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Luxury Hotels Dropping Five-Star Ratings

A number of hotel companies will let some of its properties drop some of their five-star ratings, effectively reducing their level of service, until the hospitality industry begins to recover, Bloomberg reported.

Starwood Hotels & Resorts Worldwide, the owner of luxury brands including St. Regis and W Hotels, will let some of its properties reduce their number of stars. Hilton Hotels and InterContinental Hotels Group have already cut the ratings for some locations.

“Maintaining stars requires enormous capital investment,” said Stephen Bollenbach, who formerly served as Hilton’s CEO until Blackstone Group bought the firm in 2007. “Ratings aren’t based on making good returns on your investment.”

Occupancy rates for luxury hotels worldwide plummeted to 57 percent in the year through July, from 71 percent in the same period a year earlier, a bigger decline than for other types of accommodation, according to hospitality industry consultancy Smith Travel Research (STR).

“Most luxury hotels are facing occupancy shortfalls, they are lowering rates to entice consumers to come in,” said Jeff Higley, a vice president at STR. “There rarely has been a better time to stay at a luxury hotel than right now.”