Hardly Any Room at the Inn

Space squeeze lifts rates, profits and hoteliers' spirits

Not since the hot bed days of World War II have hotel rooms been so hard to get. In Las Vegas, tourists and conventioneers are stacked tighter than a deck of cards. In Denver, occupancy rates seem to be climbing faster than the market price of silver. The only way that would-be guests can see the inside of a room at the Beverly Hills Hotel is to buy a $4 ticket to the film California Suite, and the Los Angeles Marriott, a 1,020-room slab within easy earshot of the airport runways, is expected to hit 100% occupancy for more than 150 days this year. The squeeze is much the same in Detroit (where guests sometimes have to settle for space in Ann Arbor, an hour's drive away), New York (where 1,000-and 2,000-room hotels are often fully booked), Atlanta (where a couple of large conventions had to be refused because there were no rooms for the requested dates),' and most other U.S. cities.

Space is tight, and hoteliers are smiling because of the boom in business travel and conventions, which together bring well over half of the business. As a result, the squeeze is worst on working days. Tourism is also up because of the decline in airfares, and the devaluing of the dollar has lured many foreigners to U.S. hotels. A record 2 million people from abroad visited New York City last year, an increase of 8% over 1977. Says a manager at the chic Beverly Wilshire Hotel, where foreign guests have risen from 10% of the clientele ten years ago to close to 25% now: "We are getting so many Australians that I call one hallway my Australia Row."

U.S. prices seem cheap to foreigners --first-class double rooms can go for $120 in London, $180 in Paris and $123 in Tokyo--but they are fast catching up. The most spartan single at the Beverly Wilshire has risen from less than $50 three years ago to $70 now, and doubles run as high as $135. The New York Hilton has just lifted its corporate rate for special repeat customers from $56 to $64 plus taxes for a single room; ordinary customers pay as much as $76, up $6 from last year, for a single and $92 for a double.

Occupancy rates nationwide have jumped from about 64% in 1975 to more than 72%, and many top hostelries in big cities are doing even better. First-class hotels in Dallas were almost 80% filled last year. Week after week in Houston's Southwest Galleria district, the Galleria Plaza and the Houston Oaks fill 95% of their rooms. Chicago's O'Hare Hilton runs at more than 100% capacity--with strangers bedding down with strangers or sleeping on couches in the lobby and in booths in the restaurant--when storms or fog grounds planes. Says General Manager Lynn Montjoy: "I'm the nasty man who prays for bad weather." Though they deny it, managers often overbook by about 10%. Admits Paul Sheeline, chairman of the Inter-Continental chain: "Hotels overbook a little, like the airlines, because some people do not show up."

High occupancy and rising rates lead to enviable profits. Earnings of Holiday Inns were up 24% in the first nine months of 1978, while Marriott ended its fiscal year up 30%. Hilton had the highest earnings for any month in its history last October: $9.3 million.

The innkeepers are using much of the money to build new rooms because there is a severe hotel shortage. Many old hotels have closed; New York City has only 100,000 rooms, down from 120,000 at the end of World War II. Construction of new U.S. hotels declined for four straight years through mid-1977 as a result of recession and inflation. Now many grandiose projects are set to go or actually under way. Among them: the 1,050-room Palace and an 829-room hotel at the World Trade Center in Manhattan; the $125 million Hilton with 1,800 rooms in Chicago; and two luxury hotels in Atlanta designed by John Portman, the architect who started that city's hotel surge in 1965 by building the spectacular, hollow-center Hyatt Regency.

With construction costs running at $60,000 to $100,000 a room, up from $30,000 five years ago, and with interest rates at 12% or more, many hoteliers are choosing to renovate instead of build. Los Angeles' opulent, Spanish baroque Biltmore--a 1,021-room establishment that opened in 1923--was bought by a team of local architects for a bargain $5.4 million in 1976 and is in the final stages of being elegantly refurbished. Manhattan's Shelton Towers just reopened as the Halloran House; the Commodore is being rebuilt as the Grand Hyatt New York; and the Barclay, owned by Inter-Continental, is undergoing extensive redecoration. Even with all this activity, the prospect for travelers is a continuing squeeze and ever higher room rates. Tourists and business travelers would be wise to reserve early --and get confirmations in writing.

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