As Hotels Struggle for Business, Some Guests Find an Upside

Don Schmincke can't believe the recent deal he got at a New York hotel.

"I just stayed in Times Square at the Crowne Plaza for $250 a night -- on New Year's Eve!" says the author and speaker from Baltimore.

Schmincke and other guests are reaping the benefits of the worst downturn in the nation's $140 billion hotel industry since the travel industry's collapse in the months after the 9/11 terrorist attacks. The current recession has led Americans to put the brakes on travel -- long viewed as a key measure of Americans' confidence in their financial situation -- and led hotels to turn on vacancy signs as occupancy rates have plunged.

For those who do travel, there can be an upside: bargain rates, less-crowded hotels and rooms available at the last minute at popular hotels.

Many also are enjoying improved service and special treatment, such as free upgrades to suites or club floors, as hotels roll out the red carpet to try to attract and hold on to customers.

"It reminds me of the good ol' days when a frequent traveler was pampered," says Robert Cartwright, a loss-prevention manager in Exton, Pa., who stayed 60 nights in hotels last year. "I am truly enjoying the special treatment."

Cartwright says hotel staffers welcome him, remember his name and offer a "marked improvement" in service.

Hotels have largely concealed the industry's turmoil from many guests. But behind the scenes, it's not a pretty picture:

  • Hotel occupancy fell sharply during last year's fourth quarter, including an 11 percent drop in November. Revenue declined $828 million in November, compared with November 2007, according to data provided by Smith Travel Research, a firm that specializes in the hotel industry.

  • Like numerous employers nationwide, many hotels have laid off workers or decreased their work hours. The most recent data from the Bureau of Labor Statistics show 90,000 fewer employees at hotels and motels in November than there were a year earlier.

  • New hotel construction has been slowed by tightening credit and concerns about the industry's downturn, and hotel company stocks have plunged.

    The Dow Jones U.S. hotels index, which measures the stock performance of hotels and other lodging businesses, fell 56 percent last year -- a steeper drop than the Dow Jones U.S. index, which dropped 39 percent.

    "It was almost like someone turned off a spigot on Sept. 1," says Jeff Higley, editorial director of, an online trade publication.

    "Travel was going full swing before a September slowdown hit, followed by a dramatic drop in hotel occupancy in October and November."

    Luxury hotels are off-limits

    Luxury hotels, especially, are feeling the drop-off.

    In November, they experienced a bigger decline in occupancy -- 15 percent -- than other types of hotels, according to figures compiled by Smith Travel Research. During the first full week of January, occupancy at luxury hotels fell 24 percent, compared with the same week last year. Many travelers who used to stay at luxury hotels "are trading down," staying at less-expensive ones, says Will Marks, an industry analyst for JMP Securities.

    The National Business Travel Association found that 96 of 147 corporate travel managers surveyed in October suggested their employees switch from luxury hotels to those with lower rates. The NBTA represents about 4,000 travel managers and suppliers.

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