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.
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
classic supply and demand!
just look at any region for hotel rates when different conventions come into town.
RATES GO UP!
Mr. Buffet.......see "Blue- Eyed Capitalism".
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