There is an article in today’s Contra Costa Times about the Doubletree Berkeley Marina Hotel defaulting on a $160M loan. What caught my eye was that the hotel has 387 rooms.
That works out to about $242,000 in loans per room. If we figure 6% interest, amortized over 25 years (but due in 10), that’s about $1,560 per month just in financing costs.
Hotel occupancy rates have been awful. This chart from Calculated Risk shows that hotels, have generally been just over half-full, over the course of a year.
And, it appears that Berkeley hotels may be getting hit even harder than the rest of the country. From the article:
Still, hotel revenues generated by the entire lodging industry in Berkeley have ebbed lately, city documents show.
For the nine months from July 2009 through March 2010, transient occupancy taxes totaled $2.6 million, down 6.3 percent from the same nine-month period the year before, a May 2010 report by the city manager disclosed.
“Hotels in Berkeley have been hit by the economy like every city,” said Barbara Hillman, president of the Berkeley Convention & Visitors Bureau. “Our average room rate is down 22 percent.”
They’re competing in some instances with San Francisco hotels that have slashed rates to $140 a night.
So, let’s figure our room is occupied 18 days per month and has financing costs of $1,560 per month. That’s about $90 per occupied night. Unfortunately, the nightly rates don’t seem to be that much higher. A standard room with a kind bed looks to run about $119 per night, without any discounts or promotions. Yikes…that’s not a lot left over for payroll, taxes, insurance, utilities, etc…
No wonder the place is in default. I’m surprised anyone ever thought that would work.
July 1, 2010
Banking and Finance