By Michael Matthews
September 24, 2009 -- I am sitting in my rocking chair typing on my laptop with tears pouring down my cheeks. The problem is I don't know if they are tears of laughter or tears of sorrow. Either way, they are being shed for the present state of the lodging industry.

You have surely read about the decimation of the hotel industry following last year's financial meltdown. Occupancies are in the tank, average room rates have been pummeled, staffs have been slashed and maintenance has been restricted. Literally thousands of hotels have passed into the hands of the receiver and some have simply closed their doors and said "Buh-bye!"

The worst-hit segment has been the five-star level in general and five-star resorts in particular. The problem for resorts multiplied way beyond the general financial crisis when AIG had their $500,000 party at The St Regis Monarch Beach Resort and Spa in Southern California. The outcry was intense. Most of us were stunned at the stupidity of a gigantic company that needed billions in taxpayer bailout funds simultaneously appearing to live high on the hog.

The result? Very few corporations will book their boondoggles at any resort, let alone one that might have the additional label of "spa" or "golf" or "Ritz" or "Hawaii" appended to their name. According to Alphy Johnson, a hotel-industry leader who spoke recently on NPR, many four- and five-star resorts immediately lost 65 percent of their business. Companies don't want the wrath of their shareholders (or the taxpayers or politicians) descending on them because they rewarded their top producers or clients with a few days of sybaritic lodging luxury.

Ironically, the St Regis Monarch Beach has been one of the victims of this new frugality. Its owners, staggered by hundreds of millions of dollars of debt, walked away from the property earlier this year and handed the real and metaphoric keys back to Citibank, the lead lender. (Of course, it is irony atop irony since Citibank has been one of the biggest recipients of taxpayer-funded TARP assistance.)

But things have started to get worse. Now many five-star hotels are considering lower standards. They're mulling the psychic and financial cost of reducing the quality of their service and their facilities and allowing their rating to slip to the four-star level. The public relations person of a major chain recently speculated about it in the press. Privately, hoteliers talk about the cost of maintaining five stars and whether it's worth the financial strain in these constrained financial times.

To me, that kind of thinking is just plain stupid. From the customer's standpoint, it's terrible because travelers come to a five-star place expecting five-star amenities and they will be shocked and annoyed to find no bellmen, itsy-bitsy bars of soap, no mint on the pillow at turndown--and maybe no turndown service at all. It's also stupid from a tactical standpoint: Hotels that lose stars may never be able to regain their status. At the very least, it will take them years to win back the five-star designation. As with everything in life, it's easier to climb down the ladder, but damned hard to make it back to the top.

I spoke to a couple of my favorite hoteliers about what they were doing to combat the awful state of the five-star lodging business. And I was surprised by some of what I heard.

Alberto del Hoyo, who mans the tiller at The Beverly Hills Hotel, told me that he was doing absolutely nothing to cut the property's legendary service. If anything, he says that he is spiffing up the offerings. Del Hoyo's strategy seems to be working, too. Other Beverly Hills hotels have cut back, but they are tanking. The venerable Beverly Hills Hotel managed an 84 percent occupancy in August, far above the rates of its main competitors in the crowded Beverly Hills luxury tier.

I also questioned Craig Reid, the senior vice president of operations for the Americas for the Four Seasons chain. Let me quote what he said: "Four Seasons will never sacrifice the guest experience regardless of the conditions around us. We have to find ways to cut costs and find efficiencies, but every decision relates back to the guest experience. We have to be creative, but we have built our brand on the reliability and consistency of our service."

Then Reid said something else: "We staff our hotels to service levels not business levels. In a world that is never more stressful, this type of service has never been more important."

Examine Reid's comments carefully: He says that Four Seasons has to cut costs and find efficiencies, but insists that these economies don't affect the guest experience. But what he doesn't say is what is really going on at Four Seasons: Service has suffered. Cutbacks have affected the "guest experience." One glaring example: Four Seasons has cut the concierge staff at some of its hotels and forced some concierges to do double-duty at the front desk. Five-star guests notice those kind of "efficiencies."

Meanwhile, in West Virginia, a local boy named Joe Justice snatched the once-legendary Greenbrier resort out of bankruptcy court from under the giant Marriott chain. Now that he owns the place, Justice has hired a person whose sole occupation is to raise The Greenbrier's four-star rating to five-star status. The rambling resort lost its fifth star a decade ago and Justice is convinced that winning back that star will revive the place's fortunes. After all, it's losing a million dollars a month.

Like I said, tears of sorrow and tears of laughter. And I'll be in Austin, Texas, this weekend, bunking down at a three-star La Quinta. It should be interesting--and teary.

ABOUT MICHAEL MATTHEWS Michael Matthews has managed and marketed fine hotels around the world for more than 45 years. He spent 14 years in Hong Kong building the legendary Regent International group. He has also worked with St. Regis, Ritz-Carlton and Rosewood hotels. Matthews is currently based in Arizona. He began writing Do Not Disturb in early 2004.

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