Bad News for Luxury Hotels May Mean Good News for You

October 28, 2008 at 11:07 AM | by Jenna | Comment (1)

It seems like every time we've opened up the New York Times these last few months, we've run into some kind of depressing story about the sad economic state of the hotel industry.

Here's the deal: the economy is not doing so well (have you heard?) and some folks initially thought that hotels wouldn't be in too much pain -- but then we saw bigger chains slowing down their expansion plans because of declining occupancy. While mid-priced hotel chains began hurting, the luxury segment continued to do relatively well through the summer.

But more recently, the state of the economy has struck fear into the hearts of even Manhattan hotels, a city where occupancy rarely dips below 80%. So, you know, things are bad -- but top-tier hotels weren't so worried because those properties were generally sustained by corporate travel (not super rich leisure travelers, as you may have thought). Until now.

According to today's Times, things are getting really bad now: the luxury hotels are suffering. Since September ("almost in parallel with the stock market turmoil," says the article), demand for upscale hotel rooms has taken a nosedive:

Revenue per available room, the standard measure of performance, dropped 14 percent at upscale and luxury hotels in the week ending Oct. 18 over the comparable week last year, according to Smith Travel Research. For hotels in general, the decline was about 8 percent.

Yeah. Companies have been cutting back on travel expenses (well, some companies; not naming any names, AIG) and the luxury chains are feeling it. While it can be argued that price discounting may be detrimental to any luxury brand's prestige, the falling demand has put the companies that manage the luxury hotels at odds with the developers and owners of the properties -- and the latter group, according to the article, is pushing for aggressive discounting to help stop the bleeding.

So! While this is obviously crappy news, there is a little glimmer of goodness in this whole thing for us:

What does all of this mean for the traveler � or at least the business or leisure traveler who is still able to stay at a top-tier hotel? Better bargaining power, hotel insiders say.

Again, this is not necessarily bargaining power for the individual guest, but for your company -- you know, the one sending you on all those business trips -- so, in that sense, this is good. If things get bad enough that we think you may be taking a leisurely weekend at the Four Seasons with your boyfriend for $50 any time soon, we'll get back to you.

[Photo: David Walter Banks / NYTimes]

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