Hotels Brace for Lean Times Despite High Demand

NEW ORLEANS – With a plethora of holiday activities lined up, New Orleans is once again poised to welcome the influx of visitors it has come to expect during this festive season. The city has become increasingly popular as a winter holiday destination, and this year’s visitors will find that a larger-than-ever supply of accommodations awaits them.

Thirteen hotels have opened in and around New Orleans during the past three years, and at least 11 more are planned through 2023, according to the Greater New Orleans Hotel and Lodging Association. The city now has an inventory of more than 41,000 hotel rooms.

Recent additions run the gamut of amenities and prices. They include such downtown inns as the 217-room NOPSI Hotel on Baronne Street; the 196-room Eliza Jane Hotel on Magazine Street; the Ace Hotel’s 234 rooms on Carondelet; and 207 rooms in the re-made Jung Hotel & Residences on Canal Street.

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While much of the construction has occurred downtown, other neighborhoods also are sporting new hotels. The genteel Henry Howard Hotel, for instance, opened its 18 rooms on Prytania Street in the Garden District, and the chic remake of a church and convent created Hotel Peter & Paul, with 71 rooms, on Burgundy Street in Faubourg Marigny.

As these and other inns were taking shape, still more visitor accommodations were coming online via another pipeline. Short-term rentals, in the form of private homes and condominiums being rented out by their owners for days or weeks at a time, have come on strong in New Orleans, further expanding the city’s room inventory while creating a new source of competition for local hotels.

One reason for surging visitor interest in short-term rentals, many of which are listed through the popular broker Airbnb, is a rising traveler preference for an “authentic” experience in the places they visit. Whereas hotel rooms can have much the same “feel” from one city to another, residing in a home setting can give visitors a more realistic sample of local life. That trend has helped propel the number of local short-term rental units into the thousands.

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In response to complaints that some neighborhoods are being overrun with tourists as a result of the Airbnb explosion, the city has enacted increasingly strict rules on the rentals. But these privately owned units will not go away anytime soon.

Some hoteliers believe that short-term rentals are hampering hotels’ ability to raise their room rates. Figures compiled by Tennessee-based hotel data analyst STR show that the current average price of a local hotel room is $162.97. That price is just 84 cents above the average rate of mid-2015, and analysts say the sluggish rates are unusual in a strong market such as New Orleans.

On the other hand, local hotels have managed to keep their occupancy at nearly 75 percent, which puts them near the top of national hotel ranks. The fact that local hotels have maintained occupancy while adding new rooms and facing competition from private rentals indicates that visitor interest in New Orleans remains high. But without many blockbuster entertainment events scheduled in the near term, hotels’ struggle to boost their rates likely will continue.

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Right now, hoteliers would love to see on the horizon a string of big events such as they enjoyed in 2012 and 2013 when New Orleans hosted an NCAA Men’s Basketball Final Four, a BCS College Football Championship game and an NFL Super Bowl. The college football championship will return to New Orleans this Janual 13 but with few big conventions scheduled in the near term and the next New Orleans Super Bowl four years away, hotel managers acknowledge they will just have to grit their teeth and do their best to wow guests while waiting for better times ahead.

This article originally appeared in New Orleans magazine.


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