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America's luxury hotels on the brink

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Traditionally at this time of year, staff at America's luxury hotels are beginning their work as modern-day elves, preparing lobby decorations, cocktail menus, toy giveaways and light displays as they ready themselves for a season full of holiday parties, winter weddings and New Year's Eve festivities.

This year the season won't carry the same cheer. Landmark hotels, which have long served as downtown gathering places and backdrops for the holiday season, are eerily, strangely vacant, having lost well over half their business and told most of their staff that they are not needed.

The bar at the St. Regis in Washington, three blocks north of the White House and surrounded by elite law firms, has no way of drawing thirsty office workers -- they are nearly all at home.

Across town at the Four Seasons in Georgetown, staff would normally be preparing for an influx of Hollywood celebrities in December as part of the Kennedy Center Honors, but the event has been canceled. The staff, a quarter of the size it used to be, is trying to find a safe way to still serve its traditional Thanksgiving dinner to first responders.

"Is this the year to forget them?" said General Manager David Bernand. "I don't think so."

Those are among the country's top hotels that have remained open throughout the pandemic. Others haven't reopened, and some never will. The hotel industry was the first to be hit by the economic fallout of the pandemic and may take the longest to recover, with estimates from industry analysts ranging from four to 10 years.

With no end in sight for the pandemic and calls for Congress to deliver more stimulus funds going unanswered, big-city officials and many in the tourism industry are wondering what will become of the country's marquee properties.

Of all hotels, luxury hotels have been among the hardest hit. What truly separates them from the competition -- distinctive, personalized service -- is difficult to deliver when guests check in and out through an app on their phones and rarely stop in the lobby. Masks hide the staff's eager smiles. In-room services such as fresh towels and dining have been reconfigured, but it's difficult to replace offerings like the St. Regis butler service, in which staff unpack guests' luggage, serve them coffee and open their curtains in the morning.

"The biggest difficulty is making sure we distinguish ourselves with our service," said Winfred van Workum, general manager of the St. Regis. "If you buy a Rolls-Royce you don't want it to run like a Toyota."

St. Regis staff spent the first few weeks of the pandemic fielding cancellations and rescheduling calls from event, convention and wedding planners. Business events are gone altogether; the weddings that were rescheduled from spring to fall are now being rescheduled for 2021 or 2022. Since the D.C. government continues to limit group events to 50 people, the St. Regis recently separated a wedding into two events to remain in compliance.

"The first dance they have to do twice so everyone can see it," said Ramon von Schukkmann, director of sales and marketing.

Another couple decided to do a Zoom wedding in their room. "It's just the two of them in front of a large TV and a microphone," he said.

As if the pandemic was not enough, the city's Black Lives Matter protests occurred right outside the front doors of the St. Regis, prompting neighboring businesses to board up their storefronts. As the protests continued, D.C. Democratic Mayor Muriel Bowser renamed the street. The hotel's address is now 923 Black Lives Matter Plaza.

But the St. Regis is open, which is more than many other high-end properties can say. About three-quarters of luxury hotel rooms in New York City remained closed in September, according to data from STR, a research firm.Some owners of hotels surrounding Times Square, lacking Broadway or Madison Square Garden crowds, have thrown in the towel. After nearly 100 years in operation, the Roosevelt Hotel in Midtown -- backdrop to "The Irishman" and a dozen other films -- closed its doors permanently. Owners of the 44-story Hilton Times Square hotel announced that they were closing it without plans to reopen.

Experts expect the cascade of casualties to continue. Luxury hotels were only 9.2% occupied in April, an 88% drop from the year before. Occupancy slowly crept up, to 37% in August and 36% in September, but that still amounts to a disaster. Revenue overall was still down 59% in September, STR said.

"Luxury hotels in a city, their business historically has been far more business-oriented and also a fair amount of group business," said Anne R. Lloyd-Jones, senior managing director and director of consulting and valuation of the consulting firm HVS. "That's what's not happening now."

With losses piling up, some owners who borrowed heavily to acquire their properties can't make their loan payments, no matter how well their shorthanded staffs are able to make do. In Chicago, the 1,600-room Palmer House Hilton, where Frank Sinatra, Louis Armstrong and other legends once played the ballroom, shut it doors after its bank sued its owner. In D.C., Marriott sued the owners of the Marriott Wardman Park hotel, alleging that the real estate investors who own the property are trying to convert it into a residential building and asked them to make improvements instead.

Lloyd-Jones estimates that the values of hotels will fall between 20% and 35% this year. Refinancing hotels that are falling behind may not be easy, because of how sensitive they are to the whims of the virus; when a rise in infections occurs, most companies and apartment tenants pay their rent. Hotel guests don't show up, meaning there is no revenue. Meanwhile, ownership has to continue paying staff to keep the hotel open.

"It just makes it the riskiest of the property types by far," said Mark Eppli, a University of Wisconsin business professor.

The biggest losers in the collapse of the industry aren't the banks or the borrowers but the employees, well over 2 million of whom are out of work. Three out of 10 hotel employees in the country remain furloughed or laid off, according to the American Hotel and Lodging Association, putting hotel workers in the grim company of airline and restaurant employees. Millions more could lose their jobs as more than two-thirds of hotels told the group recently that they will last only another six months barring further relief.

The list of layoffs reported to the D.C. government shows deep cuts at nearly all the city's high-end hotels: 182 layoffs from the Hay-Adams, 237 from the Trump International, 351 from the W, 359 from the Conrad, 361 from the Ritz, and 426 from the Mayflower.

Those who are still at work are often doing multiple jobs -- parking cars, carrying bags, cleaning rooms -- and allowing smartphone apps to do what they can't. If that becomes the new normal, it could mean permanent job losses. John Boardman, executive secretary and treasurer of the Unite Here's D.C. affiliate, likened it to when fuel shortages in the 1970s led service stations to eliminate jobs and let customers pump their own gas.

"There's a real cultural shift in terms of the industry trying to change the expectations of customers in order to reduce employment," Boardman said.

At the Four Seasons in Georgetown there used to be a staff of 400. Now there are 100, with 200 on furlough and 100 gone. Ownership has continued paying for benefits for furloughed staff and management has tried to keep people's spirits up, creating a GoFundMe platform to provide food for staff who have lost their jobs, Bernand said. During toilet paper shortages, the hotel provided rolls to displaced staff at low cost. They will send them turkeys on Thanksgiving.

They will do something for the winter holidays as well, but they're still working out the details. For an industry that prides itself on anticipating exactly what is needed next, everything about the pandemic is disorienting, Bernand said.

"It's very hard to be predictive when so much that has happened has been unprecedented," he said.




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