Plenty of room at the inn

//August 24, 2009

Plenty of room at the inn

//August 24, 2009

Cost consciousness of vacationers has left hotels scrambling to entice guestsBob Progner has seen ups and downs in 31 years owning the Sea Crest Inn in Cape May, but he’s never seen vacancy rates like this year.

“We’re really dependent upon disposable income,” Progner said. “And there’s no disposable income.”

Hotels and motels across the state are trying a combination of rate cuts and creative promotions to entice customers, but some of the hospitality industry’s leaders in New Jersey forecast it will be years before the industry returns to its pre-recession heights.

Progner said he has seen some success by offering specials and $100 rebates, but those modest results have been overwhelmed by the drop in leisure trips.

He added that customers are nickel-and-dimed by government costs, ranging from the state occupancy fee to the inability to transfer beach tags. After a guest spent $500 at a local mall, she found a parking ticket on her car. Progner said he paid it to prevent the guest from having a sour impression of Cape May.

“We’re doing everything we can,” he said. “We’ve got a good product here.”

Another Cape May hotel owner said she set room rates to meet operating costs and could not reduce them. Cuts to room rates have been a frequent strategy elsewhere in the state, even when the long-term financial implications are stark.

Mark Giangiulio, general manager of the Grand Summit Hotel, said it might take years to return room rates to where they were.

“We’ve rolled back prices to a level that we never thought we’d see again,” said Giangiulio, board chairman of the New Jersey Hotel & Lodging Association.

The Grand Summit Hotel has been looking for ways to generate business, and recently scored a success by helping to stage the first Summit Food and Wine Festival. The event brought together wine makers and experts with chefs to draw customers, Giangiulio said.

“It’s trying to make something out of nothing,” he said, referring to the absence of similar events in the area. He said resort areas traditionally have been the locations for such festivals — not suburbs — but many people are looking for something to do closer to home.

Giangiulio said the collapse in business travel, which he termed the “AIG effect,” has been devastating. He added that many smaller promotions haven’t worked for New Jersey hotels.

Mike J. Taylor, New Jersey Hotel & Lodging Association president and general manager of The Heldrich, a hotel in New Brunswick, said there has been a dramatic falloff in business across the state since the bad economic news snowballed last September.

It’s not uncommon for New Jersey hotels to have lost up to 30 percent in revenue year over year, Taylor said.

“Everybody is achieving their numbers through cost cutting, not through revenues,” he said.

Taylor said it’s been personally difficult to cut staff at his hotel.

“It’s hard any time reducing staffing when you have very good people who work hard,” Taylor said.

The Heldrich has offered rooms that normally would be $130 or $140 per night for less than $100. While the cuts can be made quickly, costs and the ability to raise rates are less flexible, Taylor said.

“What’s going to happen is that people become accustomed to a price point,” and ask themselves why they would pay more for what was less expensive, Taylor said.

There aren’t many rosy predictions about the future either.

“What everybody’s basically feeling is that next year will be flat, or maybe a little better than this year,” Taylor said. “It’s been a long, substantial downturn, and it’s going to be a slow climb coming back out.”

Even with all of the negativity, Taylor noted from previous experience that while recessions seem like they’re never going to end, they do.

Taylor said while occupancy actually is higher at his 248-room hotel on the weekends than last year, the steep declines in business meetings and travel have been much greater.

“The worry I think a lot of us have is that we’ve taken rates to a point where it’s going to take a while to get them back to where they were 12, 18 months ago,” he said.

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