The city-owned Hilton Baltimore lost nearly $11.2 million in 2012 — a slight improvement from a year earlier, according to an audit to be presented to the city's Board of Estimates next week.
Because of mounting losses, the city was forced to withdraw funds in February from reserve accounts to make debt service payments when operating cash flow was insufficient. The Hilton was coming off several traditionally slow months, the audit said.
The Baltimore Hotel Corp., created in 2005 to manage the Hilton's operations, withdrew about $1 million from an operating reserve account and $1.5 million from a hotel occupancy tax account to make bond payments, according to the audit, which was completed in May.
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401 West Pratt Street, Baltimore, MD 21223, USA
"Management is working diligently to increase operating revenue to prevent the need to draw on reserve funds in future years," the audit said. Last year, the hotel used nearly $4 million from operating reserve funds to pay investors.
Drawing from the reserves is allowed under the bond agreement, according to the audit, and the Baltimore Hotel Corp. has almost $23.5 million remaining in its reserves.
The convention center hotel is on West Pratt Street overlooking Oriole Park at Camden Yards. It opened in August 2008, two years after Mayor Martin O'Malley and the City Council issued more than $300 million in tax-exempt bonds to finance the hotel's construction.
The hotel has lost $65.1 million since it opened, according to the 2012 audit. The hotel lost $11.5 million in 2011.
The hotel's occupancy rate was up a bit — one percentage point from 2011 — to just over 64 percent in 2012, according to records the Baltimore Hotel Corp. filed with the Municipal Securities Rulemaking Board.
But the average daily room rate for the year was down from 2011, records show. In 2011, the average cost for a night's stay was $171.53. In 2012, the average was $170.79.
Still, revenue per available room, an indicator commonly used in the lodging industry to gauge a hotel's health, was up $1.24 from 2011 to $109.41, according to the hotel's filings.
After similar financial results were released last year, officials from the Baltimore Hotel Corp., which shares staff with the city's economic development agency, the Baltimore Development Corp., said that either the occupancy rate or the average daily room rate needs to go up significantly to get the hotel, burdened by about $15 million a year in debt payments, into the black.
Ideally, they said, the occupancy rate would be near 70 percent. When the bonds were issued, it was projected the average daily room rate in 2012 would be $214.70 and the occupancy rate would be 74 percent.
In December, Moody's Investors Service issued an opinion on the Baltimore Hotel Corp.'s bonds that said the Hilton Baltimore "is generally outperforming its competitive set in the Baltimore market" and has shown a "solid financial performance during the economic downturn."
The Baltimore Hilton, the ratings agency said, has the second-highest revenue per available room in the Baltimore market.
Nevertheless, Moody's continued to offer a negative outlook for the Hilton bonds because "revenues continue to fall short of expected levels at the time of the bond financing." Moody's analysts said they believe the Hilton, which has nearly 760 guest rooms, will continue to underperform initial projections.
One of the hotel's challenges, Moody's said, is that its occupancy is largely dependent on Baltimore Convention Center bookings. That sentiment has been echoed by Baltimore officials, who have said that group bookings are well below pre-recession levels.
The hotel's cash balance at year's end increased in 2012, to $7.7 million, from $7.2 million in 2011.