"This Morning" with Gordon Deal
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Posted: Thursday, 26 June 2014 7:14AM

New hotels not likely in New Orleans near future

In his recent 'State of the City' address, New Orleans Mayor Mitch Landrieu said he sees tourism growing to 13 million visitors per year by the city's 300th anniversary in 2018.

However, hospitality leaders say that will require more hotel rooms. And, Mark Romig, President and CEO of the New Orleans Tourism Marketing Corporation, doesn't see them appearing in the city any time soon.
"With the existing number of hotel rooms now, we will certainly need to see more development if we want to see 13 million visitors in the city," says Romig. "But we still have lots of hotel rooms to fill now, particularly in the early part of the week."

It's easy to think New Orleans could handle plenty of additional hotels when we constantly hear of occupancy rates of 90 percent and higher for weekend events. But, that's not what's going to drive the development of new properties.
"We're doing really well, promoting New Orleans as a weekend visitation destination, for festivals, the Saints and special events." Romig says. "But our efforts need to be focused more on the early part of the week. We really need to look at our occupancy average, year-round, before we start thinking about more hotel rooms."

"We can find ourselves on a weekend, literally, at 100 percent occupancy. But we have this great capacity early in the week, unless we have a city-wide convention in town. So, we really need to raise the average occupancy, on a year-round basis, upward to close to 80 percent."
He says the current average occupancy rate for New Orleans hotels, year-round, is about 68 percent.

"When we can get our annual average occupancy up to about 80 percent, I think you'll see more hotels come on line."

"Then, I think you'll see the market responding by wanting to put more hotel rooms in New Orleans. But we still have a lot of work to do to get to a point where we are...on a regular basis, day in and day out...handling an occupancy level of close to 80 percent."

New Orleans has seen a lot of hotel activity in the past two years, but it's mostly involved the buying and selling of existing properties.

Since April 2009, the number of new hotel rooms in the New Orleans metro area increased from about 34,000 to 38,000. And, the city hasn't really seen significant hotel growth beyond the inventory that came back on line after Hurricane Katrina.

It all comes down to the law of supply and demand. And right now, the year-round, average demand does not demand an additional supply.

Romig says demand may increase with the completion of the medical corridor in Mid-City. But, again, that's future demand.
"If the medical industry moves in a way that we expect it to do...once those two facilities open, you'll have more and more people coming in from the drive markets to seek medical services, both at the Veterans Administration and the University Hospital Medical Center. So, that will also create demand. And we hope it creates demand, as you average it out, in the early part of the week. Because, once again, weekends, we seem to be doing very well."


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