**State Funding Leads to Hotel Surplus in Essex County**
**By James M. Odato**
State taxpayers have invested millions in two new hotels in a prominent Adirondack tourism area. However, now that these establishments are operational, occupancy rates suggest that the financial boost may have led to an oversupply of rooms, challenging inn operators’ ability to turn a profit.
Data indicates that thousands of beds remain unoccupied weekly in Essex County, a crucial market. While this trend might benefit consumers seeking lower rates, industry experts warn that it could lead to closures or foreclosures of unprofitable properties.
The long-term impact is uncertain, but declining hotel conditions could negatively affect guest experiences and deter tourists, according to tourism and event officials. Persistently low occupancy rates might force hotels to cut staff hours or services to survive.
Despite hotels displaying no-vacancy signs during the April 8 solar eclipse, occupancy for the first four months of this year fell to levels that threaten profitability, according to Smith Travel Research (STR), a hotel benchmarking organization. Essex County’s occupancy rate dropped below 39%, a critical indicator of the region’s tourism health.
If Essex County is struggling, it may signal broader issues, given the county’s reliance on events organized by the Olympic Regional Development Authority (ORDA) to attract visitors to Lake Placid hotels.
The newest hotels in the county, which benefited from substantial state investments, might be among the hardest hit as per-room profits decline.
**Declining Profits**
In Essex County, average revenue per room decreased to $80.56 in the first four months of 2024, down from $96.32 during the same period in 2023 and $88.25 in 2022.
“There are so many more rooms,” said Andrew Weibrecht, operations manager for the 124-room Mirror Lake Inn in Lake Placid, now celebrating its 100th year. “It’s definitely very concerning from a staffing and business perspective. There’s probably a breaking point somewhere. It’s really diluting the market for a lot of hotels that have been here for a long time.”
The Saranac Waterfront Lodge has been on the market since early spring, according to Weibrecht and others.
The Green Bank, part of the New York State Energy Research & Development Authority, invested $11.5 million in the lodge project, becoming an equity owner of Saranac Lake Resort Owner, which owns the lodge. Additionally, Champlain National Bank committed $13 million.
With 93 rooms on Saranac Lake’s Lake Flower, the lodge opened in November 2020, aiming to employ 71 people.
Manager Matthew Taormino declined to comment on the property’s status. “We’re in the hunt,” he said, referring questions to a director at HEI Hotels.
HEI, the company managing the lodge, did not respond to inquiries. Green Bank stated it does not discuss “confidential discussions” about its equity investments.
**Grant Projects**
In Lake Placid, the 185-room Cambria Hotel received a $3 million state grant to support its opening in October 2023.
Since then, it has offered below-market introductory rates to attract customers, said Bhavik Jariwala, the managing member of the Cambria’s ownership group.
He noted that the Lake Placid property is the most challenging of the seven hotels his Matrix Hotels group operates, which include locations in Plattsburgh and Queensbury. He declined to disclose its occupancy rate.
Jariwala has been approached about acquiring the Saranac Waterfront Lodge but is already focused on managing a new hotel in the Adirondacks.
Some hotel operators complain that Cambria’s lower rates are disrupting the market.
“Why are we giving properties in Lake Placid grants to build new hotels?” asked Andrew Milne, owner of two small motels in Saranac Lake and manager of The Devlin, a 51-room hotel in Lake Placid.
Kristin Devoe, a spokeswoman for Empire State Development, said the Cambria project was deemed worthy of funding to stimulate local business. “We helped refurbish a property that was vacant,” Devoe said. It is too early to determine if the Cambria will reach its goal of 51 employees, she added.
**Debating Rates**
Some criticize the Saranac Waterfront Lodge for setting rates too high for the Saranac Lake market.
“They wanted overflow from Lake Placid,” said Mary Jane Lawrence, chief operating officer at the Regional Office of Sustainable Tourism (ROOST) in Lake Placid. “That’s not sustainable. How often are Lake Placid hotels at 100 percent occupancy? Maybe a couple of times a year.”
David Roedel, a principal of Roedel Companies, which has owned the 82-room Hotel Saranac since 2018, did not confirm if he’s been approached to buy the waterfront lodge.
However, he emphasized the need for more events to drive traffic, as hotels struggle to make the economics work.
“We’ve realized it’s crucial to attract leisure travelers to the Adirondacks, but you must have group events and find ways to host more events,” he said. “Without that, it’s always going to be a 40 percent market.”
Roedel does not believe short-term rental units significantly contribute to the weak occupancy rates.
Data from STR shows an ample supply of rooms—over 2,700 across Essex County’s 70 hotel properties, including the Saranac Waterfront Lodge and Cambria. The supply may be at record levels, said ROOST’s Lawrence.
**A Downtick in Demand**
Available rooms in March and April 2024 increased by nearly 12% from the previous year. Demand was trending down—by 2.2% for the first four months—and might have dropped further if not for the solar eclipse traffic in April.
Year-to-date and 12-month data indicate a troubling trend of declining demand and double-digit decreases in occupancy rates.
Hotel revenues support tourism marketing programs and organizations like ROOST through occupancy taxes.
These taxes fell in Essex County, despite the Lake Placid World University Games filling many rooms in January 2023.
“Bed taxes” were $6.75 million in 2023, $6.8 million in 2022, and $6.59 million in 2021. In Franklin County, with fewer beds, such taxes increased—$1.17 million in 2023, $1 million in 2022, and $969,236 in 2021, yet hotel demand is down this year, according to Franklin County’s economic development officer, Jeremy Evans.
If the weather worsens—a concern linked to climate change—it could further challenge attracting tourists who check conditions before booking, some industry insiders note.
**Drawing Tourists and Workers**
A common concern is the competition for workers.
The larger hotels in Lake Placid have arranged lodging for their staff, many of whom come from outside the region, some under federal visas for foreign workers.
“There’s always going to be labor challenges,” said Jariwala of the Cambria. “There’s got to be some large workforce housing projects subsidized by the state.”
ROOST’s Lawrence said they are developing a more targeted and strategic tourism marketing program based on extensive research on visitor interests. The aim is to boost hotel traffic by building around competitions hosted by ORDA and events unaffected by adverse weather. “I’d like to have a simple solution to this, but there are factors working against us,” Lawrence said, including inflation and weather.
“What can we develop long-term that isn’t climate-sensitive?” she asked. “Is it breweries, wineries, museums, arts, indoor activities?”
This article first appeared in a recent issue of Adirondack Explorer magazine. Subscribe today to receive seven issues a year delivered to your mailbox and/or inbox!
Source: adirondackexplorer.org