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Luxury Hotels: Discount or Die

The luxury segment of the hospitality industry has come to grips with the recession by offering steep discounts, hotel credits or a third or fourth night free. The drop not only in wealthy vacationers, but also corporate travelers, has hit the segment hard.

"Overall, Hawaii has always relied on peaks and valleys, but at this point with the economy there are no peaks and valleys. It's all pretty much flat," Elizabeth Churchill, vice president of sales and marketing for Aqua Hotels & Resorts, told the Honolulu Star-Bulletin. Hotels there are marketing "staycations" to Hawaiian residents, partnering with holiday charities and competing fiercely with each other for every tourist dollar. That competition has led to many of its luxury resorts dropping prices to compete with three-star hotels.

Dire reports that travel will drop to post-9-11 levels seem to be coming true, and now the high-end hotels are suffering as much as their less-expensive brethren.

"We are seeing special offers from luxury properties that have never had them in the past," Tim MacDonald, president of Classic Vacations, told the International Herald Tribune. In addition to nights free, hotels are offering spa credits, adjoining rooms, discounts on seven-day packages and free meals. Loews Hotels is even offering up to 20 percent off if guests book 60 days in advance. Westin Hotels and Resorts' senior vice president Sue Brush said that the chain will forgo glossy magazine ads in luxury pubs and promote more online and in newspapers, enhancing their "value message."

But for some properties, that may not be enough. In an effort to fill empty rooms, some upscale hotels are now relying on third-party services like LuxuryLink, an auction site that offers discounted rates on hotels in places like Italy, Costa Rica, California's wine country, Beverly Hills and Turkey -- kind of like a chi-chi Other lux hotels and resorts are also quietly using the regular, something unheard of a few years ago.

Perhaps it's merely a question of timing, because not only is the economy tough, but it's also changing attitudes about spending money. With a recession and possibly a depression on the horizon, even the rich think displays of wealth are tacky. According to a recent study, 67 percent of Americans with households with at least $100,000 in discretionary income said they were planning to cut back on personal travel.

Perhaps the Hawaiian hotels, partnering with local charities and playing on guests' philanthropic tendencies, may be one of the solutions to the declining luxury market. But so far, it looks like the luxury market will continue to discount in hopes of luring visitors --some new, some returning -- willing to part with hundreds or thousands of dollars.

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