ATTACK OF THE VELCRO HOTELS
By Joe Brancatelli
November 25, 2008 --The hotel at 2100 Massachusetts Avenue NW near Dupont Circle in Washington has changed names. Again.
When Al Gore grew up there in the '50s and '60s, the building was called the Fairfax Hotel, and it was home to the Jockey Club, a saloon for Washington's power players. The last time I stayed there, about a decade ago, it was called the Ritz-Carlton. But the sheik who owned the property fell out with Ritz and peevishly renamed it "the hotel formerly known as Ritz-Carlton." Then it became the Luxury Collection, the Westin Fairfax, and the Westin Embassy Row. The sign on the door now says "The Fairfax at Embassy Row."
The Fairfax is what lodging insiders derisively call a "Velcro hotel"—a property that changes brand names so often that hotel signs may as well be fastened with hook-and-loop tape. There are dozens of infamous Velcro hotels around the nation and thousands more properties that have changed brand affiliations—the industry calls it "reflagging"—at least once in the last decade.
Business travelers joke about Velcro hotels too. They tell tales of going to sleep in a Hilton and waking up in a Marriott; of seeing signs hastily obscured with black plastic; of the breakfast menus on the doorknob changing in the middle of the night; and even of hotel staffers fluffing lobby ashtrays so that the former chain's logo, ostentatiously stamped in the sand, is obliterated.
Brand-hopping isn't fatal to business travelers, but it is an annoyance. If your favorite Sheraton suddenly becomes a Radisson (or vice versa), your status in the hotel's former frequent-stay program won't be recognized. You'll lose your points, your upgrades and all of the other perks. A reflagging may mean a hotel has failed to meet the standards of its previous brand, a sure sign that the property is scrimping on maintenance or guest services. If a hotel has switched to a pricier brand, you might get hit with a sudden increase in rates without a commensurate improvement in service.
According to Smith Travel Research, the crucial indicator called revpar (revenue per available room) plummeted 13 percent during the week ended November 15 compared with the similar period in 2007. Hotel occupancy nationwide declined by 11.6 percent and the average daily rate fell by almost 2 percent. One glaring specific: On Maui, the percentage of rooms occupied tumbled to 58.3 percent, down 22 points from the first week of November 2007.
That kind of implosion is sending waves of panic through the layered system that dominates the lodging industry and creates the phenomenon of Velcro hotels. A generation ago, hotel-keeping was a fairly straightforward operation: Companies like Hilton, Hyatt, and Marriott owned the buildings that flew their corporate flags, and managed the hotels inside too. No more. The most common model these days is a tri-partite arrangement: Real-estate interests own the buildings; hotel companies franchise their brand name and control the reservation systems and frequent-stay programs; and management specialists run the hotel day-to-day.
This spread-the-risk approach has permitted the massive growth of the lodging sector. In 1981, when Marriott took most of the risk, it had just 100 hotels. Now there are more than 3,000 properties flying one of Marriott's 15 brand flags. Hilton has 3,000 hotels, manages very few of them, and owns even fewer. Wyndham Worldwide controls 10 famous brands—including Ramada, Days Inn, Super 8, and Howard Johnson—and has more than 6,700 franchises, but it doesn't own a single hotel building.
Franchisers like Marriott, Hilton, Wyndham, and Starwood (which controls the Sheraton, Westin, W, and St. Regis names) can take as much as 12 percent of a hotel's nightly revenue right off the top. So whenever a brand ups its standards and mandates expensive property improvements like a new bedding system or a lobby redesign, a percentage of owners refuse to pay and go shopping for a new sign. Whenever a hotel building changes hands, the new owner may look for a new deal and a new brand. Management companies such as Interstate Hotels are often hired by the real estate owner and told to choose the brand flag.
In the case of Washington's Fairfax Hotel, ownership shifts have caused most of the reflaggings. In the early 1980s, the building's owner adopted the Ritz-Carlton brand. They fell out a decade later, and Ritz recruited Sheik Abdul Aziz bin Ibrahim to buy the hotel. Ritz and the sheik began to clash shortly after Marriott purchased Ritz-Carlton in 1995 and Ritz withdrew as the management company in the middle of an August night in 1997. The sheik brought in Starwood to manage the hotel, then Starwood bought out the sheik in 1998. A Boston company purchased the building in 2006 and shed the Westin affiliation last week.
Confused? You ain't heard nothing yet. Consider New York's Hotel Pennsylvania. The McKim, Mead, and White-designed building was built by the Pennsylvania Railroad in 1919 and management was handled by Ellsworth Statler, one of the first great names in 20th-century lodging. Statler's company bought the building in 1949 and merged with Hilton in 1954. That's when the hotel was renamed the Statler Hilton. Hilton sold the building 15 years later and it became the New York Statler. In 1983, a consortium of airlines bought it and renamed it the Penta. Brief stints as a Ramada and a Best Western followed. It resumed its original name in 1998 after still another ownership change. The only constant at the Hotel Pennsylvania? The phone number, Pennsylvania 6-5000, best known as the name of a 1930s Glenn Miller tune.
Velcro Hotels aren't limited to big cities. In Toledo, Ohio, a hotel opened on Summit Street in 1985 and was called the Sofitel, a brand controlled by Accor, the French lodging giant. Three years later, it became a Marriott. Then it was a Holiday Inn, a Crowne Plaza, and a Wyndham. In 2005, a new owner called it the Toledo Riverfront. The building changed hands again last year and a new management company brought Crowne Plaza back as the brand flag.
My personal favorite Velcro Hotel is in Stamford, Connecticut. The 32-year-old building on Hartford Avenue has been a Howard Johnson, a Days Inn (twice), a Grand Chalet, and a Fairfield by Marriott. It was also briefly known as the Stamford Hotel. Last year, a new owner hoisted the La Quinta sign on the building.
The bottom line on these bottom-line concerns? Get used to it. In these difficult times, there'll be more Velcro hotels than ever before as panicked hoteliers cut corners and switch flags.
The Fine Print…
This year's most notable reflagging: After a festering contract dispute with the owner, St. Regis departed as manager of a 14-month-old, $140 million resort in Fort Lauderdale. Ritz-Carlton stepped in a month later and the property magically morphed into the Ritz-Carlton, Fort Lauderdale.
ABOUT JOE BRANCATELLI Joe Brancatelli is a publication consultant, which means that he helps media companies start, fix and reposition newspapers, magazines and Web sites. He's also the former executive editor of Frequent Flyer and has been a consultant to or columnist for more business-travel and leisure-travel publishing operations than he can remember. He started his career as a business journalist and created JoeSentMe in the dark days after 9/11 while he was stranded in a hotel room in San Francisco. He lives on the Hudson River in the tourist town of Cold Spring.
THE FINE PRINT This column is Copyright © 2008 Condé Nast Inc. All rights reserved. Reprinted with permission. JoeSentMe.com is Copyright © 2008 by Joe Brancatelli. All rights reserved.