Businesses Wait Out Gustav

Reprinted from www.Forbes.com The New Orleans Marriott is a PACE 2009 Headquarters Hotel.

By midday Monday, Category-2 Hurricane Gustav had made landfall in Cocodrie, La., about 80 miles southwest of New Orleans. Power was knocked out in several areas, including New Orleans, and water began splashing over the top of several of the city's levees. Journalists, power-company workers and emergency personnel are packed into New Orleans hotels, doing the same thing people far beyond the reaches of the storm are doing: waiting.

Essentially, nothing can be done until Gustav passes and power-company employees can begin to repair any damage the storm will bring. That's also when the city's hotels stand to benefit; once additional relief workers, power-company workers and claims adjusters come to town, they'll need places to stay.

How much of a business boon these workers' arrival will bring depends on how much damage Gustav causes. After Katrina three years ago, one guest stayed nine months. Others only stayed a month or two. Either way, the hotels that stay open through this storm will be the ones most ready to receive guests after it.

"For a small hotel, [the post-storm business] could have a big impact," says Gil Zanchi, area general manager for New Orleans Marriott. Because 70% of Marriott's business is from tourist sales and 30% from business travelers, having the influx of post-hurricane staff "could balance what we lost this weekend."

And the losses were likely substantial. The Marriott New Orleans in particular had an 85% occupancy rate for the weekend because of the Decadence Festival--1,000 of the 1,200 rooms booked. Right now there are only 200 guests (mostly media, along with police officers, private security contractor employees and Marriott's own emergency preparedness staff), but that number could swell right after the storm.
Marriott has 15 properties in New Orleans, but only two are open: the Marriott New Orleans and the JW Marriott, both on Canal Street. The 13 other properties, if they don't sustain heavy damage, could get up and running much faster than they did after Hurricane Katrina, in part because the Marriott has stationed a handful of private security employees at all its hotels. Their job, says Zanchi, is to "secure the assets."

Zanchi is also glad to host journalists at the two hotels still open. "Having media here," he said, "keeps a sense of normalcy, instead of having an empty hotel."

Just how long that sense of normalcy lasts is anyone's guess. Local television stations reported water splashing over the Industrial Canal levee and in the Lower Ninth Ward, which saw devastating floods after Katrina and is still in the midst of recovery. Meanwhile, the Times-Picayune is reporting 6 inches of flooding from waters splashing over the tops of the levees in the city's Upper Ninth Ward--with plenty of the storm still to go. Rod West, president and CEO of Entergy (nyse: ETR - news - people ), the city's utility company, said that, as of 8 p.m., 750,000 Louisianans were without power.

Leading up to Gustav's arrival, inside the Crowne Plaza Astor in New Orleans' French Quarter, 175 rooms were occupied by a motley crew of journalists, the staff of Mayor Ray Nagin and employees of Entergy. A group of four policemen from Texas hired as security for a cable station staying at the hotel joked about how Gustav was just "a little puff."

That seems to be have been an understatement, but not a grave one--at least not so far. Hurricane Gustav, which reached Category 4 strength at its worst, was downgraded to Category 2 by the time it reached the U.S. coast in an area vital to America's energy industry. Gustav was down to Category 1 strength with winds of 90 mph by late afternoon.

Later in the day, the mood in and around New Orleans' hotels was somewhat relaxed. A small crowd gathered on Canal Street as the Today Show's Al Roker tried to film a segment. The wind was blowing fiercely, and he stretched out his arms to try to maintain his balance. Inside the Crowne Plaza hotel, children of hotel employees took pictures of the empty streets and fierce winds or pushed and played on a luggage cart in the empty lobby.

Days before Gustav's landfall, New Orleans and Gulf Coast residents began evacuating, with millions clogging highways and thousands more leaving the city by buses and trains. Lower-population areas to the south and west of the city are taking the lion's share of the storm's strength, though tornado warnings are being issued in multiple areas throughout the storm's wide path.

With the results so far and the questionable outlook, Gustav is still a stark contrast to the scene of Katrina, especially in the city. But this time around, New Orleans hotels took no chances, refusing to take reservations for locals. Among the few hotels that are actually open, the occupants are the media, government officials and private security firms. In some cases, accepted occupants were given wristbands by hotel management. In the hours before Gustav's landfall, hotels' policy was simple: no wristband, no entry.

Tourism is the lifeblood of New Orleans. Last week, the city's convention and visitor's bureau put out a report on the state of the industry--the largest employer in New Orleans and the second-largest industry in the state, generating $5 billion in visitor spending and $250-$300 million in tax revenues for New Orleans. Sixty-nine thousand people from every neighborhood in the city currently depend on the hospitality industry for their paycheck. Tourism accounts for 35%, or $210 million, of the City of New Orleans' annual operating budget, according to the bureau. The report estimates that the industry lost $3 billion after Katrina.

And Gustav couldn't have come ashore at a worse time: right as the city's tourism industry was close to full recovery. In 2007, 7.1 million visitors came to town and spent $4.8 billion, a 92% increase over the number of visitors in 2006 and not far from the pre-Katrina norm of 8.5 million annual visitors. New Orleans hosted the Sugar Bowl, BCS National Championship, NBA All-Star Game, Mardi Gras, Jazz Fest, Essence Fest, Satchmo Fest and hundreds of conventions. The 25th annual French Quarter Festival in April 2008 had its highest attendance ever of 435,000.

Inside the Crowne Plaza Astor, a relaxed skeleton crew of managers and service staff waited for the hurricane to make landfall in the next few hours. Light jazz was being piped in through the hotel's speakers. Zimmer was confident: "I think we'll come through this quite well."

Monday, neworleansonline.com, the official Web site for visitors, posted a note saying, essentially, that the city was closed but hoped to be open again soon: "Thank you for checking on New Orleans! Wish us good luck. We are ready."