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% 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% last year — a steeper drop than the Dow Jones U.S. index, which dropped 39%.

"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% — 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%, 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.

Besides the weak economy, the "AIG effect" has had a major impact on luxury hotels' occupancies, says Vivian Deuschl, vice president of The Ritz-Carlton.

Companies are concerned about being seen as spending too much after insurance industry giant American International Group (AIG) was blasted by Congress last fall for spending $440,000 on an executive retreat at a California resort after being bailed out with taxpayer money.

Most of Ritz-Carlton's 72 hotels "have adjusted staffing levels downward, reduced hours and closed some dining outlets," Deuschl says.

"We have not compromised service levels but definitely have taken a hard look at operations and staffing and are trying to salvage jobs wherever possible."

Deuschl says Ritz-Carlton hotels offer discount packages but aren't having a "fire sale" on rates. Some Ritz-Carltons have lowered room rates, however.

At the chain's hotel in Philadelphia, for example, rates have dropped 10% to 15%, says Michael Walsh, the hotel's general manager. On Feb. 5, the hotel's website was charging $199 to $364 a night for a stay in mid-February.

Hotels with less-expensive room rates also are adjusting to the downturn.

Best Western spokeswoman Marie Yarroll says the chain, which has about 2,100 independently owned U.S. hotels, imposed a hiring freeze and other measures last year to "free up additional dollars for marketing."

Marriott has not filled some vacant jobs, and most of its more than 2,600 U.S. hotels have "instituted contingency plans with very tight cost controls," according to a company filing in October with the Securities and Exchange Commission. Marriott hotels also have reduced restaurant hours and made menu changes, company spokesman John Wolf says.

Guests notice cutbacks

Hotels cannot hide all the cutbacks. Some frequent travelers say they're starting to notice little things.

Some amenities — such as a bottle of water in the room or a newspaper delivered to the door — are gone. The quality of complimentary food and beverages has diminished in some club rooms or lobbies, or at hotel managers' guest receptions, they say.

Because many hotels have cut their staffs, frequent travelers say they're waiting longer to check in and out, have rooms made up and have cars retrieved by valets.

"There are fewer people to provide basic services, answer questions and make suggestions for restaurants and activities," says Howard Knoff, an education consultant in Little Rock.

Mike Maloney of Overland Park, Kan., says he and more than 10 other guests at a hotel near the Atlanta airport waited 30 minutes recently for the hotel's shuttle van, which was supposed to run every 10 minutes.

When the van didn't arrive, "I tried to get someone in a supervisory capacity to talk to at the front desk, but no one was manning it," says Maloney, who works in the beverage industry. He and the others had to pay for taxis to get to the airport.

Joe McInerney, president of the American Hotel & Lodging Association, says there may be "isolated cases" of service problems, but service hasn't declined at most hotels.

"The last thing a hotel wants is to have a guest leave and not come back," he says.

Some frequent travelers say some hotels have begun to nickel-and-dime them with charges for services that had been free.

Dawn Boehmer, a product specialist from Colorado Springs, says some hotels have started charging for Internet access and are charging excessively for faxes.

Technology consultant Michael Sommer of Jacksonville says some hotels have begun charging for toll-free calls, receiving Express Mail packages and storing luggage after checkout. Business centers in hotels "that were once free now have fees associated with them."

Sue Reiss, who lives in the Florida Keys and is a sales manager for a Texas manufacturer, says rooms at several of the "higher-end" hotels she stayed at last year needed repairs or remodeling.

Many hotels are taking pains to try to avoid such complaints.

At the Wyndham Garden Hotel in Austin, there's been no reduction in service, amenities or maintenance, says Allan Reagan, managing director for the firm that owns and operates the hotel.

"If anything," he says, "we are working even harder to improve our guest service."

The hotel has cut costs by sometimes closing its formal restaurant, freezing managers' salaries and requesting price reductions from suppliers. It also is cross-training staff, Reagan says. Agents and front-desk clerks may drive airport shuttle vans, and housekeepers may wash dishes.

"It helps us improve guest service by having more employees trained to respond to any guest need," he says.

Quick turnaround unlikely

The recession is pummeling the hotel industry, but analysts predict that the big-name chains will survive.

"I cannot think of a single major brand that is so financially weak that it cannot survive the current situation," says Rick Garlick of Maritz Research Hospitality Group, which does research for hotel companies.

He warns, however, that some individual hotels, including some that are part of major chains, may disappear.

Jeremy Glaser, senior equity analyst for Morningstar, an investment research firm, says some hotels could fall victim to the credit crunch and face foreclosure if they can't renegotiate loans written when the industry was growing at a steady rate.

Industry analysts don't foresee a quick rebound.

Joe Berger, Hilton Hotels' president for the Americas, says he expects occupancy rates to continue to deteriorate this year.

Christine Klauda, vice president of lodging research for D.K. Shifflet, a travel market research firm, predicts the industry probably will not recover until summer 2010.

"That's when people will say, 'Enough of this bad economy, we're going on vacation,' " Klauda says.

McInerney of the American Hotel & Lodging Association says the industry should be helped by the fact that it didn't build too many hotels last year, which would have added to the number of vacant rooms.

Although new construction slowed last year, many projects that had been planned before that are being completed. More hotels are opening worldwide this year and next than at any time in the past decade, according to Lodging Econometrics, which tracks hotel real estate. In the USA, more than 1,400 hotel projects are expected to be completed this year, compared with 1,330 last year.

In Las Vegas, for example, four new hotels, with a total of more than 6,000 rooms, are being built as part of the CityCenter complex between the Bellagio and Monte Carlo resorts. Three are scheduled to open this year.

Marks, the industry analyst at JMP, says the increase in rooms available this year will add to the pressure on hotels to cut rates.

Guests aren't complaining.

Bill Teater of Mount Vernon, Ohio, says that "everyone" — from budget to luxury hotels — "is willing to deal on rates" for frequent guests.

"Some might say, 'Well, you could do that all along on,' but you do not have to go to Priceline," says Teater, a consultant who stayed 204 nights in hotels last year. "You can go to the hotel and work it out."

Linda Curran, a consultant in Palm Springs, Calif., booked a $45-a-night rate at Hilton's website for a mid-December stay at the Las Vegas Hilton.

"This is a top-notch hotel," she says. "Incredible."

TELL US: What changes have you noticed during your hotel stays?