Luxury Hotel Chains Dropping Five-Star Ratings to Conserve Cash

Luxury-hotel chains, the biggest losers in the lodging industry’s decline, are giving up some of their hard-won stars to save money. Starwood Hotels & Resorts Worldwide Inc., the U.S. owner of luxury brands including St. Regis and W Hotels, will let some of its properties reduce their level of service — and number of stars — until the industry begins to recover, spokeswoman K.C. Kavanagh said. Hilton Hotels Corp. and InterContinental Hotels Group Plc have already cut the ratings for some locations.

‘Maintaining stars requires enormous capital investment,’ said Stephen Bollenbach, who retired as Hilton’s chief executive officer when Blackstone Group LP bought the company in 2007. ‘Ratings aren’t based on making good returns on your investment.’

Luxury-hotel operators have struggled to attract customers as the recession deters vacationers and forces companies to slash their travel budgets. That should mean lower rates for high-end business and vacation travelers. It may also mean the loss of some amenities, such as welcome gifts, flowers in your room, complimentary newspapers or 24-hour room service.

Hotel operators need to reduce services to conserve cash. Occupancy rates for luxury hotels worldwide fell to 57 percent in the year through July from 71 percent in the same period a year earlier, a bigger drop than for other types of accommodation, according to Smith Travel Research.

External Source – For the complete article click here

Source – Bloomberg