Faltering economy deals blow to Hilton Vancouver

A bad economy is causing the city-owed Hilton Vancouver Washington to fall 13 percent short of its revenue budget projection this year.

A forecast developed earlier this month shows hotel and convention center revenues will be almost $1.94 million less than the $15.18 million budgeted for 2008, according to figures presented during Thursday’s Vancouver Downtown Redevelopment Authority meeting.

“We are in a very challenging environment in the hotel business,” said Tom Morone of Warnick & Co., the firm the city hired to look out for its interests and to work with Hilton, the hotel and convention center’s manager. “I would be making it up if I told you I knew where this was going.”

Hotels nationally are experiencing a 20 percent to 25 percent reduction in revenue per available room, an industry performance standard, Morone said.

“We’re seeing much less than that in Vancouver,” he said, adding that it could be because Vancouver is a “tertiary” city that isn’t taken the same hit as larger metro areas.

Gerry Link, the Hilton Vancouver Washington’s general manager, said as revenues have fallen, the hotel has reduced its operating costs accordingly.

Those spending cuts can be seen in the figures presented Thursday. The Hilton, which has the equivalent of 205 full-time employees, is on track to finish 2008 with expenditures $1.13 million below the $11.38 million budgeted, a 10 percent reduction.

Hotel managers are not expecting a quick turnaround in 2009.

“It will be a very challenging year,” Link said. “There’s just no sugarcoating as to where we stand.”

The good news is that the city forecasts it will receive $2.53 million this year in tax revenues to subsidize the project, namely sales tax credits and lodging taxes.

That money will ensure Vancouver has adequate resources to make payments on construction bonds, eliminating any chance the city would have to bail out the project.

Lloyd Tyler, the city’s chief financial officer, said there’s “no question” tax revenues will drop in 2009 as the economy continues to slump, but he isn’t sure how big that decline will be.

An economy that turned sour in September forced Hilton to repeatedly redo its 2009 budget.

“What we were thinking in August became obsolete in the first week of September,” Link said. “What we were thinking in September became obsolete in the first week of October. The economy is changing that fast.”

Morone said Hilton probably has the most extensive zero-based budgeting of any hotel chain and breaks down its personnel costs to 15-minute intervals.

Said Link: “We are prepared to meet a challenging year. And we are prepared to monitor not just on a monthly basis but on a weekly basis.”

Deborah Ewing, a member of the Downtown Redevelopment Authority board of directors, said when Hilton was selected to manage the hotel in 2003, one of the items that impressed her the most was its ability to track expenditures.

“I have every confidence that you and your team are doing that every day,” she told Link. “In today’s times, it’s absolutely critical.”