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Simon Cooper, president of The Ritz-Carlton Hotel Company talks to Claire Ferris-Lay about his toughest challenge yet - getting customers to check-in amid the global downturn.

Ritz-Carlton staff must cower when Simon Cooper, the luxury hotel chain's president and COO comes to visit. It's not that Cooper isn't friendly, just like his brand, he is charming and laid-back, he just doesn't allow standards to slip - ever.

One of his pet hates, he tells CEO Middle East, is scrimping on flowers, no matter how devastating the economic downturn has been on the international travel industry.

"I was at a hotel the other day where they had cut back on flowers and we put them back very quickly," he says. "Entertainment and flowers are some things that are easy to cut and I'm certainly not a big fan of that."

Flowers weren't the only changes Cooper made when he first took over at The Ritz-Carlton Hotel Company eight years ago. In addition to almost doubling the number of hotels, he has revolutionised the way in which the hotel operates, from the contemporary, relaxed décor to its first class guest relations. But, now he is facing his biggest challenge yet; the economic downturn coupled with the backlash on luxury travel.

According to the travel research firm, STR Global, revenue per available room (revPAR), the measure of demand used by the hotel industry, dropped 20.5 percent to $56.18 in North America in March. During the same period, European revPAR dropped 14 percent and in the Middle East and Africa it dropped sixteen percent to $105.51.

The global downturn might have ensured that the average family is no longer looking to travel abroad this summer, but it is this, together with what has been dubbed the "AIG affect" that has ensured that this downturn has been one of the most devastating yet for the travel industry.

"That's damaging, no two ways about it," admits Cooper.

According to analysts' predictions corporate meetings account for more than half of the annual occupancy for many resorts in North America. In 2007, business travel was worth $240bn, according to the US Travel Association.

The ‘AIG effect'

The backlash started in September when executives at American insurance giant, AIG spent more than $443,000 at the St. Regis Resort in California, days after accepting an $85bn US federal bailout. The following month, the insurer was forced to cancel a second team building event at the Ritz-Carlton, Half Moon Bay in northern California. "America has one thing that is different from everywhere else and that is there has been a lot of focus in Congress about groups and luxury hotels. We are sort of trying to stop talking about the [AIG effect]. It really made a big hole throughout ‘09," says Cooper.

"We are going to have to wait until 2010 for a lot of those groups to come back and it wasn't just the ones that were using taxpayer's money, frankly it rippled throughout. You have the secondary effect - should I be celebrating when times are tough? Our industry has obviously done a lot to try and change that. ‘Meetings means business' is the sort of tag line that we use and I think that the media frenzy [of] trying to find somebody meeting in some hotel, I think it's over. Nevertheless, companies [are] conserving cash."

Feeling the heat

In April, Marriott International, America's largest hotel firm and owner of the Ritz-Carlton, reported net losses of $23m for the first quarter of 2009, as recession eroded spending on travel. Despite the losses, the results were better than analysts predicted and the news sent stock markets in the US rallying.

Cooper says Marriott has a strong balance sheet. "Obviously all balance sheets are being impacted and the Marriott has a very strong balance sheet. I think a lot of analysts are looking at whether [hotels] can withstand the environment that we are in and the liquidity situation and Marriott - it's very strong relative to the competition.

"The stock has actually done relatively well in the last month and then they changed their dividend so the dividend is now in stock, which is frankly a smart move when you are trying to reserve cash."

So what is Cooper doing to limit the fallout over at the Ritz-Carlton if he isn't cutting back on flowers? He's making small changes, he says; replacing flowers with potted plants, for example. The luxury hotel chain has also introduced a corporate incentive offering to donate ten percent of the cost of a conference held at Ritz-Carlton premises to charity. The incentive, say spokespeople, is expected to appeal to companies growing emphasis on corporate social responsibility.

The company has been forced to lay-off staff - around 20 percent in North America, less across the rest of the world - and for those that remain with Ritz-Carlton, Cooper has used them to remind the US Congress just how many taxpayers the firm employs.

"One of the things we've tried to use in terms of shifting Congress, especially those who actually wanted to put in more travel constraints, was [point out] the unintended consequences of the amount of unemployment in remote locations. Because a lot of luxury hotels are in remote locations on beaches and we are very often, by far the largest employer in the community, by far the largest taxpayer... and the alternatives in these remote locations are not obvious."

Cooper has also closed a number of restaurants, which during the boom period were busy both at lunchtime and in the evenings. "We have a couple of restaurants we don't open for lunch any more - some of the ones that are more suitable for dinner, but in a good economic environment you can still do good lunch with business people," he explains.

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