Starwood Hotels & Resorts hot, one of the largest hotel groups in the world, is deeply discounting rooms at hundreds of its properties, sparking concern that the cuts could trigger a rate-slashing war in the midst of an unprecedented downturn for the industry.
Starwood, which owns the Sheraton and W hotels among others, is cutting room rates by up to 50% at more than 600 of its nearly 1,000 hotels and resorts here and around the globe.
The promotion, good for a stay through Oct. 12, is designed to woo guests at a time when U.S. hotel occupancy through June was down 11% from the same six-month period in 2008, according to Smith Travel Research, a hotel research firm.
Under the Starwood offer, the cost of a night at the W San Francisco could be as low as $189, for example.
But deep discounting has hurt the industry in the past, most notably in the wake of the terror attacks of Sept. 11, 2001, when it took six years for U.S. hotels to climb back to where they would have been had they not imposed steep cuts in room rates.
Hoteliers and industry watchers generally believe that it's better to keep rates up, even if some rooms go empty, and to offer other perks to attract travelers.
"Cutting prices across the board … doesn't just damage Starwood's reputation and their hotel profitability, but it does a disservice to our industry, since it creates a rush to bottom feeding," Chip Conley, CEO of the Joie de Vivre hotel chain, says in a post on USA TODAY's Hotel Check-in blog.
Starwood contends that this is a limited-time promotion offering a limited number of rooms that will be tailored by its various hotels. And the sale is similar to several others Starwood has offered in the past four years, the company says.
"Maintaining price integrity in this environment is vital," agrees Leslie Anderson, Starwood's vice president of revenue management, in a response to Conley. "Our industry learned the hard way after 9/11 that if you discount too aggressively you'll pay for it upon recovery. … As Mr. Conley said, it isn't a good way to build strong brands."
But with the offer crafted to boost business short term, she adds, "We're able to strategically target this segment … with no negative impact on our long-term pricing power."
Jan Freitag, vice president of Smith Travel Research, says that Starwood is no different from many of its peers that already have offered room discounts. Marriott, for example, previously offered a global promotion featuring a 20% discount.
Through June, U.S. room rates dropped 8.7%, and they declined roughly 16% in the luxury market, he says.
"The hotels are already in the middle of a rate war as we speak," Freitag says. "This is not the first salvo, and it will not be the last."