- Buffett continues to fight for his shareholders.
- By promoting Airbnb, he is giving this fast growing company huge credibility.
- Taking care of shareholders will pay off for Berkshire Hathaway.
Buffett Is Upset
Besides his immense wealth from his astute knowledge of investing, Warren Buffett (BRK.A, BRK.B) is well-known for two other things: boosting his hometown, Omaha, Nebraska, which he affectionately calls the cradle of capitalism, and standing up for his shareholders.
Now he has stirred up a kerfuffle, a storm of discontent, within the local Omaha hotel industry for championing the rights of shareholders to a decent hotel fare when they convene at Berkshire Hathaway's annual shareholder meeting.
The chief executive of Berkshire Hathaway has accused the local hoteliers of price gouging, taking advantage of the law of supply and demand when the convention begins in Omaha by raising their standard rates. Adding to this affront, as far as the hotel operators are concerned, he is touting the benefits of Airbnb Inc, which is an online business that arranges lower accommodation rates. The hospitality industry considers Airbnb an anathema because it takes away customers from their business.
As far as visitors to Omaha are concerned, the annual shareholder meeting is a big deal. In the 1970s, about a dozen shareholders would attend. By the 1990s, the numbers ranged between 5,000 and 10,000. Now, fourteen years into the new century, the attendance is something like a rite of spring, with attendees numbering in the tens of thousands. It is at this time that the hotels charge their highest prices, something that irks Mr. Buffett.
Despite the fact that occupancy rates rise from an average of 59 percent to 96 percent during the weekend of the meeting, a large number of the hotels are doubling, even tripling their room rates for the shareholder meeting. Moreover, some hotels are even charging as much as a grand a night.
Buffett Takes Care Of His Shareholders
Mr. Buffett describes himself as somewhat like a mother bear when it came to protecting his cubs. He wants to make his shareholders feel welcomed, not exploited when they show up for the annual meeting. He expressed his umbrage over the rate hikes, considering them exorbitant. In a recent interview with the Omaha World-Herald newspaper, which is part of the Berkshire properties, he even threatened to move the entire meeting to Dallas, where he felt his people would be treated better.
Meanwhile Airbnb, the San Francisco company, decided that this was all too good an opportunity to miss out on. The company works with local homeowners and apartment complexes in different cities to rent out spare rooms to travelers. At a recruiting seminar in Omaha on April 19, they invited local residents to a Bloody Mary and cupcake party in an effort to increase the number of rooms available in the city when the meeting takes place.
Naturally, Mr. Buffett's outspoken opinions and Airbnb's swift marketing maneuvers made local hotel owners defensive. While Omaha's Magnolia Hotels general manager justified the rate hike of $169 a night to $425 a night during the weekend meeting as merely responding to market pricing, the Nebraska Hotel & Motel Association commented to media outlets about their dismay that local citizens (implying Mr. Buffett) would promote a San Francisco company over Omaha's hoteliers.
This year, 38,000 attendees are expected to attend. They will have a choice of 13,850 hotel rooms. However, many homeowners have agreed to rent rooms after Mr. Buffett endorsed Airbnb, a turn of events that will double the number of rooms that the city will have available for visitors over the weekend.
Huge Visibility For Berkshire Hathaway
Buffett's annual meeting and his advocacy for his shareholders is giving his company very favorable press and visibility.
These bold actions are very positive for the stock.
We continue to rate Berkshire Hathaway a solid core holding for growth investors who do not need a dividend.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.