Hotels for rich are doing fine in lean times

Distress in Manhattan means changing fresh flowers only once a day

July 28, 2002|By Jayson Blair | Jayson Blair,NEW YORK TIMES NEWS SERVICE

NEW YORK - True, economic troubles may be at hand. But it does not really matter quite so much when your hotel caters to clients who pay $10,000 a night and who tip a waiter more than most people pay to spend a night in a typical Manhattan hotel.

Manhattan luxury hotels like the Four Seasons, the New York Palace and the St. Regis have had their share of problems since the World Trade Center attack. But the economics are a bit different: The distress here may mean changing the fresh flowers only once a day and replacing the Italian curtains less frequently, minor adjustments compared with what is happening at most Manhattan hotels.

Thick profit margins

Why are they on sounder ground financially?

For one reason, they have thick profit margins - meaning that it takes a longer time for them to get squeezed so hard that it hurts. But probably the most important factor contributing to their economic stability in a time of great problems in the industry is the nature of their clientele: the very, very rich.

"This is not meant to sound arrogant," said Michael Matthews, a vice president at the St. Regis Hotel, on East 55th Street at Fifth Avenue, "but you have to understand that we are home to a certain world.

"We are the New York Yacht Club. We are more Martha's Vineyard than we are Hamptons. In bad economic times they sell just as many Rolls-Royces and private jet aircraft as they do in good times. Our clients are recession-proof."

The data appear to support his conclusion. In Manhattan hotels where the rooms cost an average of $300 or more a night, occupancy rates have dropped only 2 percent from a year earlier, compared with a decline of more than 3 percent among other hotels in the borough, according to PKF Consulting, a hotel industry research firm.

At the same time, these high-end hotels have seen room rates drop only 8 percent from a year earlier, compared with a roughly 11 percent decline in the rest of the borough, according to PKF's figures. These distinctions may seem minor, but they can mean the difference between profits and layoffs.

This has made it much easier for luxury hotels to avoid layoffs and cuts in amenities, like large, fluffy bathroom towels and Godiva chocolates on the pillows. "The bottom line is that a guy who wants to spend $700 a night to go shopping in New York is not going to be affected as much as the average tourists," said John A. Fox, a PKF senior vice president.

While many in this rarefied slice of the Manhattan hotel industry worried about job cuts after Sept. 11, these hotels laid off fewer people and brought them back faster than did most Manhattan hotels, industry officials say.

Officials at the New York Hotel Trades Council, the umbrella group of unions that represent everyone from butlers to dishwashers, say that layoffs at high-end hotels make up only a small fraction of the jobs lost since the terrorist attack.

Hotel is hiring

At the New York Palace, which laid off five of its 19 bellhops in September, most of its workers are back and the hotel is actually hiring. According to the trades council, about 4,500 of the hotel industry's 24,000 workers in New York were laid off after the attacks. About 1,000 have yet to be rehired.

Luxury hotel officials explain that they cannot afford to lay people off and leave their jobs empty until business recovers.

Julie Devlin, a concierge at the Palace, said that serious staff cuts at her hotel, where many employees have worked for more than 15 years, would have destroyed a lot of institutional history.

"It takes a long time to pick up on the patterns, like the certain guest who calls up at 6:30 in the morning and wants a grand piano in his suite by 7," Devlin said.

Michael Silberstein, managing director at the Palace, said that during tough economic times, Palace customers - often shrewd businessmen and businesswomen themselves - often search for the slightest imperfection, particularly in places like the Palace's four triplex suites with balconies, private elevators, bars and solariums with fireplaces.

Not surprisingly, Palace officials will not give out names of customers, making it hard to ask about service.

But one well-known millionaire was said recently to have been upset about the lack of freshness of the flowers. Others at some luxury hotels have complained about cleanliness, suggesting that managers may be cutting back on housekeeping staff.

Trimming food costs

At one elite hotel, which insisted on anonymity, managers are looking to maintain profits by wrangling with their food service providers to trim a few dollars off the cost of each Long Island duck breast and pan-seared salmon they serve. Likewise, at the Palace, Silberstein says he has argued to vendors - much as management would argue to a union - that they should take the hit now so that the hotel stays healthy and is able to repay them in good economic times.

But Silberstein said quality had not been sacrificed.

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