By PALLAVI GOGOI
DailyFinance
Just last year, the stigma associated with luxury was so great that some high-end hotels were changing their names. The four-diamond Ballantyne Resort in North Carolina renamed itself the Ballantyne Hotel and Lodge, dropping “resort” from its name.
Back then, Congress was attacking financial executives for enjoying visits to resorts even while their firms were taking billions of dollars from taxpayers.
No more. Today, the winds are changing — quite dramatically. People are traveling and spending money again, and hotels are hiring. That’s a reflection of higher economic activity, and it could be a harbinger of better times to come. After all, corporate executives are seeing enough demand that they’re comfortable with opening up the spigot of employee travel. It also means consumers are getting more comfortable with spending on vacations again.
“The Business Traveler Is Back”
According to the latest jobs report, the leisure and hospitality industry hired 45,000 new workers in April, contributing to the 290,000 net new jobs added last month, the highest one-month gain in four years, according to the U.S. Department of Labor.
“The recovery is playing out better than most people expected, including ourselves,” says Frits van Paasschen, CEO of Starwood Hotels & Resorts Worldwide (HOT), the largest global operator of luxury hotels, including the St. Regis and W Hotel brands.
Starwood’s W Hotels saw occupancies return to near pre-financial-crisis levels, with gains of 28% in the first quarter in its top cities like New York. At its Phoenician resort in Scottsdale, Ariz., occupancies were up more than 30% in the first quarter. “The business traveler is back, and leisure travelers are rewarding themselves with vacations to our one-of-a-kind properties,” says Paasschen.
Indeed, these early signs of recovery have taken many in the industry by surprise. The hospitality sector made some of the deepest cuts during the recession, and few hoped for a comeback so soon. Hotels have been operating with fewer hands — over 400,000 hotel employees were laid off in the last couple of years because hotels slashed costs to stay afloat as corporations cut meetings and training at hotels. PricewaterhouseCoopers in an outlook report said room occupancy will likely go up, but that the luxury and upscale segments will continue to see declines.
As Demand Recovers, Wage Increases Are Likely
However, many hotel operators are seeing the high-end market bouncing back more quickly. Laurence Geller, CEO of Strategic Hotels and Resorts (BEE), in a conference call with analysts, pointed out that guests’ spending rose at the Four Seasons Punta Mita, which the company views as the leading indicator of luxury spending in its portfolio of hotels.
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