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WSJ: Luxury Chain Cuts the Flowers, Sends Out Wash at Some Hotels

WSJ: Luxury Chain Cuts the Flowers, Sends Out Wash at Some Hotels

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Old Jun 3, 10, 7:11 am
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WSJ: Luxury Chain Cuts the Flowers, Sends Out Wash at Some Hotels

On-line edition includes an interesting map of propoerties with financial challenges.

http://online.wsj.com/article/SB1000...Tabs%3Darticle

TORONTO–Four Seasons Hotels & Resorts, famed for its top-flight hotels, has agreed to skimp on some of its signature features, bowing to pressures by some financially strapped owners of properties that bear its name.

Many Four Seasons hotels have stopped displaying huge vases of fresh flowers. Others are closing their high-end restaurants on slow days. And some have begun outsourcing laundry.

Trouble Spots at the Four Seasons
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The moves may seem small—and many guests won't even notice them—but they are seismic for a brand like Four Seasons, which built its reputation on impeccable service and pioneered labor-intensive perquisites like in-hotel spas and free shoe shines.

In the past, the company, which holds long-term contracts with the hotels it manages, shrugged off downturns as passing cycles that didn't warrant altering its expensive but successful formula. This time, though, Isadore Sharp, Four Seasons' founder and chief executive, agreed to some concessions that wouldn't hurt service.

"Like most companies, when things are going well there's always the sort of excess that is allowed to be built in," Mr. Sharp said in an interview at Toronto headquarters. Now, he added, "there will be changes that will be built in forever that will be more efficient."

But Mr. Sharp also had little choice. Of the 82 hotels that fly Four Seasons flags, at least a dozen are in financial distress. Last year, occupancy levels at the luxury chain's U.S. hotels averaged 57%, and revenue per available room fell 26%. Even with room rates that average $400 a night, many Four Seasons hotels can't generate enough cash to pay both interest and operating costs.


Matt Nager for The Wall Street Journal
Meanwhile, Four Seasons hotels in Maui and Seattle are delinquent on their mortgages, and lenders have taken over one in Dallas. In Barbados, a Four Seasons stalled in construction was rescued by a loan guarantee from the Barbadian government.

And the owner of Four Seasons hotels in San Francisco and Miami sold a two-thirds stake in the hotels in March to lighten the debt burdens, saving the San Francisco hotel from foreclosure.

Even the iconic Four Seasons in New York, the chain's flagship hotel, which operates in one of the world's preeminent business markets, almost ran afoul of its lenders this year when it couldn't qualify to extend its mortgage because it wasn't generating enough cash flow. The hotel's owner avoided default this spring by paying off some of the principal and putting up another property as collateral.

Tensions between hotel owners and hotel managers aren't unusual as they try to co-exist in a way that is profitable for both sides. At one time, a hotel's owner and manager was the same company. But in the 1980s, the industry began to split into two separate groups, with some companies owning the real estate and other companies managing the hotel operations. Today, Hilton Worldwide Inc. and Marriott International Inc. own just a small percentage of the hotels carrying their names.

Mr. Sharp, the son of Polish immigrants, built his first hotel in Toronto in 1961. Over the decades, he built Four Seasons' reputation for providing attentive, pampering service for affluent guests. But in 1986, Four Seasons began selling off its hotels, and now it no longer owns any of them and is purely a management company.

The company was taken private in 2006 in a $3.7 billion deal that gave Saudi Prince Alwaleed bin Talal a 45% stake and Microsoft Corp. founder Bill Gates's Cascade Investment LLC 45%. Mr. Sharp, now 78 years old, kept 10% and stayed as CEO.

Prince Alwaleed, whose Kingdom Hotels owns stakes in 11 Four Seasons hotels across the globe, said it's not the company's fault that so many individual hotels are in trouble. "Having the name Four Seasons made [some owners] over leverage, and some banks accepted that," he said. "It is not good publicity at all. But you cannot put the blame on Four Seasons."

That's not how some other hotel owners see it, though. In the most public dust-up between the management company and an individual hotel owner, Broadreach Capital, owner of the Four Seasons Aviara in Carlsbad, Calif., last year sought to oust Four Seasons as the hotel's manager in a dispute over costs.

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Matt Nager for The Wall Street Journal

Catherine Baxter is one of many employees willing to work in a recent Four Seasons cross-training program.
The tiff – which led staffers at the Four Seasons to block Broadreach's new management company from entering the hotel – landed in arbitration. In April, the arbitration panel ruled that Broadreach must pay Four Seasons to end its contract, allowing Hyatt Hotels Corp. to take over management of Aviara in June. Broadreach declined to comment.

Though they can be owned separately, hotels and management companies are closely linked by their management contracts. The contracts can stipulate almost every aspect of how a property must be operated, including how much to spend on decor. A typical Four Seasons contract, which can extend for 60 years, guarantees Four Seasons a management fee equal to 3% to 3.5% of a hotel's revenue without bearing any of the hotel's labor costs. Four Seasons also gets a negotiable percentage of the hotel's profit.

Chris Jeffries was one of the owners who approached Mr. Sharp about cutting costs. Mr. Jeffries' Millennium Partners LLC owns the Four Seasons hotels in Miami and San Francisco, which was delinquent on its $90 million mortgage. He suggested dozens of cuts that, he said, wouldn't hurt service.

Among those that Four Seasons accepted were outsourcing laundry, simplifying menus and closing a restaurant or two on slow nights at hotels with multiple eateries.

It agreed to quit stocking fresh flowers in the lobbies of Mr. Jeffries' hotels, allowing him to replace them with sculptures or ornate vases. It also cut duplicate jobs and combined management positions at the hotels, thinning the ranks by 41 positions between the two.

Some employees take part in cross-training, working in multiple departments to cut costs.

But Four Seasons refused other cuts proposed by Mr. Jeffries. After experimenting with combining the concierge and check-in duties on the graveyard shift, it stopped after determining the change hurt its service. It also declined to eliminate staff bonuses and to discontinue having staffers turn down guests' bed covers each evening. And a suggestion from Mr. Jeffries to end room service between midnight and 4 a.m. got nowhere.

All told, the cuts pared the San Francisco hotel's annual operating expenses by $6.6 million, or 15%, and the Miami hotel's expenses by $5.4 million, or 19%, Mr. Jeffries said.

But certain expense-cut requests are nonstarters for Four Seasons. That's because those changes might reduce customer service, Four Seasons executives say, and that would cost the hotels more money in the long run.
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Old Jun 3, 10, 7:56 am
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Originally Posted by mktozd View Post
staffers at the Four Seasons to block Broadreach's new management company from entering the hotel
>
Originally Posted by Kagehitokiri View Post
Four Seasons says that instead of waiting for an arbitration panel's directions, the partnership's representatives entered the hotel around 1 a.m. on March 29, a Sunday, picked the locks in a manager's office and posted private security guards outside.
new info, most importantly things FS wouldnt cut >
Originally Posted by mktozd View Post
Among those that Four Seasons accepted were outsourcing laundry, simplifying menus

After experimenting with combining the concierge and check-in duties on the graveyard shift, it stopped after determining the change hurt its service. It also declined to eliminate staff bonuses and to discontinue having staffers turn down guests' bed covers each evening. And a suggestion from Mr. Jeffries to end room service between midnight and 4 a.m. got nowhere.
previously, incl compilation >
http://www.flyertalk.com/forum/luxur...save-cash.html

related compilation >
http://www.flyertalk.com/forum/luxur...arn-money.html

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Old Jun 3, 10, 10:01 am
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Its ashame to see some of these things go, but probably better than losing more hotels.
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Old Jun 3, 10, 10:21 am
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Have other luxury hotels done the same already or will they follow suit? It seems, at times, FS is a trendsetter of sorts...
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Old Jun 3, 10, 11:04 am
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It seems that Luxury Hotel Owners need very deep pockets and perhaps the attitude of English Premiership Football Club Owners. I recall a colleague telling me a few years back in the big UK recession so many hotels ended up being owned by the banks.

Some of the cost cutting steps are shocking - removing 24 hour room service. But some possibly make sense - outsourcing laundry - who would know / notice?

Eagle eyes on the look out for Luxury Hotel cost cutters - Lifts being switched off, the indoor pool a couple of degrees cooler, energy saving key fobs, air conditioning / heating adjusted by a couple of degrees, turning the hot water thermostat down a couple of degrees (how many can cope with the water at full temperature) - all of which can be branded and promoted through a BS customer feedback as "We've listened and we're reducing our carbon footprint".

Mothballing floors. The Desert Bambooing of the toiletries (Wynn hotels own "designer" toiletries, utter crap). Doorman not Doormen. and so one

As suggested on other posts, if 4 star hotels make all the money and some luxury hotels are facing long term poor occupancy some may have to reconfigure in order to survive - Floors 1-20 4 star hotel, Floors 20-30 Luxury hotel some sharing of facilities.

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Old Jun 3, 10, 11:06 am
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Originally Posted by Kettering Northants QC View Post
Some of the cost cutting steps are shocking - removing 24 hour room service. But some possibly make sense - outsourcing laundry - who would know / notice?
Kettering Northants QC, see quote in my post. FS refused to cut 24 hour room service.
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Old Jun 3, 10, 11:18 am
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Originally Posted by Kagehitokiri View Post
Kettering Northants QC, see quote in my post. FS refused to cut 24 hour room service.
Yes, I know - I was shocked that it was even suggested. It seems to me one of the "you can take it for granted" things that luxury hotels should offer - the ability to live your life, within reason, to your body clock.

It would be on a par with a suggestion that a First Class cabin on a premier airline shouldn't serve champagne to save costs
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Old Jun 3, 10, 11:44 am
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ah. indeed.

millenium partners owns >
FS - miami, san francisco
RC - battery park, boston, georgetown, washington

interesting it seems RC washington club is open this summer for once, although dove mountain closed club after taking bookings.. IIRC this is something RC did pre crisis. perhaps post marriott? considering how long marriott has owned, seems most of the marriott comments here are since crisis started in fall 2007.

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Old Jun 3, 10, 12:31 pm
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Does anyone think FS could go down the club route in the same way that MO has at selected properties?

Its most frequent guests would probably pay for the club and be more or less immune from the service cut backs AND be paying a premium to do so. It's less frequent guests would stop at the non club floors and would probably unaware that on these floors things were being trimmed back.
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Old Jun 3, 10, 12:37 pm
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FS has more clubs than MO..

my point was it seems to be a problem for RC at least during summer.
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Old Jun 4, 10, 7:22 am
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Originally Posted by Kettering Northants QC View Post

As suggested on other posts, if 4 star hotels make all the money and some luxury hotels are facing long term poor occupancy some may have to reconfigure in order to survive - Floors 1-20 4 star hotel, Floors 20-30 Luxury hotel some sharing of facilities.
This would be an interesting model and to some extent, I feel that Ritz practices this with their club floors versus regular floors. Four Seasons doesnt have a lot of properties with club floor that I can think of off hand, other that Maui.
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Old Jun 4, 10, 9:20 am
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Originally Posted by mktozd View Post
This would be an interesting model and to some extent, I feel that Ritz practices this with their club floors versus regular floors. Four Seasons doesnt have a lot of properties with club floor that I can think of off hand, other that Maui.
FS hotels with Club are largely in Asia -- Bangkok, Singapore, Jakarta , Macau, Hong Kong... have I missed any, Kage???

Edited to add: Sydney and Shanghai have Executive Clubs as well

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Old Jun 4, 10, 11:09 am
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FS (8)
asia pacific >
- bangkok
- hong kong
- jakarta
- macau
- sydney
- shanghai
closed >
x chinzan-so
x singapore
other, limited rooms >
- buenos aires (25 on 7th-8th)
- maui (26 on 8th) (31 if incl top 5 suites)


MO (7)
asia pacific >
- sanya (15 villas have F&B lounge) (16 if incl presidential)
- manila (93 on 15th-18th)
- singapore (102-126)
- kuala lumpur (159)
nonbranded "discount" MO >
- grand lapa macau (99 on 15th-18th)
- excelsior hong kong (21 suites + ? rooms)
other >
- washington DC (53 suites + ? rooms) (originally members-only, now bookable)

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Old Jun 4, 10, 12:02 pm
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The FS managed Regent Singapore and Taipei have Regent Clubs I believe.....
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Old Jun 6, 10, 9:59 am
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Originally Posted by luxury View Post
The FS managed Regent Singapore and Taipei have Regent Clubs I believe.....
I don't think the Regent Club in Taipei is managed by FS anymore
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