Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Thread -- Ignore unavailable to you. Want to Upgrade?

To: nolimitz who wrote (41678)	3/29/2001 7:19:32 PM
From: 2MAR$	Read Replies (2) \| Respond to of 49816

Hotel California ? ------->California hotels feel pressure from energy rate hike By Doug Young LOS ANGELES, March 29 (Reuters) - California hotels will soon face pressure to offset a 40 percent jump in the state's power rates by raising room charges, but many will also see margins shrink as they are forced to absorb some of the increase, analysts said on Thursday. The nation's three largest hotel operators -- Marriott International Inc.<MAR.N>, Hilton Hotels Corp. <HLT.N> and Starwood Hotels and Resorts Worldwide <HOT.N> have each added temporary energy surcharges in recent weeks at their California properties to offset soaring power and natural gas costs. But now the cost of electricity looks set to grow even more -- about 40 percent -- following regulatory approval on Monday of the largest rate increase in the state's history. California accounted for about 18 percent of the $118 billion in U.S. hotel revenues in 2000 because of the state's popularity as a destination for both tourists and business travelers. Under their existing surcharges, Starwood and Marriott now levy an extra $2.50 fee per night at most of their California hotels, while Hilton charges $3. But now all three will face mounting pressure to raise those surcharges when the new rate increases start appearing on their April power bills, said Michael Mahoney, a hotel specialist at PricewaterhouseCoopers. However, he said, the hotels must also be careful not to raise surcharges too high and risk turning off travelers. "With the latest increases (in electricity rates), it's going to be very hard to pass that all on to the consumer," Mahoney said. "There's going to be a balance -- you might see the energy surcharge top out at $5 before you see serious reaction." Jason Ader, an analyst at Bear Stearns, agreed that $5 was a threshold beyond which consumers -- especially leisure travelers -- might begin to cut back on their vacation plans. "Consumers are able to digest conceptually a couple of dollars (extra) a night," he said. "If you were to get above $5 a night, you might start to see some resistance." SURCHARGES TO STAY PUT FOR NOW Representatives from the big three hotel companies said it is still too early to say if their surcharges might be replaced with higher fees or permanent rate hikes. Hilton spokesman Marc Grossman said the company has no plans to change its surcharge at this point. "It's a situation that we're always monitoring," he said. "At this stage, we're satisfied with the $3 surcharge." Marriott spokesman Gordon Lambourne said Marriott is also monitoring the situation. "We'll have to watch it before we would make any kind of decision," he said. Starwood, which previously said it will soon install generators at some of its California hotels to offset higher energy costs, also has no immediate plans to raise rates, said spokeswoman K.C. Kavanaugh. "We continue to be concerned about rising energy costs," she said. "We're in the process of studying the impact of this (rate increase) right now, but as of now we have no plans to change our surcharge." If they toe the line and keep room rates in check, hotel operators will likely end up having to swallow at least some of the increased energy costs themselves, said Bryan Maher, an analyst at Credit Lyonnais Securities. "You've got to have some margin pressure there," he said. "It's got to be tough when you have softening room demand -- it's tough to pass through for increased costs." ((--Doug Young, Los Angeles bureau + 1 213 955 6750)) REUTERS * end of story * bring a fan ;-)