Buffett fumes over hotels gouging Berkshire fans

Shareholders heading to Omaha this weekend are seeing sky-high room rates. 'I want to protect my cubs,' Buffett says.

By MSN Money Partner May 2, 2014 12:33PM
Credit: © Rick Wilking/Reuters

Caption: A huge picture of Berkshire Hathaway Chairman Warren Buffett looks over shareholders swarming the exhibit floor at the company's annual meeting in Omaha May 4, 2013By Anupreeta Das and Timothy W. Martin, The Wall Street Journal

Warren Buffett is arguably the biggest booster of Omaha, Neb., calling his hometown "the cradle of capitalism." But he has caused a stir with comments about how the local hotel industry is addressing supply and demand.

Ahead of the annual shareholder meeting for his Berkshire Hathaway (BRK.A) this weekend, the chief executive and famed investor complained of "price gouging" by local hotels when setting rates for the gathering. 


Making matters worse -- at least in the eyes of hotel operators -- is that Mr. Buffett urged his acolytes to consider saving a few bucks by booking rooms through Airbnb Inc., the online startup that has become a scourge of the hospitality industry.


The kerfuffle comes amid a Midwestern rite of spring, when tens of thousands of Berkshire shareholders descend on Omaha -- and hotels in the area charge some of their highest prices.


Many hotels double and triple their room rates for the weekend of the Berkshire meeting, with some asking for as much as $1,000 a night. Occupancy rates in the city, which average around 59 percent for the year, shoot up to 96 percent for the two days around the Berkshire meeting, according to data from the Omaha Convention & Visitors Bureau.


Mr. Buffett said in an interview with The Wall Street Journal last month that he has grown increasingly concerned about his shareholders paying exorbitant prices. He said he is a bit of a "mother bear."


"I want to protect my cubs, make sure shareholders are well taken care of," Mr. Buffett said.


He even suggested to the Omaha World-Herald newspaper, which Berkshire owns, that he has considered moving the meeting to Dallas to better accommodate the swelling crowds.


Airbnb acted on the opportunity: The San Francisco firm, which lets homeowners rent apartments or spare rooms to travelers, subsequently distributed postcards in the city headlined "Hey, Omaha!" and promoting the service. On April 19, Airbnb staff from San Francisco provided Bloody Marys and cupcakes to Omaha residents at a recruiting seminar designed to boost the number of rooms offered in the city.


But local hotel owners say they are being unfairly targeted for simply capitalizing on high demand.


"We price ourselves to the market," said Tim Darby, general manager of downtown Omaha's Magnolia Hotel. The hotel's rates, which he said average around $169 a night the rest of the year, rise to an average $425 a night during the Berkshire weekend. The hotel, like many others in the downtown area, also has a 30-day cancellation policy for Berkshire-weekend reservations, much stricter than its normal 24-hour policy.


One bonus: champagne and chocolate-dipped strawberries for guests during Berkshire weekend.


"I'm not hearing [complaints] from the guests," Mr. Darby said, adding that about half his Berkshire customers are repeat visitors.


Still, some in the industry didn't take kindly to Mr. Buffett's comments: The Nebraska Hotel & Motel Association distributed a commentary to media outlets, including The Wall Street Journal, that didn't mention Mr. Buffett by name but said the group found it "distressing that local citizens" would promote a San Francisco-based business over local hoteliers.


"Airbnb is helping countless local residents share their homes and earn extra money," an Airbnb spokeswoman said. Airbnb users, she added, stay longer in the cities they visit and spend more than hotel guests do.


Other local officials say they are taking Mr. Buffett's concerns seriously, in part because many other businesses prosper on Berkshire weekend. For example, Omaha's Buffett-approved steakhouse, Gorat's, expects to serve 1,500 pounds of beef this weekend, three times its normal amount.


"We're continually trying to caution people not to make a killing on this," said David Brown, chief of the Greater Omaha Chamber of Commerce. "Let's not overplay that hand, because the meeting isn't something that has to be here."


Berkshire Hathaway's annual shareholders meeting Saturday, held the first weekend of May each year, is expected to have 38,000 attendees this year. For the Midwestern town of about 430,000 residents, with about 13,850 hotel rooms, it is the second-biggest tourism event each year, behind college baseball's World Series.


It wasn't always like this. In 1981, as Mr. Buffett's renown was growing, only 12 people attended Berkshire's annual meeting. The numbers continued to swell through that decade, and they reached 10,000 attendees in 1997. That was the first meeting after Berkshire created a class of stock that traded at a fraction of the price for its original A shares, allowing thousands of new investors to buy into the company.


In his early annual letters, Mr. Buffett recommended hotels for shareholders, but he stopped doing that after the number of attendees surged. With them, hotel prices did, too.


Berkshire is in discussions with Airbnb to see if the two could partner to offer a large block of accommodations for the 2015 annual meeting. Meanwhile, more than 50 residents have signed up to offer rooms since Mr. Buffett made his Airbnb endorsement -- doubling the city's offerings, the Airbnb spokeswoman said.


Terrill Maxwell listed her four-bedroom home, about 5 miles north of the Berkshire Hathaway shareholder meeting, early this week. She did so after seeing one of Airbnb's postcards.


"I told my sister, 'I didn't even know you could do that,'" said Ms. Maxwell, a contract negotiator at Union Pacific Railroad and herself a Berkshire shareholder.


Ms. Maxwell, a 45-year-old Omaha native, decided to give out-of-towners a hometown discount: $336 a night for her home. She had heard of Mr. Buffett criticizing exorbitant hotel prices and considered her home a prime location, given its proximity to the Berkshire-owned Borsheims jewelry store and a short drive to the Berkshire-owned Nebraska Furniture Mart -- two Buffett-suggested retailers that do millions of dollars of business over the weekend.


But it seems most Berkshire shareholders already had made other plans: As of midday Thursday, Ms. Maxwell hadn't received a single response. "If I had posted my place earlier, I would've definitely gotten a taker," said Ms. Maxwell, who next year plans to post her place on Airbnb about six months in advance. She added, "The goal wasn't to get rich, but make it affordable to others."


More on The Wall Street Journal

74Comments
May 2, 2014 12:41PM
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classic supply and demand! 

 

just look at any region for hotel rates when different conventions come into town. 

 

RATES GO UP!

May 2, 2014 1:18PM
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So Warren, capitalism is great as long as others, people you do not know of, are being gouged. LoL  Perhaps, Senator Liz Warren should be the keynote speaker at your shareholders meeting.
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Seems a bit self serving for Buffett to be complaining about hotel rates for his stockholders, most of which are wealthy anyway. It's common practice for hotels to raise their rates when events create demand. Does he think the rates stayed the same in the host city where the Super Bowl is played?
May 2, 2014 1:42PM
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Tell you what numnuts! Quit having berkshire tie up the billions they owe in back taxes and pay the 400 million you hid away in a shell corporation for the Graham Holding/Washington post sale so you didn't have to pay, Then and only then we may let you complain.
"I pay less taxes than my secretary, its not fair" Pay your taxes then you hypocrite piece of garbage or at least teach your secretary how to cheat the system the way you do. Otherwise close your trap.
May 2, 2014 1:58PM
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The "King of Capitalism" complaining about capitalism?

Mr. Buffet.......see "Blue- Eyed Capitalism".

May 2, 2014 1:48PM
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The stock is at $196,000 a share and he's worried that some millionaire is going to have to shell out a couple of hundred more dollars for a hotel room.  What a grandstander!
May 2, 2014 2:02PM
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Warren Buffett, champion of bailout, is also leading beneficiary

mcclatchydc 

Now he's complaining about prices? CRY ME A ****ING RIVER WARREN!!!! YOU CORPORATE WELFARE RECIPENT! 
May 2, 2014 4:09PM
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Hotels will price themselves right out of a convention. Reasonable rates are expected, price gouging will send people heading to a better place than Omaha for a lot less money. Why do you think CHicago and New York struggle to keep conventions - the price is too high.
May 2, 2014 1:51PM
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His real estate companies screw home sellers everyday. High commissions, don't allow other agents to show it (not know to most sellers) and his agents are notorious for being unethical. Ha - the pot calling the kettle black, I would say. 
May 2, 2014 2:52PM
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Just buy the GDamn Hotels and Motels Warren, then charge everybody $50 a night that week.
May 2, 2014 1:42PM
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$336 a night sounds like rip off to me !!!!!!
May 2, 2014 3:32PM
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Anyone ever check how the rates shoot up within a hundred miles of Sturgis?
May 2, 2014 4:23PM
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While supply and demand are at work here - businesses should never over play their hand. The meeting can be moved very easily. It is just like if a state makes a regulation that affects a business a lot - the business has a lot of leverage and can move to another state quite easily. Then the state or city is left bot having that business that brought so much revenue.
May 2, 2014 2:46PM
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The billionaire is complaining that his millionaire associates have to pay more when hotels are busy?  It is supply and demand!  Demand is high, so hotels should be able to price their rooms appropriately to maximize their revenues.
May 2, 2014 1:22PM
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The senile old goat just wants his name in the news.  Seriously, his stock is at $196,000 a share and he's worried about what some multi-millionaire is going to have to pay for a hotel room?   Worse yet, you triple the price of a room in Omaha and you end up with $200 a night stay.....golly gee whiz Gomer, I wonder if the shareholders will be aghast at that rate (which won't even buy you one night in a run down flea bag in NY City).
May 2, 2014 4:38PM
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If Buffett doesn't like it, let him buy a hotel.
May 2, 2014 6:50PM
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So Buffet likes capitalism except when it affects him and his own. Imagine that ! ! ! Grow up Warren, the same thing happens EVERYWHERE there is an event that pushes supply -v- demand to its limits. The hotel industry makes its money off of conventions and event pricing. The same happens here during the Indianapolis 500 EVERY YEAR. The same with Limo service during PROM season, and so on. You can't have it both ways. Besides, your clients can afford it or they wouldn't come to such a lame event. I can't afford to take time off to come to something so lame so don't expect me to feel sorry for those that do ! ! ! !
May 2, 2014 5:15PM
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Again, forget us little people, worry about the millionaires.
May 2, 2014 2:06PM
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Spoken like the true liberal he is. Warren your just a victim LOL.
May 2, 2014 2:25PM
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Not to worry, with BRK.A barely matching the DJ and S&P500 indices---and way underperforming the NASDAQ---over the last five years, the crowds should start tapering off soon.
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