New York Hospitality by Vijay Dandapani

Boutique fatigue?

Today's Wall Street Journal (subscription required) has an article named "The Downgrading Of Business Travel" that focuses on "skyrocketing" hotel rates around the world and quotes companies that are "clamping down on spending" with "business travel becoming increasingly bare-bones, even a tinge humiliating". With rates on vertiginous climb from Bombay to Boston it is unsurprising that companies are resorting to a range of budget tightening measures from the stark step of banning stays in pricey boutique hotels to paying for two nights of lodging when employees double up leaving employees with the prospect of having to pay for a room out of their pockets if they choose to stay in a room by themselves. Some companies such as Honeywell have gone so far as to switching "to more limited-service hotels such as Courtyard by Marriott and Holiday Inn from full-service Marriott, Hilton, and Hyatt hotels in cities employees travel to most often".

The cost cutters have boutique hotels in their sights. The Journal article notes one instance where "Jennifer Jones, a marketing and communications manager in Chicago, usually stays at luxury boutique hotels such as Kimpton Hotel & Restaurant Group LLC's Alexis Hotel in Seattle, where rooms are $389 a night. But for a recent conference, her employer put her up at the Sheraton New York Hotel & Towers, since it was more cost-effective for a group of employees. Her room, she says, "was coffin-sized".

Interestingly, a similar paring down of expenses occurred in the immediate aftermath of 9/11 but the upswing in the economy since the end of 2004 threw that model out of the window and developers jumped wholesale into the boutique bandwagon. However, service in many of the 400-thread-count sheet hotels with duvet pillows and a range of spa amenities ranged from patchy to indifferent with a few notable exceptions. While moves to tighten the budget in today's strong economy is unusual it is indicative of the whiplash the many new entrants to what has been perceived as a latter day klondike are likely to feel when the economy dips. Lessons to be learned for developers, operators from what could end up being a trend away from fluff to substance include shoring up service standards and an accelerated renovation program that ensures value for money in today's times and a fresh face when rates and occupancies dip in response to a downturn.

Wage mobility in the hospitality industry

MSNBC has a report from Forbes recently came out with a list of America's best and worst paying jobs. While the top end was predictably taken by doctors (with surgeons leading the way) unfortunately and also predictably, a majority of the lowest paying jobs were in the food service industry including hotels. Scraping the bottom of the barrel were fast-food cooks with a mean annual salary of $15,230. Even though the Census bureau puts the poverty threshold at approximately $12.5 K per year, in most if not all parts of the country, $15.2K puts a family squarely in the church mouse category.

But what the report does not account for is mobility in wages. Like the transport sector the food service industry (and hotels) provides, although grossly inadequately, transitions out of low wage earnings via intra and inter-firm mechanisms. The volatility in employment and low retention accounts for the latter while large firms have a not-insignificant ratio that moves on to higher paying wages. The ability to develop a horizon that includes a transition out of low paying jobs via the employer can and will contribute to employee retention. The industry's high turnover and resultant costs ought to warrant greater studies on providing opportunities for employees to exit with a combination of skills and employer sponsored training.