How Hurricane Harvey can help Houston's hotel industry in the long run

The Marriott Marquis Houston opened in December 2016 and is connected to the George R. Brown Convention Center.
The Marriott Marquis opened last year by Houston's Convention Center

The stories from Texas are both heartbreaking and heartwarming as people help one another through the devastation of Hurricane Harvey. As we’ve been reporting, hotels in the surrounding areas are lowering rates to help evacuees and rescuers alike, and companies like Marriott and Hilton have all announced donations to help the affected communities.

Balancing Business with Support

While some hotels have lowered rates, others may raise them, however inadvertently. “It's our job in the hotel industry to not gouge and take care of people during these crises,” Bob Rauch, founder and CEO of San Diego-based RAR Hospitality, said. “There's a tendency by many—and this has nothing to do with hotels and everything to do with business—to gouge because of demand.”

Demand sparked by an emergency, of course, is not the same as demand sparked by a sporting event, and hoteliers in affected zones need to be certain that they’re doing the right thing not just for their bottom line, but for everyone. Amid stories of hotels raising rates for evacuees, the Texas Hotel and Lodging Association is encouraging its member hotels to keep prices affordable for evacuees and others. "For lodging operators, we advise that a hotel not raise its rates to levels that are higher than the rates the hotel would normally charge for that level of occupancy when there is not an emergency," the Association said on its website.

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This can be complicated by hotels using automated rate programs. “We've seen a few cases of that, where the hotelier was unaware that their reservation system was raising prices,” Justin Bragiel, general counsel at the Texas Hotel & Lodging Association said. “We ask our members to turn that system off so that it doesn't automatically raise prices.”

Compassion First, Money Next

During the initial stage of a crisis, Rauch said, hoteliers must do two things for locals: First, they need to drop rates to as low as possible to provide people with a place to stay. “Reduce your rates dramatically to something that you can afford. And just survive short term. The long term will take care of itself.”

The second thing, he continued, is to relax rules as needed. For example, the the Holiday Inn Express and Suites in Katy, Texas, is struggling not only with the crisis at hand but with social media outrage after they refused to allow an evacuee family to bring their three dogs into the hotel. After three days of leaving the dogs in a car outside, the family moved to a TownePlace Suites several miles away.  

Pet policies, or limitations on how many guests can use a room at one time, should always be relaxed in a crisis, Rauch said, even if it means the housekeeping team may have to spend more time cleaning a room that’s not designed to hold pets. If brand standards or a an off-site management company's policies don't allow for this kind of support, Rauch advises communicating with the management company to paint a broader picture of what is needed. If that fails, he said, risk the punishment and help the guests anyway. “I have always believed in getting my wrist slapped afterwards for having done the wrong thing than doing nothing, and you can't do the wrong thing when you're taking care of people,” he said.  

In some cases, being flexible can have a significant payoff in the long run. When Rauch was the GM and owner of the Homewood Suites by Hilton San Diego Del Mar in 2007, a fire forced people to flee their homes, and Rauch opened his hotel to evacuees with the lowest rate possible. In spite of the hotel’s no-pet policy, one guest asked to bring a small dog into his room—and wound up bringing two large ones instead. When the guest checked out, he revealed that he was a senior executive with Qualcomm, and would be bringing the company’s business to the hotel from then on in gratitude for Rauch’s help during the crisis. “I didn't know he was an executive of any kind much less my single largest potential producer of rooms in the market,” Rauch said. “Compassion first, money next.”

The Long-Term

Once the waters go down, demand for hotel rooms is likely to remain high. “Between the aid workers and insurance companies, there is so much demand for hotel rooms,” Rauch said. “That creates a huge compression  in the market, and what I mean by that is that all of a sudden, many hotel rooms are full and the guests are coming back to do business as usual or even to visit. Hotels start having much higher rates because there are few so few rooms available because you have closed hotels and you have hotels full of aid workers and volunteers.”

This situation can drive up room revenue—and, if everything works well, can help a destination’s hospitality sector in the long run. “There is going to be a lot of demand in Houston,” Rauch said, “and that will cause occupancy increases.” Houston, he said, was sufficiently prepared for the disaster that it will likely recover reasonably quickly from the hurricane, with new infrastructure (and hotels) replacing what was damaged. Given the recent increased supply and lack of demand, Houston hoteliers may be able to take advantage of insurance policies to build new hotels that will meet new demand. “The economy of Houston could actually come back very strong during rebuilding,” Rauch said.

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