by Kaylee Hultgren and Michael J. Shapiro | March 01, 2010

Construction timelines and financing agreements stalled or ran aground at an alarming rate in 2009. Project postponements and cancellations were at historical highs in the fourth quarter, according to Lodging Econometrics, the Portsmouth, N.H.-based hotel real-estate consultancy. Yet, a number of companies have overcome adversity and are planning or already celebrating resort openings (see "Meet the Newcomers").

To better understand the challenges facing these properties and how they've had to adjust their marketing and branding in a down economy, M&C spoke with a number of key industry executives, at both the property level and at chain headquarters.

M&C: What are some challenges you've faced by opening a resort in the current economic climate?

Helstab: If you're opening into a destination where demand is soft and it's oversupplied, particularly in the five-star end, it's going to be difficult. We've just opened a hotel in Beirut, and it's going to do phenomenally well because there's more demand in Beirut, which doesn't have a hotel of the caliber of Four Seasons. That's what drives whether it's going to be a really tough opening for a hotel or resort.

The biggest challenge is that our sales team is accustomed to smoother negotiations with meeting planners. In this case, our salespeople have not been in the driver's seat. In the past, not as many concessions were asked of us. Also, where you're opening a resort, the expectation from the ownership group is that return on investment is going to be there as soon as the door opens.

Deucker: Of course there are challenges. But the way I look at is, why wouldn't you open a resort now? We've been building for the past year. All the best trade and construction companies were available when we were building. We were really the only project going on in the Tucson area. From a construction standpoint, that's perfect timing. Three years prior, it would have been different.

McBeath: It was a little terrifying to be opening up into such a soft economy and bringing on new luxury capacity in a market that was shrinking. When you plan these things -- it was a 60-month process for us -- you know that the economy is cyclical. But to be at the narrowest point of its constriction, opening up something of this magnitude? It's been challenging. Obviously, the pricing we had built into our business model has changed significantly, and although we're priced at the top end of the luxury marketplace here in Las Vegas, these aren't the same rates that we enjoyed in 2007. But you build a product for a certain customer who is willing to pay at the highest price points as long as they get the kind of service, accommodation, amenities and perceived value associated with that. So we've maintained our pricing and our market position, and it really wouldn't do me any good to go out and discount further.

M&C: How does marketing and branding a new resort today differ from methods of the past? What are some specific issues you've had to address?

Capuano: I think that today, whether it be a leisure-transient or group customer, what they're seeking right now is value. It's less about the name and the branding of the resort and more about the overall quality and value of the destination.

We're selling value a lot harder than we ever have before, and we're reinforcing the importance of service and consistency. We've just changed the frame of the dialogue, and we reinforce all of those things that would help a customer, or a third-party meeting planner, be able to sell Four Seasons or sell a five-star experience with confidence -- to overcome some of the potential resistance.

Longstreth: We are really listening to the customer and, in particular, paying attention to the things that planners require to hold the meeting. We can't give them everything, so we try to prioritize. One of the biggest concessions they ask for is complimentary meeting space. Also, a lot of them are asking for discounts on menu and audiovisual pricing. We've come up with programs to adjust to these requests.

Deucker: This past year there were so many offers to planners for free breaks and other concessions, but when you talk to our most loyal customers, it's not about what you get for free. Ultimately, partnership is more important than a free continental breakfast. Planners want a relationship they can trust, because curve balls will keep happening in 2010. Attendance might still be down, checkbooks won't be opening freely. Having a relationship with the general manager and sales managers is important for when things go wrong. In fact, I don't think relationship-building is talked about enough. And every business is looking at value now. We try to be fair and equitable with pricing, without going rock bottom.

McBeath: We didn't really need another casino and hotel in Las Vegas, so we had to do something different. That's how we came up with the mixed-used development concept. At the same time, Aria was created, branded and marketed to be intelligent, contemporary luxury, and designed to complement Bellagio and the rest of our luxury properties. For the past five years, people have been watching City­Center, and Aria specifically, come out of the ground. To celebrate its completion, people have come back, or booked a convention or meeting to be one of the first groups to be here.

M&C: Has the very word "resort" presented difficulties? Do you avoid it when naming new properties?

Capuano: We name and position our hotels for the long term, and so we're certainly not going to pretend that the JW Marriott San Antonio Hill Country Resort & Spa is not a resort. It's got all the attributes and facilities and amenities of a resort, and that's how such properties are positioned. I don't think it's creating any sort of enormous barrier to securing group bookings.

McBeath: I don't think it scares people away. I think that what "resort" says, vs. Aria Casino or Aria Hotel, is that it's a full-service destination, with all of the amenities -- F&B, retail, entertainment and, of course, beautiful hotel rooms, a spa and a salon. We discussed whether we should put "casino" on there, because it was so distinctly different from other casino properties.

Helstab: We really haven't thought about either renaming a resort or a hotel or not putting the resort name on any of our properties that we're opening in the near future.

M&C: Have you had to change your pitch to attract groups? How have your negotiations changed?

We're being pretty aggressive in terms of programs and deals we're putting together for meeting planners -- relaxed attrition allowances, all sorts of point promotions through the Marriott rewards program, those types of things -- to try and spur a return of group volume. But our focus is on the long-term. I think our view is that we'd be ill-advised, on a daily, weekly or monthly basis, to change the way we pitch our offerings.

Longstreth: For resorts, which are luxury products, it's about trying to find customers who are able to come into properties with a more lucrative spend. Something different is that there has been more targeted marketing toward groups that have been less effected by the economy, such as law firms and medical markets. We're also reaching out to international tour groups. That market remains strong. We've seen the financial markets decline, and some pharma is scaling back.

One strength we see is the social group markets [weddings, family reunions, etc.], which have huge blocks of rooms waiting to come into this type of resort.

The biggest thing planners are saying is that it's important that we as suppliers understand the situation they're in. Those conversations take place now more than ever. The other thing we're dealing with is the customer's unwillingness to commit to cancellation fees. In the past we would have put a cancellation fee in the contract. Now we'll hold rooms as long as we can, but if a new group comes along and wants to book, we'll call the first customer and let them know. These kinds of transactions are more transparent now. We depend on the group market to succeed. We could never survive without all the F&B and ancillary revenues.

Helstab: We are very intent on making sure that we are competitive in this environment. And so we're very flexible  around rates and other things that are of interest and concern, like attrition and cancellation policies, to make sure that people feel that they don't take on a lot of risk in booking business now. We're finding that we're booking a lot of business with customers who never thought they could afford a Four Seasons, who aspired to having some of their meetings at a five-star hotel, and who now find it affordable. It will be really interesting to see how we are able to hang onto that business -- you know, convert those first-timers, and keep them in our hotels as the economy comes back and as demand comes back.

Deucker: We got creative. A lot of it was about keeping planners appraised of the resort's development and progress. If they were concerned about things, we worked through them one by one. For some, we gave leeway in their contract. Sometimes we put in a clause that allowed planners to hold the space until construction was completed -- we would release them from the contract before then.

McBeath: The fact that we designed and built a LEED-certified green building campus -- the largest such development in the world -- demonstrated to our corporate clients how serious our company was about being green. And if we can establish and set the precedent with a development of this magnitude, it's hard for anybody not to say that they are going to make their best efforts to reduce their carbon footprint for future generations. And that has been a very strong talking point and sales point for us.