Upscale Hotel Brands In "Survival Mode"

Despite recent brandchannel reports about hotel expansions and chain upgrades, the hospitality industry is feeling the effects of "a declining demand for rooms, low rates and plummeting revenue," according to USA TODAY.

Particularly hard hit are upscale hotel brands. The W Hotel in San Diego and the Wyndham Drake in Chicago have closed, and the Ritz-Carlton on Lake Las Vegas, Henderson, Nevada, will close in May.

Other upscale hotels are adjusting their services to meet soft demand. Barona Resort & Casino in California, for example, is offering discount menus and half-price entrees for some gamblers. Upscale hotels that cater to business travelers are deeply discounting their weekend rates.

Robert Habeeb, president of Chicago's First Hospitality Group, tells USA TODAY, "The industry is in survival mode, while Ed Watkins, editor of Lodging Hospitality, says "It's the worst downturn in decades – perhaps ever." The occupancy rate in US hotels dropped to less than 55 percent in 2009 – the lowest ever recorded by Smith Travel Research, an industry research firm. The rate fell to 45 percent in January. While a few hotel chains continue to open some new properties and refurbish existing ones, the emphasis these days seems to be on cutting costs. Habeeb says hotels are focusing on things like lowering thermostats, turning off lights, and closing unoccupied floors or wings.

But there are some hotel brands that expect to survive the current downturn and come out stronger. Marriott International saw revenue decline by 38 percent in 2009, but the company showed a profit in the fourth quarter because of "aggressive marketing campaigns" and a modest increase in business travel. Starwood Hotels & Resorts opened more than 80 hotels in 2009 and reduced its debt by more than $1 billion.

After going through one of the worst periods ever for both business and leisure travel, hoteliers are hopeful 2010 will show significant improvement.