THE SUITE SPOT
By Joe Brancatelli
June 23, 2010 -- Checked into a Baccarat Hotel lately? I didn't think so. Seen the latest Candela Hotel? Missed it, huh? How about your last visit to an I Hotel? Been to the Nicky O? I guess not.
Welcome to the world of hotel brands that never were. The chimera of big-name, big-idea, big-bucks lodgings that never got past the introductory party stage and into the real estate pipeline. They and dozens of others ghost chains are victims of the worst hotel depression since, well, the Great Depression.
It's no use weeping for all those hotel concepts because they probably weren't needed then and certainly aren't needed now. On an average night in America, nearly 45 percent of the nation's hotel inventory sits empty. The rooms that do rent are selling for an average of about 30 percent less than they were back in early 2008.
Want it up close and personal? I booked a room at the Hilton Garden Inn at Los Angeles Airport earlier this month for $87. I paid twice that for an overnight stay there in 2005. Thanks to my AAA discount and my elite status in Hyatt's frequent-guest program, I paid $200 for a weekend night at the newish Andaz hotel in the old Barclays Bank building on Wall Street and was upgraded to a lavish suite larger than most New Yorkers' apartments. I found four-star rooms in downtown Philadelphia next month for $135 a night. And this weekend I'll be working out of a suite in a hotel in Whippany, New Jersey, (I lead a glamorous life) for $79.
The oversupply in guestrooms and the plunge in nightly rates have turned the hotel business upside down. Thousands are in default, many have been sold at absolute auctions, and gems like the 7-year-old Ritz-Carlton in Las Vegas closed last month when the lender decided it was cheaper to shut the doors rather than continue to underwrite cash-draining daily operations.
"A lot of hotels are still in trouble," says Mike Leven, a 50-year veteran of the hotel industry who now runs the Sands Corporation, which includes the gigantic Venetian and Palazzo resorts in Las Vegas. "Many have serious financial problems; there are many foreclosures and fast sales to pay off debts."
Leven believes some hotels in Las Vegas, particularly hard-hit by the recession and the "AIG Effect," may need five years just to get rates back to 2007 levels.
The fiscal chaos is leading hotels to pursue some unorthodox strategies to survive. One example: the Greenbrier Resort in rural West Virginia. After a self-made local millionaire appropriately named Jim Justice snatched the bankrupt 721-room resort out from under Marriott last year, he promptly began building an $80 million casino on the 6,500-acre property. It is set to open on July 2. Delta Air Lines this month launched daily flights to the nearest airport from both Atlanta and New York (Justice subsidizes the service). The Greenbrier’s owner convinced the PGA Tour to bring a golf event to the resort's three courses late next month. And Justice says that he'll invest $15 million more in a luxury train to haul passengers nearly six hours from Washington's Union Station to the White Sulphur Springs rail stop near the resort.
Unique promotions aren't unique to out-of-the way places. The Four Seasons in Beverly Hills now rents an upper floor to former child actor R.J. Williams, who has turned it into a television studio. The so-called Young Hollywood project films interviews with actors and sports figures. Four Seasons management believes celebrities will raise the profile (and thus the occupancy and room rate) of the hotel in celebrity-crazed Los Angeles.
And the Taj Hotels in the United States may have the ultimate glamour perk: free parking for your Jaguar when you visit its New York, Boston, and San Francisco properties for dinner or an overnight stay. Of course, there's a little more there than meets the driver's eye: The huge Indian conglomerate Tata owns both Taj Hotels and Jaguar.
Independent hotels are also rethinking the contours of their independence. Some have joined with Marriott to create the Autograph Collection. The hotels maintain their identity and management, but Marriott provides access to its website, reservation service, and the Marriott Rewards frequency program. Still other independents have recently launched their own frequency and loyalty plan called Stash Rewards.
Meanwhile, the big hotel chains are discounting liberally, using tried-and-true rate cuts as well as targeted promotions. For summer bookings made in next few weeks, Hyatt properties are offering AARP members as much as 25 percent off the nightly room rate and a $25 credit toward hotel charges. All of the chains in the Marriott family are offering gift cards worth as much as $25 a night when travelers book weekend stays this summer. Starwood is offering a free weekend night after every third stay. Hilton is promoting a worldwide 30-percent-off sale.
The industry's financial straits have also forced hoteliers to rethink their expansion plans. Several years ago, for example, Barry Sternlicht, the man who founded Starwood Hotels, gleefully announced the creation of a hotel group named after the luxury Baccarat crystal brand and another built around the Crillon, a luxury hotel in Paris. He abandoned the Baccarat project, never launched the Crillon chain, and has apparently put the eponymous Paris hotel on the market. But he recently made an unsuccessful run at Extended Stay America, a bankrupt group of low-end hotel properties, and bought into Hersha Hospitality Management, which operates about 70 midprice and full-service hotels for major lodging chains.
Even highflyers like Marriott and Ian Schrager, the one-time owner of Studio 54 who built a small group of über-trendy boutique hotels, have had to trim their metaphoric wings. Two years ago, Marriott and Schrager held a glitzy party in Los Angeles to announce a joint hotel venture named Edition. The notoriously aloof Schrager even made the rounds of magazine offices to pump up Edition, which he claimed would have as many as three dozen properties in development by the end of 2008.
Funny how things didn't turn out that way. The first Edition Hotel, a top-to-bottom remake of a frumpy condo tower at the edge of Honolulu's Waikiki district, is finally due to open this fall. A second Edition is in the works in Istanbul. But as of this week, only three other properties (in Mexico City, Bangkok, and Barcelona) are in the Edition pipeline.
The Fine Print…
Before you giddily plan your travel assuming hotel rates will stay low indefinitely, be warned: Lodging demand is showing the first signs of a revival. Smith Travel Research, the industry's leading lodging information service, has revised its projections upward for the rest of 2010. For the year, occupancy and average nightly rate will be up about 3.5 percent compared with 2009, Smith now says.
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 © 2010 American City Business Journals. All rights reserved. Reprinted with permission. JoeSentMe.com is Copyright © 2010 by Joe Brancatelli. All rights reserved.