Luxury hotels give up stars in recession

AFR

CARRY YOUR OWN BAGS, GUV: Hotels are cutting back on luxuries to lure cash-strapped tourists in a recession.

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Luxury hotel chains, the biggest losers in the lodging industry's decline, are giving up some of their hard-won stars in an effort to save money.

Starwood Hotels & Resorts Worldwide, the US owner of luxury brands including St Regis and W Hotels, has announced it will let some of its properties reduce their level of service - and number of stars - until the industry begins to recover.

Hilton Hotels and InterContinental Hotels Group have already cut ratings in some locations.

"Maintaining stars requires enormous capital investment," says Stephen Bollenbach, who retired as Hilton's chief executive officer 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 holidaymakers and forces companies to slash their travel budgets. That should mean lower rates for high-end business and holiday makers. It may also mean the loss of some amenities, such as welcome gifts, flowers in rooms, free newspapers or 24-hour room service.

Hotel operators need to reduce services to conserve cash.

Occupancy rates for luxury hotels worldwide fell to 57 per cent in the year to July, compared with 71 per cent in the same period a year earlier - a bigger drop than for other types of accommodation, according to US-based Smith Travel Research.

The average daily room rates at the most luxury hotels worldwide dropped 16 per cent to US$245.13 (NZ$347), the hotel-data company estimates. Prices for mid-range hotels fell about 13 per cent to US$87.12.

"Most luxury hotels are facing occupancy shortfalls, they are lowering rates to entice consumers," says Smith Travel's Jeff Higley.

In the US, travel guides such as the one provided by the American Automobile Association and 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, hotels must provide "an exceptionally distinctive environment, offering consistently superlative, personalised service", according to Mobil Travel Guide.

Hilton abandoned the five-star rating for the Hilton Vienna Plaza this year and does without an official rating at another hotel in the city, says spokeswoman Claudia Wittmann. She says the company abandoned the star rating at its hotels in part because of the different standards required in each country.

"It's not uncommon that hotels make the decision that it doesn't make financial sense to keep the fifth star and to instead reposition the hotel," says Mark Woodworth, president of PKF Hospitality Research.

InterContinental Hotels has also decided not to renew the five-star classification on its only hotel in the Austrian capital, says spokesman Charles Yap. And Starwood is trying to eliminate some of the frills on offer at its luxury hotels.

"Given the current economic climate, we may allow an individual property to adjust its services to below the agreed star rating," says spokesman K.C. Kavanagh, declining to name the hotels.

- © Fairfax NZ News