Five-Star Chains react to the recession

The Recession has been particular brutal for five star hotel brands. Heavily reliant on high spending business travelers, they have been hit by the financial crisis as bankers and the investment community has severely curtailed their travels and high end meetings have been reduced. "It is important that you manage your business differently, and you have to be smarter, and that's healthy," says Christopher Norton, Regional Vice President of Four Seasons Paris. "But it would be a mistake to try and reposition the hotel. You can't discount your way out of a recession. You win by holding rate and providing value, whatever the value is to your customer." I disagree with this statement. Yes, it is very important that you try to hold your service quality so this country doesn't forget what good service is but it's very dangerous to not fill your hotel rooms. Hotel rooms is a perishable product unlike most items bought in the consumer world. Empty rooms means no revenue no mater even if it's 50% off. Yes you want to cover your operating cost and at least try to get a 5-10% contribution margin. Your RevPar is very important and empty rooms does not help RevPar or ADR. See most of these 5 star brands believe that what they offer doesn't have a price. It's the experience but with this recession most business travelers are more savvy now and will think twice about spending 200-300 dollars a night for a room. The value of a dollar is worth more mentally to us now. People are more cautious before they pull out that credit card. Now I'm not saying you have to turn your Westin to a Best Western, this would be very damaging to your brand and once this has bottomed out it would be very difficult to return your your brand to the previous image it was created for. However, a discount here and there would greatly help your bottom line. The only thing is that these hotels are well established and most hoteliers that own these particular hotels are not in development like most hoteliers of 4 Star and limited service hotels with bank loans out the ASS. Usually about 10% of profits goes into capital for reinvestment and upkeep to keep the 5 star status. So please walk the fine line.

Citations from Tom Otley Business Traveler

Introduction

Hello,

My Name is Jordan Garcia and I am here to write about hotels! I love Hotels! I am a Senior at the University of Arkansas and am majoring in Hotel & Restaurant Management there. I also work at a 4 star property as Event Coordinator and Manger On Duty. I have several certifications from the American Hotel and Lodging Association Educational Institute as well as the National Restaurant Association. I was the youngest person to ever be promoted to my current position at the age of 19 in my company's history. Even though I am young professional I am here to discuss current trends, future of the industry and critique decisions and structures of hotel management companies.