Will guests notice as upscale hotels shed workers to survive?

by Barbara De Lollis

Reprinted from USA Today

Good morning! I'm back from Manhattan, where I spent Monday and Tuesday attending the 31st annual New York University's International Hospitality Industry Investment Conference.

It's arguably the most important gathering of the year for the industry, where the top execs of the USA's major hotel-brand companies, hotel owners, investment bankers and other industry movers and shakers go to rub elbows and (in better times) do deals. Not surprisingly, the tone this year was somber as people pondered whether travel demand has hit bottom yet (answer? probably.) One of the other constant themes was the lack of access to capital, which is rippling through the industry in meaningful ways such as smaller hotel payrolls.

During one session, Strategic Hotels CEO Laurence Geller talked about the impact on staffing. I found his take especially interesting because Strategic's portfolio includes three Four Seasons, three InterContinentals, two Ritz-Carltons, two Fairmonts and one Loews. This is the same category that's been disproportionately hit by the double whammy of both the recession and the trend among big companies to scrap their old habit of gathering at luxury hotels to avoid negative perceptions.

"As I look about it there’s two roles we can play we can fix what we’ve got," he said. "I can’t alter the capital markets but what we can alter are the operations of the hotels. That’s what's happened. For the first time, I believe, we’ve had systemic organizational change throughout hotels. (We) lost 15 to 20% of labor. Probably a quarter to one third of that won’t ever come back so your margins are going to be higher. You’ve just got to muddle through. It may take longer (than prior industry downturns), but the halcyon days for this industry have to be ahead."

Charles Henry of Hotel Capital Advisers followed by saying that what he's seeing in the industry "has proved to me that we're all slashing costs like mad. Hopefully we’re not slashing so much that they effect the customer."

When travelers Travis Parker of Los Angeles emailed me to say that he was told of service changes up front - as soon as he checked in last month at the luxury J.W. Marriott Guancaste Resort and Spa in Costa Rica for a 10-day stay.

"(I) was advised at check in that due to hotel occupancy (25%) that one of the hotel's five restaurants would not be serving dinner," he said. Since the resort has four other restaurants and room service, he says he didn't mind, but other another guest who loved that particular restaurant might've balked.

Editorial by Aaron Tucker

During my visits to properties across the State of Arizona I have witnessed first hand the downturn in corporate and personal travel and how it affecting the Hotel and Lodging industry. Cutbacks were inevitable and when times get tough many businesses are forced to look within their own walls in an attempt to "cut their way to profitability". Of course we all know that positive sales go a long way to cover up the inefficiencies of an operation, but these matters are often exposed in dire times.

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