Renovated Jefferson Hotel Checks In Amid Recession

In March 2007, the luxury Jefferson Hotel in downtown Washington closed for major renovations. Since then, the market has changed dramatically, with a brutal recession severely hampering tourism and consumer spending. With millions of dollars invested in upgrades, a big question looms: If you rebuild it, will they come?
Washington Post Staff Writer
Wednesday, August 19, 2009

In March 2007, when the luxury Jefferson Hotel in downtown Washington closed for major renovations, owners didn't anticipate two major problems: structural deterioration that prolonged construction by four months and reopening during a brutal recession.

But officials hope the result will be worth the effort when the rehabbed 1923-era hotel reopens Aug. 31 with a host of new high-end amenities:

A plaster-covered ceiling in what is now the atrium was removed to reveal skylights that were original to the building. Bathrooms have remote controlled TV screens in the mirrors to allow guests to catch up on the morning news while they're brushing their teeth. Food trays are embedded with computer chips to alert the kitchen staff when guests set them outside their rooms. The pumpkin-colored bar, made of molded glass and illuminated with fiber optics, glows eerily like a jack-o'-lantern.

"We have spared no cost to make it one of the most attractive hotels in the city," said Franck X. Arnold, managing director of the hotel, which was acquired in 2005 by DC Cap Hotelier.

Such lavish spending was a hallmark of the boom times when the project began, but these days travelers appear to be in a more frugal frame of mind; indeed, luxury hotels are suffering more than their downscale counterparts. So even with millions of dollars invested in upgrades, a big question looms: If you rebuild it, will they come?

"I would prefer to open in better economic times," Arnold added. "We're hopeful [the economy has] bottomed out and in the future we'll see improvement. No hotel ever makes profits two or three years" after opening.

Occupancy at U.S. luxury hotels during the first half of the year fell 14.5 percent from the same period in 2008, according to Smith Travel Research. At the same time, the occupancy rate at economy motels dropped less -- 10 percent. Revenue per available room -- a key indicator for the industry -- plunged 28 percent at luxury hotels during the same period. That compares with a 15 percent decrease at economy motels.

"Travelers are intimidated enough that they're staying away from luxury hotels -- it's a taboo," said Jeff Higley, a vice president at the company.

Nevertheless, data on the Washington region are "better than the rest of the country" and bode well for the Jefferson, said Elliott L. Ferguson, president and chief executive of Destination DC, an organization that promotes local tourism. Occupancy in the region during the first half of 2009 actually increased 2.4 percent from the same period in 2008 and revenue per available room decreased only 0.3 percent, according to Smith Travel Research.

"Bookings for the fall are on pace with our [projections] made before the recession," said Erik J. Grazetti, the hotel's director of sales and marketing. "For 2010, we're ahead. There's definitely a market for luxury hotels."

The Jefferson, hotel officials say, offers a unique experience: accommodations -- fresh flowers, the size of the pillow, the thickness of the bathrobe -- customized to the guest's specifications; a butler assigned for each guest room; and discretion.

"What happens in a guest room is not our business," Arnold said. "We pride ourselves on maintaining the privacy and confidentiality of our guests."

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