Chicago hotel’s impairment a major factor in Xenia’s 57% net income slump in Q3
CHICAGO–(BUSINESS WIRE)–In a report published today, hospitality union UNITE HERE Local 1 questions Xenia Hotels and Resorts’ (NYSE: XHR) explanation of the $14.8 million impairment loss at its Marriott Chicago at Medical District-UIC hotel.
Read the full report: https://www.boycottmarriottmedicaldistrict.org/wp-content/uploads/Xenia-Writedown.pdf
Xenia announced this August that they “wrote down the carrying value of our 113-room Marriott Chicago at Medical District/UIC by $14.8 million.” The Chicago hotel’s impairment was a major factor in Xenia’s overall 57% decrease in net income for the nine months ending September 30, 2019 compared to the previous year, according to Xenia’s 3Q 2019 report.
Xenia Chief Financial Officer Atish Shah said that “It is unlikely that this full-service Marriott’s profitability recovers to prior levels despite the renovation we completed last year.”
Xenia blamed higher operating expenses, higher property taxes, and increased competition from new supply. However:
- Xenia was silent on the growing labor dispute stemming from the hotel’s refusal to negotiate with its recently unionized employees. Hotel workers have called for a boycott of the hotel, potentially affecting future revenue.
- New hotels have largely been built in the downtown and convention center submarkets – not in the submarket where Xenia’s hotel has few competitors. Two new directly competing hotels have been in development since 2014 and 2016 – long before the 2019 writedown.
- The hotel’s property taxes increased 85.9% between 2014 and 2018 – not “over 100%” during that period, as Xenia’s Chief Financial Officer stated.
“How much of the hotel’s impairment can be attributed to the union boycott?” asked UNITE HERE Local 1 research analyst Marcos Feldman.
In May 2018 workers in the hotel’s food and beverage and housekeeping departments voted overwhelmingly for union representation by UNITE HERE Local 1. On November 6, 2019 the NLRB ordered Xenia’s Chicago Marriott to “cease and desist” from its refusal and to start negotiating with its employees.
The Marriott Medical District was acquired for $19.8 million in June 2005 by RLJ Funds, which in 2007 was acquired by Inland American Real Estate Trust. In 2015 Inland spun off much of its hotel portfolio into Xenia Hotels & Resorts.
UNITE HERE Local 1, Chicago’s hospitality workers union, represents over 15,000 hotel and food service workers in Chicago and casino workers in Northwest Indiana.
UNITE HERE Local 1