Hotel won’t resort to lower prices

TEXT OF STORY

Bill Radke: OK, what do you do in this situation? You operate a luxury hotel.
Business is way off. Do you drop your rates, or does that just make you look cheap? Today, that argument pits the owners of the Four Seasons Resort Aviara against its managers in a federal court near San Diego. Reporter Joel Rose tells the story.

Joel Rose: The group of investors that owns the Aviara resort accused the Four Seasons of mismanagement and tried to bring in a different operator to run the place. The Four Seasons responded by hiring more security and locking the owners out.

Extreme? Yes — but not un-heard of:

Gary Vallen: This dispute is a classic argument.

Gary Vallen teaches hospitality at Northern Arizona University. He says luxury hotel chains like the Four Seasons hate to reduce their room rates for fear of damaging the brand, even if that means more empty rooms in the short run.

Vallen: You’ve got on the other side of the coin an owner of a property who is looking at his own personal needs, which is debt repayment, and he needs revenue everyday.

Vallen says rising vacancy rates just add more pressure to the situation. Still, he says owners and operators usually try to settle their disputes in private, because a prolonged court fight makes everyone look bad.

I’m Joel Rose for Marketplace.