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2Q revenue down at Sax owner
August 15, 2009 – The real estate investment trust that owns Hotel Sax and commercial property at Marina City is looking for business to pick up next year. As for the rest of 2009, it is going to be “extremely difficult and challenging” for LaSalle Hotel Properties, according to its president and COO. During a conference call with investors on July 23, Michael Barnello called Chicago one of LaSalle’s “weakest markets” due to “very poor convention attendance and widespread discounting.” LaSalle owns 31 hotels nationwide, including Hotel Sax with its 353 rooms and the 752-room Westin Michigan Avenue. While the Westin made Barnello’s list of “weakest properties in the quarter,” Hotel Sax did not. The Maryland-based company is reporting net income down from a year ago. LaSalle took in $8.2 million from April to June, down from $20.5 million during the same period last year. Earnings before interest, taxes, depreciation, and amortization were $59.5 million, down from $70.5 million. Occupancy was 74.7 percent, down 7.9 percent from the second quarter of 2008. Company offcials believe the decline in demand for hotels overall is slowing. Barnello says group sales are down as corporations “dramatically” reduce the number and size of their meetings, number of employees attending, and length of stays. Group demand industry-wide in the U.S., according to Barnello, is down 20 percent from a year ago. Leisure travel is not so bad, with demand down no more than five percent in the second quarter – although, says Barnello, “it did turn positive in June.”
No more free bottles of shampoo LaSalle is trying to save money by reducing the number of managers and hourly workers at its hotels, reducing housekeeping hours, and tinkering with menus, food portions and prices. Also, by replacing traditional miniature bottles of shampoo and conditioner in each room with pump dispensers in the shower. “It is a sad reality that downturns force us to reduce jobs and services at all of our properties,” says Barnello. “However, in the short and long term our [earnings] will benefit from these operational improvements.” In the first quarter of the year, LaSalle reported a net loss of $18.9 million. Occupancy was 60.4 percent. But the REIT raised more than $100 million by selling new stock. “We’ve been through a very difficult environment before,” says Barnello, “and our team will continue to be effective at facing the challenges and taking advantage of the opportunities that lie ahead.” 330 North Wabash on hold Meanwhile, the project to build a 335-room “super luxury” hotel at 330 North Wabash, across State Street from Marina City, has been temporarily suspended. LaSalle president Michael Barnello told investors last month that as of April 1, his company is “no longer capitalizing interest and other expenses related to the development project.” However, says Barnello, “We continue to believe the project when completed will create long-term value for the shareholders.”
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Serving the Loop and Near North neighborhoods of downtown Chicago
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