Hotel Reflaggings

Image: Scot Frei/Corbis

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The hotel at 2100 Massachusetts Avenue NW near Dupont Circle in Washington has changed names. Again.

When Al Gore grew up there in the '50s and '60s, the building was called the Fairfax Hotel, and it was home to the Jockey Club, a saloon for Washington's power players. The last time I stayed there, about a decade ago, it was called the Ritz-Carlton. But the sheik who owned the property fell out with Ritz and peevishly renamed it "the hotel formerly known as Ritz-Carlton." Then it became the Luxury Collection, the Westin Fairfax, and the Westin Embassy Row. The sign on the door now says "The Fairfax at Embassy Row."

The Fairfax is what lodging insiders derisively call a "Velcro hotel"—a property that changes brand names so often that hotel signs may as well be fastened with hook-and-loop tape. There are dozens of infamous Velcro hotels around the nation and thousands more properties that have changed brand affiliations—the industry calls it "reflagging"—at least once in the last decade.

Business travelers joke about Velcro hotels too. They tell tales of going to sleep in a Hilton and waking up in a Marriott; of seeing signs hastily obscured with black plastic; of the breakfast menus on the doorknob changing in the middle of the night; and even of hotel staffers fluffing lobby ashtrays so that the former chain's logo, ostentatiously stamped in the sand, is obliterated.

Brand-hopping isn't fatal to business travelers, but it is an annoyance. If your favorite Sheraton suddenly becomes a Radisson (or vice versa), your status in the hotel's former frequent-stay program won't be recognized. You'll lose your points, your upgrades and all of the other perks. A reflagging may mean a hotel has failed to meet the standards of its previous brand, a sure sign that the property is scrimping on maintenance or guest services. If a hotel has switched to a pricier brand, you might get hit with a sudden increase in rates without a commensurate improvement in service.

According to Smith Travel Research, the crucial indicator called revpar (revenue per available room) plummeted 13 percent during the week ended November 15 compared with the similar period in 2007. Hotel occupancy nationwide declined by 11.6 percent and the average daily rate fell by almost 2 percent. One glaring specific: On Maui, the percentage of rooms occupied tumbled to 58.3 percent, down 22 points from the first week of November 2007.

That kind of implosion is sending waves of panic through the layered system that dominates the lodging industry and creates the phenomenon of Velcro hotels. A generation ago, hotel-keeping was a fairly straightforward operation: Companies like Hilton, Hyatt, and Marriott owned the buildings that flew their corporate flags, and managed the hotels inside too. No more. The most common model these days is a tri-partite arrangement: Real-estate interests own the buildings; hotel companies franchise their brand name and control the reservation systems and frequent-stay programs; and management specialists run the hotel day-to-day.

This spread-the-risk approach has permitted the massive growth of the lodging sector. In 1981, when Marriott took most of the risk, it had just 100 hotels. Now there are more than 3,000 properties flying one of Marriott's 15 brand flags. Hilton has 3,000 hotels, manages very few of them, and owns even fewer. Wyndham Worldwide controls 10 famous brands—including Ramada, Days Inn, Super 8, and Howard Johnson—and has more than 6,700 franchises, but it doesn't own a single hotel building.

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