Let's cool the luxury

Executives are being advised not to stay at hotels like the Four Seasons, Ritz-Carlton and Mandarin Oriental, where room rates easily run $500 a night. Demand really plummeted this month, the NYT reports, although the reasons have as much to do with perception as budget savings. "How does it look if you’re laying off 10 percent of your work force and you have people staying at $500-a-night or $1,000-a-night hotels?” Bjorn Hanson, an NYU professor, told the Times. What's interesting is that the drop in revenue doesn't necessarily lead to price cutting.

It is axiomatic among top-tier hotels — as it is among top-tier department store and jewelry sellers — that price discounting is detrimental to brand prestige. Holding sales in uncertain times means less ability to raise prices back to normal levels when good times return, hotel managers insist. But many owners, feeling the pinch from credit and mortgage debt, want more revenue now and are pushing for aggressive discounting. In past downturns, the luxury hotel companies — whose books are generally free of huge debt (since they did not build the property or buy the real estate) — have managed to resist owners’ pleas for overt discounting.