Falling stars

When corporations forbid their employees, even executives, from using the services of five-star hotels,  it is generally for the peace of mind of the company’s accountants. However, what sometimes happens is that a five-star hotel can change the number of stars it has to four to put such bookkeepers’ minds at rest. And it can then issue invoices for the same amount as before
Emil Górecki

The Kraków Sympozjum hotel was the first to peel off one of its stars. It received the official documentation for this from the Małopolska provincial marshal in May, but has been advertising as a four-star hotel since the beginning of the year. “We were receiving a lot of signals from our guests saying that they could not stay or organise a conference in our hotel because their internal procedures do not allow them to use five-star hotels. So we have lifted this barrier for them. Now we can see the effect, because business turnover has increased again,” explains Marek Tomczyk, the general director of the hotel. He goes on to add that hardly anything has changed apart from the number of stars on the sign. Only the standard of rooms on one of the floors has been raised. “Prices, just as before, are dictated by the market, based on such factors as occupancy rate, date and competition. The number of stars is irrelevant in this case,” adds Marek Tomczyk.
Luxury without change
The Warsaw Hilton Hotel & Convention Centre has also been stripped of one star by the marshal’s office – at its own request, of course. Having four instead of five stars was supposed to draw corporate customers to the hotel like flies to honey – but the prices of accommodation and other services have not been reduced as a result of the move. The chain has not been forthcoming about whether this has increased occupancy, instead issuing a statement that reads: “Each of the brands belonging to Hilton Worldwide is positioned individually and has clear service standards which are audited regularly. Therefore we do not usually classify our hotels on the basis of local categorisation systems unless we can see an obvious business advantage in doing so or if the categorisation is obligatory under the local legislation. In the case of the Hilton Warsaw Hotel & Convention Centre, the change is not connected with any reduction in the standards of client service or other services rendered. We believe that the change in the categorisation of the hotel will bring about a business advantage.”
Bacoli Properties, which is building the Hilton hotel in Łódź, has decided that it will not have five but only four stars for similar reasons – but it remains to be seen whether this comes to pass. The investor was supposed to finish the construction in spring 2010, but it has now announced that it is hoping to apply for a building permit in the spring. However, Łódź city council is claiming PLN 10 mln in damages for the delays and the change in classification.
Market dictates the prices
Frédéric Le Fichoux, associate partner and head of the hotel department at Cushman & Wakefield CEE, admits that he has not heard about voluntary star reductions by hotels. He admits that such decisions are usually connected with the general deterioration of the standard of a given facility and forced by the administrative bodies that are responsible for the classification. “Some owners of five-star hotels have, however, dramatically decreased the prices of accommodation in their facilities in order to reverse the losses resulting from lower occupancy rates. Unfortunately, this brings about the knock-on effect of pushing down prices in four-star hotels, which in turn affects three-star facilities and so on. This strategy is one that is harmful for the market and it will take a lot of time for prices to return to their former levels,” believes Mr Le Fichoux.
David Jenkins, the head of the hotel department of Cushman & Wakefield Russia and CIS has also failed to observe luxury hotels giving up their stars. According to him, real luxury hotels have to have five stars, even if in fact their room rates have fallen – and a similar situation taking place in the other hotel segments. “The ratio of average daily income per rented room in a five-star hotel amounts to a minimum of RUB 12,000 nowadays. This is much lower than the figure in 2008, when it was RUB 16,000. Despite the depreciation, these prices are still much higher than those for four-star hotels in Moscow. Fortunately we should be seeing a return to growth in prices in all categories in 2011, including for five-star hotels,” predicts David Jenkins.
Another conclusion drawn from the agency’s report for Q3 is the fact that the level of occupancy in luxury hotels has already returned to that of 2008. The ratio of average daily income per rented room is continuing to fall, but the income per rented room has grown slightly compared to last year.
Five stars for presidency
Starwood Hotels & Resorts is another of the chains that has plans to reclassify – in this case the Sheraton hotel in Warsaw. Thomas Schön, the regional director of the chain for Poland, claims that the measure was being considered last year because a lot of companies were forbidding their employees to use the most expensive hotels at the beginning of the crisis, i.e. five-star hotels. Sheraton executives were thinking about relinquishing one star, but not the prices, interior design or standard. In this way guests would be able to sleep in the same conditions and bookkeepers would receive invoices with the same amounts as before, but from a hotel with a lower classification. “Accommodation prices in five-star hotels in Poland are still much lower than those to be found in much of the rest of Europe. The difference between the cost of a stay in a four-star and a five-star hotel is small. So we did not want to lower the rates, as we are working on stabilising them,” explains Thomas Schön.
Ultimately the issue is academic because the Sheraton hotel still has five stars, as it has always had. “An improvement is already noticeable on the market, besides we have the six months of Poland’s EU presidency ahead of us, followed by Euro 2012. We believe that we will benefit from holding on to the top category,” adds Thomas Schön.
What is the difference between four-star and five-star rooms in Poland? In a five-star facility a single room has to have an area of 14 sqm and a double one 18 sqm. We can expect a safe, a mini-bar, a telephone and a bathroom equipped with scales and a hairdryer. In a four-star facility our room will be 2 sqm smaller, and while we might not have a telephone or safe, we are still sure to find a mini-bar and a fridge.