and Timashenka said. That assertion is backed up by officials at Destination DC, who noted that when families were calling to inquire about visiting for Obama’s inauguration, nearly as many were calling to ask about visiting in the months just after the historic event.

“There’s definitely an increase in patriotic tourism,” Torres said. “We’re just hoping it will last long enough to give us something to stand on until this economic situation corrects itself,” he added. “We’ll certainly be ready for them on that end.”

Besides the incoming administration, what makes Washington different is its foreign dignitary and diplomatic community, which can always be relied upon to make trips to D.C.

Torres’s hotels so heavily depend on the diplomatic community — which accounts for as much as 8 percent of total business at certain times of the year — that he plans to create a diplomat-guaranteed rate that’s on par with the federal government room rate.

Likewise for Timashenka, business travel, much more than leisure travel, makes up the core of his clientele. His location in Virginia draws on a major chunk of federal contractors who, even in harsh financial times, must continue coming to Washington for work. “Government contractors are still traveling. We’re still at war so that’s a must,” he said.

In fact, Timashenka’s hotel, which is just over a year old, has been so profitable that it recently partnered with the Corporate Executive Board’s Waterview Conference Center to increase the amount of convention space available to guests. Even in the tumultuous economy, the demand was simply there to up the capacity, the general manager noted.

Likewise, the troubled economy hasn’t seemed to put a damper on the expanding area presence of Kimpton Hotels, which just opened the Lorien Hotel & Spa in Old Town Alexandria, the company’s fourth property in Northern Virginia, on top of the seven hotels it has inside D.C.

All hotels located in the Washington region also benefit from the area’s unique geographical position, which has helped it to withstand the tourism slump. That’s because a quarter of U.S. residents live within a six-hour drive of the area, according to Destination DC, making it a convenient and relatively affordable place to visit. In 2007, a whopping 16.2 million people made the trek to the region, with more than 90 percent hailing from within the country.

In the immediate future, the big annual National Cherry Blossom Festival, which runs until April 12, is also certain to help, with a variety of hotels offering packages starting as low as 9 per night running until the end of the month. Hoteliers are no doubt hoping the flower power from the festival adds to the power of the region to keep bringing people in while keeping the country’s financial woes at bay.

About the Author

Dena Levitz is a contributing writer for The Washington Diplomat.