Empty beds in Adirondack hotels: The downside of tourism projects

How millions in state funds are resulting in hotel excess in Essex County

Editor’s note: A version of this story originally ran in the July/August 2024 issue of Adirondack Explorer magazine. Since publication, the Saranac Waterfront Hotel has been sold. We’ve updated the story to reflect those changes.

By James M. Odato

State taxpayers have provided millions of dollars toward two new hotels in a key Adirondack tourism region. But now that they’re open, the occupancy numbers show the stimulus may be contributing to an oversupply of rooms, making it difficult for inn operators to profit.

Every week thousands of beds lay empty in the key market of Essex County, data shows. The downward trend could benefit rate-shopping consumers, industry officials say. But market tensions may result in casualties as unprofitable properties fall to banks or close.

The impact isn’t clear, but if hotels deteriorate it can harm the guest experience and turn off tourists, tourism and event officials say. If occupancy rates remain low, hotels will be forced to take measures to stay afloat, such as cutting staff hours or services.

Even though hotels flashed no-vacancy signs in the days around the April 8 solar eclipse, occupancy for the first four months of this year dipped to lows that will push many operators toward the red, according to market data from Smith Travel Research (STR), a hotel benchmarking organization. The data showed an occupancy rate below 39% in Essex County, a key indicator of the region’s tourism market.

If Essex County is hurting, it points to wider troubles because the county benefits from Olympic Regional Development Authority (ORDA) events that help drive customers to hotels in and around Lake Placid.

The newest county hotels—recipients of millions of dollars of state investments—may be among the harder hit as per-room profits dip.

Falling profits

In Essex County average revenues per room fell to $80.56 in the first four months of 2024, down from $96.32 for the same period of 2023 and from $88.25 for the same period of 2022. 

“There are so many more rooms,” said Andrew Weibrecht, operations manager for the 124-room Mirror Lake Inn in Lake Placid, now in its 100th year. “It’s definitely very concerning from a staffing and a business point. 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.”

Among those in trouble, the recently sold Saranac Waterfront Lodge was shopped for sale since early spring, according to Weibrecht and several others. 

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The Green Bank, an arm of the New York State Energy Research & Development Authority, invested $11.5 million in the lodge project to become an equity owner of Saranac Lake Resort Owner, which owns the lodge. Besides that public money, Champlain National Bank also committed $13 million.

With 93 rooms on Saranac Lake’s Lake Flower, the lodge opened in November 2020 with a goal of employing 71.

Manager Matthew Taormino said he could not discuss the property’s status. He referred questions to a director for HEI Hotels.

HEI, the company managing the lodge, did not respond to messages. Green Bank said 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 help fund its opening in October 2023. 

It has been offering below-market introductory rates ever since to build up its customer base, said Bhavik Jariwala, the managing member of the Cambria’s ownership group.

He said the Lake Placid property is the most challenging of seven run by his Matrix Hotels group, including hotels in Plattsburgh and Queensbury. He declined to reveal its occupancy rate.

The Cambria’s lower rates are disrupting the market, some hotel operators complain.

“Why are we giving properties in Lake Placid grants to build new hotels?” said Andrew Milne, owner of two small Saranac Lake motels and manager of The Devlin, a 51-room Lake Placid hotel.

A spokeswoman for Empire State Development said the Cambria project was worthy of funding to stimulate business in the area. “We helped refurbish a property that was vacant,” said Kristin Devoe. It is too soon to know if the Cambria will reach its goal of 51 employees, Devoe said.

Debating rates

Some criticize the Saranac Waterfront Lodge’s insistence in 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 of year.”

David Roedel, a principal of Roedel Companies, owner of the 82-room Hotel Saranac since 2018, said the area needs to develop more events to drive traffic or hotels can’t make the economics work.

“We’ve come to realize it’s important to get that leisure traveler up to the Adirondacks, but you must have group events and must find ways to get more events,” he said. “Without that it’s always going to be a 40 percent market.”

Roedel said he doesn’t think short-term rental units are a big reason for the weak occupancy rates.

Data by STR indicates an ample supply of rooms—more than 2,700 at 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 were up almost 12% from a year earlier. Demand was trending down—a negative 2.2% for the first four months—and might have been a greater dip if not for solar eclipse traffic in April.

Yet year-to-date and 12-month data pointed to a troubling trend of demand dropping and occupancy rates down by double-digit percentages.

Hotel revenues fuel tourism marketing programs and organizations like ROOST through the occupancy taxes.

Those taxes declined in Essex County, despite the Lake Placid World University Games filling many rooms in January 2023. 

“Bed taxes” were at $6.75 million in 2023, $6.8 million in 2022 and $6.59 million in 2021. In Franklin County, with fewer beds, such taxes grew—$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 sours—a concern associated with climate change—it could add to the challenge of attracting tourists who scout conditions before booking, some in the industry point out.

Drawing tourists and workers

One common worry: the competition for workers.

The bigger 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 it is developing a more targeted and strategic tourism marketing program based on greater research on visitor interests. The goal is to help drive hotel traffic by building around competitions hosted by ORDA and events that can’t be harmed by unfavorable weather. “I’d like to have a simple solution to this, but there are things working against us,” Lawrence said, including inflation and weather.

“What can we develop long term, which is not climate sensitive?” she said. “Is it breweries, wineries, museums, arts, indoor activities?”