GlobeSt.com UPDATE: Shakeout Imminent Among Smaller Inns in Disney Corridor

ORLANDO-One of the biggest hotel/motel shakeouts in the past 10 years among family-owned and operated lodging properties may be occurring along U.S. 192 in east Kissimmee, FL, 15 miles from Walt Disney World’s front door, suggest new industry occupancy figures.

Two prominent larger Orlando hotels, not in the Disney corridor, are preparing to file for Chapter 11 protection under the U.S. Bankruptcy Code, industry insiders tell GlobeSt.com on condition of anonymity.

While the hospitality sector generally is suffering nationally and locally, not all of the properties are hurting with the same degree of pain at the booking desk. Smaller hotels are being hit the hardest.

For example, hotels and motels in the 50-room to 75-room category averaged 44% occupancy in October while chain hotels and Disney’s 22,000 rooms themselves average 60%. The overall occupancy mark was 53%.

This time last year, all of metro Orlando’s 110,000 rooms were averaging 71% occupancy, according to Smith Travel Research of Hendorsonville, TN.

November occupancy numbers are still being crunched. The disappointing occupancy levels follow a dismal Thanksgiving week that produced an average overall occupancy of only 47.8%, down 24% from a year ago.

Smaller properties are particularly vulnerable to the recession because of two key elements, industry consultants tell GlobeSt.com. First, even though the mom-and-poppers can slash room rates to the bone, they still can’t compete rate-wise with Disney and the nearby chains who continue to cut their rates to match their smaller rivals.

Secondly, the smaller inns don’t have an advertising budget to promote their properties in this downturn as Disney and the chains do. “That means right away, tourists and travelers spotting Disney’s lower rates will gravitate to their properties immediately, seeing the rates as a first-class bargain on a first-class hotel,” an owner of one of the smaller hotels tells GlobeSt.com on condition of anonymity.

At larger hotels, however, away from the U.S. 192-Kissimmee submarket, the occupancy level isn’t that grim. At the Westin Grand Bohemian in Downtown Orlando, for example, the eight-month-old property is holding its own.

“We are exceeding our expectations and meeting our budget for 2001,” Richard C. Kessler, president/CEO of The Kessler Enterprise Inc. and Grand Theme Hotels, tells GlobeSt.com. “We predict the same for 2002.”

On International Drive, Orlando’s main tourist corridor, Kessler’s Doubletree Castle and Sheraton Studio City properties are also performing steadily. “Our 2002 bookings and our budget are very close to the levels that we have achieved in 2000,” Kessler says.

The hotelier notes the seven main hotel submarkets in Orlando are Kissimmee, 20 miles south of Downtown; Lake Buena Vista, home of Walt Disney World; International Drive; Orlando International Airport; Downtown; suburban Maitland; and the University of Central Florida hub in east Orlando.

“The above markets are reacting differently” to the recession and the traveler slowdown, Kessler tells GlobeSt.com. “Some of them have been affected minimally and some of them have been affected very dramatically this last quarter.”

He says the Airport and Kissimmee submarkets “have been hit the hardest and they will be the two submarkets that will take longer to rebound because there is a high concentration of low-end product that is 100% dependent upon Disney.”

Other properties in Kessler’s Grand Theme Hotel Collection are the Celebration Hotel, Celebration, FL; Casa Monica Hotel, St. Augustine, FL; Universal Inn, Orlando; and Hampton Inn Savannah North, Savannah, GA.

Paul M. Guyet, a vice president at Orlando-based Smith Equities Corp. and a longtime hotel consultant, predicts a fire sale of smaller hotel properties in the east Kissimmee and airport corridors in 2002 if the economy is long-lived. “The vultures will show up in 2002 if the market doesn’t pick up,” Guyet tells GlobeSt.com.

But the consultant notes, “This is where I disagree with some of the so-called economic experts–I think the tourism business will return much faster than most of the prognosticators” are saying. “I look forward to 2002 picking up slowly and performing very well from May and June onward.”

Still, the former New York broker says, “I wouldn’t want to own a hotel on Route 192 today” where room-rate cutting competition from Disney and the national chains is fierce.

“When Disney lowers their rates, it’s like a huge bowling ball rolling down Route 192,” Guyet says. “It doesn’t care what hotel is in the way.”