Los Angeles: Luxury hotel chains, biggest losers in the lodging industry’s decline, are giving up some of their hard-won stars to save money.
Starwood Hotels and Resorts Worldwide Inc., the US owner of luxury brands including St Regis and W Hotels, will let some of its properties reduce their level of service—and number of stars—until the industry begins to recover, spokeswoman K.C. Kavanagh said. Hilton Hotels Corp. and InterContinental Hotels Group Plc have already cut the ratings for some locations.
Slowdown woes: A file photo of the St Regis hotel in New York, US. Luxury hotel operators have struggled to attract customers as the recession deters vacationers and forces firms to slash their travel budgets. Daniel Acker / Bloomberg
“Maintaining stars requires enormous capital investment,” said Stephen Bollenbach, who retired as Hilton’s chief executive officer when Blackstone Group Lp bought the company in 2007. Ratings aren’t based on making good returns on your investment.
Luxury hotel operators have struggled to attract customers as the recession deters vacationers and forces companies to slash their travel budgets. That should mean lower rates for high-end business and vacation travellers. It may also mean the loss of some amenities, such as welcome gifts, flowers in your room, complimentary newspapers or 24-hour room service.
Hotel operators need to reduce services to conserve cash. Occupancy rates for luxury hotels worldwide fell to 57% in the year through July from 71% in the same period a year earlier, a bigger drop than for other types of accommodation, according to Smith Travel Research.
The average daily room rates at the most luxurious hotels around the world dropped 16% to $245.13 (Rs11,962), the Tennessee- based hotel-data company estimates. Prices for mid-range hotels fell about 13% to $87.12.
“Consumers want the best deals that they can get,” said Jeff Higley, a vice-president at Smith Travel Research. Most luxury hotels are facing occupancy shortfalls, they are lowering rates to entice consumers to come in. There rarely has been a better time to stay at a luxury hotel than right now. In the US travel guides such as the one provided by the American Automobile Association and the Mobil Travel Guide give star or diamond awards. Internationally, there is no standard classification. Ratings are given in some countries by hotel industry associations.
To qualify for five stars, the highest rating, hotels must provide an exceptionally distinctive environment offering consistently superlative, personalized service, according to Mobil Travel Guide, which lays out specific requirements.
“A lot of things we all got drunk over can be eliminated and reduced to being less intrusive and hence more economical,” said Lewis Wolff, co-chairman of Martiz, Wolff and Co., owner of luxury hotels including the Ritz in St Louis, Missouri, a Four Seasons in Toronto and Houston and the Carlyle in New York.
“Hilton abandoned the five-star rating for the Hilton Plaza in central Vienna this year and deliberately does without an official rating at another hotel in the city,” said Claudia Wittmann, a spokeswoman for the US company. Some luxury hotels have to be subsidized for part of the year to meet all the expenses associated with a high star rating, according to Harry Nobles, the founder of Nobles Hospitality Consulting. A vast amount of these hotels don’t generate all the money they would need to operate on a five-star level, he added.