Despite Risk of Wildfires, Owners Keen on California
Along with all of the destruction the wildfires in California have caused, they threaten and disrupt nearby hotels. But despite the risks, some hotel owners continue to see the state as a strong, long-term investment.
By Bryan Wroten
REPORT FROM THE U.S.—With three devastating California wildfires now completely contained, hoteliers in the region are assessing their losses and the risks associated with staying and potentially investing more in markets where this is a recurring concern.
Having burned more than 200,000 acres, destroyed thousands of buildings and resulted in at least dozens of deaths, the Camp, Woolsey and Hill fires rank among the state’s worst wildfires. The Camp fire alone burned 153,336 acres in an area north of Sacramento and is considered “the most destructive wildfire in California history,” The Washington Post reports. The fires forced thousands of residents to flee their homes, and many are still unaccounted for. Smoke from the wildfires in Butte County caused flight delays and cancellations at San Francisco International Airport.
But even as the frequency and intensity of these California wildfires appear to increase each year, some hotel owners who have invested and look to invest in the state say the return on investment there outweighs any concerns raised by the wildfire threat.
Wildfires certainly have an effect on business, Atlas Hospitality Group President Alan Reay said, citing disruption due to last year’s fires in Napa Valley and Santa Barbara.
But he said at his company, which has represented many buyers and sellers of California hotels, Reay has never heard a client raise concerns about wildfires or the cost of insurance associated with them.
“I don’t want to say it’s a non-issue, but it never comes up,” even for clients now looking in Napa Valley and Santa Barbara, he said.
California has markets with high demand from business and leisure travelers, and a limited supply of hotel rooms, Reay said. Owners see their returns over the long term, he added, and the benefits definitely outweigh any of the perceived risks of fires or other disasters.
“Those are the markets we’re dealing with,” he said.
As an owner with several hotels in California and on the West Coast in general, Pebblebrook Hotel Trust EVP and CFO Ray Martz said his company has no concerns about the long-term benefits of investing in the state. California continues to be a center for innovation and job creation, all of which are positive drivers for hotel demand, especially in the urban core.
“You should expect our net investment in the West Coast markets, with California being our largest market, to increase over time,” he said. “We believe these markets offer the best long-term supply-demand fundamentals, which more than offsets the risks caused by the wildfires.”
Pebblebrook hasn’t seen any notable changes in traveler sentiment at its hotels, Martz said.
“We are seeing some cancellations, mainly around the leisure-oriented trips,” he said. “However, there are also some displaced residents who are relocating to hotels since they lost their homes, so this is mitigating some of the impact.”
Pebblebrook’s Le Meridien Delfina in Santa Monica had a bride cancel last minute and move her wedding to another location because of the nearby wildfire, Martz said. The hotel staff helped to find an alternative site to host the wedding, which took no more than four hours, he said.
The air quality is good in Mendocino, which is about 100 miles from the nearest fire, but during the wildfires many guests canceled their reservations at the Stanford Inn by the Sea, said the hotel’s co-founder, Jeff Stanford.
However, many people from the Bay Area were desperate to get out and surged to the property, resulting in hotel occupancy returning to its normal pre-Thanksgiving weekend level, he said.
Hotels closer to the fire are busy housing firefighters and displaced residents, Stanford said. While that’s great for business, no owner feels good about this, he said. Hotels in areas that are associated with the fires but not actually near them—such as those on the Mendocino Coast—are taking a hit.
“Smoke from fires kills businesses,” he said.
Similarly, the rains and floods that hit Oroville last year and the news about them frightened potential guests, some of whom canceled reservations, Stanford said.
“We are 300 miles from the dam,” he said. “It rained here, but no power outages and no major flooding. When Highway 1 is closed due to landslides, people from other states cancel reservations because they were planning to drive from San Diego to Portland. These are slides that can be avoided by taking easy detours.”
Reporter Danielle Hess contributed to this report.