PSP vs PKF projections of occupancy

In a July 20th article entitled "Marriott Lancaster on schedule for March", the Sunday News reports: "Developers have said the 14-story hotel needs to maintain a 68 percent occupancy rate to meet fiscal projections."

The 2006 PKF Feasibility Study reports on Page ll-10, "Our stabilized year projection assumes an annual occupancy rate of 53.0 percent at an average daily rate of $105.00 (in current value dollars)." As pointed out elsewhere, it usually takes two or three years for occupancy to reach the "stabilized year projection."

15% less occupancy for a 300 room facility = 45 room nights x $105 per day = $4,725 per day x 365 days in a year = $1,7224,625 less 10% for variable cost savings = $1,552,162.

Thus Penn Square Partners' projections are $1,552,162 higher than PKF's. If PKF proves correct, it is unlikely that the hotel will generate sufficient funds to cover operations and debt service.

A drop of 15% in occupancy would also impact the sales of food and beverage for hotel guests, which would be an additional drag on revenue and profits.

Time will tell who was right.