Profit in Sight for a Rejuvenated Plaza

Abstract

The Czechoslovakian flag flies prominently over its main entrance. Roses beneath the colossal chandelier in the main lobby are a special breed called "Ivana pink," and The Art of the Deal is for sale in the gift shop. Lest anyone forget, the Plaza Hotel is now owned by Donald Trump. Almost two years after Mr. Trump spent a steep $390 million to buy the 808-room New York landmark and turned it over to his Czechoslovakian-born wife to run, it's been restored both physically and financially. Luxurious rugs have been imported from India, tapestries have been brought in from France, and the ubiquitous gold leaf restored by Italian craftsmen. Occupancy is up, room rates are higher and the banquet business is booming. A profit even seems within reach. (excerpt)

The Czechoslovakian flag flies prominently over its main entrance. Roses beneath the colossal chandelier in the main lobby are a special breed called "Ivana pink," and The Art of the Deal is for sale in the gift shop.

Lest anyone forget, the Plaza Hotel is now owned by Donald Trump. Almost two years after Mr. Trump spent a steep $390 million to buy the 808-room New York landmark and turned it over to his Czechoslovakian-born wife to run, it's been restored both physically and financially.

Luxurious rugs have been imported from India, tapestries have been brought in from France, and the ubiquitous gold leaf restored by Italian craftsmen. Occupancy is up, room rates are higher and the banquet business is booming. A profit even seems within reach.

Ivana Trump, however, may just be beginning to earn her $1-a-year salary (plus "all the dresses she wants to buy"). Within the next two years, 4,000 hotel rooms are expected to open in New York, many targeted directly at the Plaza's customers.

Finding a balance between keeping the hotel filled and the need to raise room rates would test even the most skilled hotel professional, and Mrs. Trump's tenure has already been marked by the controversy of high staff turnover and complaints about autocratic management.

"There have been lots of people let go," concedes vice president and general manager Richard R. Wilhelm. "It takes a lot of desire to be the best and some people didn't have it." (Mrs. Trump declined to be interviewed.)

There's no denying that the Trumps have improved the venerable hotel on Central Park's southeast corner, which had been run by the Westin Hotels & Resorts chain since 1972.

Most observers agree the Plaza suffered under Westin's management, and praise its remarkable rejuvenation. Beyond the redecorated public spaces, all banquet facilities, suites and rooms have a new look. Suites house such trappings as a 19th century, $40,000 Biedermeier chest and Italian silk tablecloths. All rooms now have Frette linens, Chanel toiletries and are getting special makeup mirrors --Mrs. Trump's own idea. The Grand Ballroom has been restored to look like the Court Theatre at Versailles.

All this has helped attract important fashion shows and major charity functions, keeping the hotel cozily ensconced in society and gossip columns. Last year, the Plaza's banquet-department sales totalled $18.5 million, up from $14 million in 1988. This year, revenues should hit $22 million.

"The Trumps' connections make marketing easier," says Lawrence Harvey, executive director of catering. "They know a lot of people, and market when they are out. She is very good at it."

More guests are registering now, and they are paying more for the privilege. Last year, the Plaza's occupancy rate rose five percentage points to 79%, and sources say its average room rate rose 31.9%, to $244. Mr. Wilhelm says the rate is higher but declined to be specific.

Mrs. Trump has even won over tough critics. "The housekeeping is perfect and from curb to checkout I encountered staff with good attitudes," says William Tomicki, publisher of Entree, a Santa Barbara, Calif.-based newsletter for sophisticated travelers. "With all of those rooms, it's hard to provide really high-quality service, but I had quality service that approached high quality."

Say staff not treated well

Mr. Wilhelm believes staff turnover has helped rather than hurt the Plaza's upgrading. Within the hotel industry, some say those who have passed through the Plaza's revolving doors are excellent managers; others say they wouldn't hire them.

Whatever their qualifications, many ex-staffers say they weren't treated respectfully. They describe Mrs. Trump as stubborn, and brusque, and as a controlling leader who is prone to screaming -- a junior-league Leona Helmsley. Mr. Harvey, however, insists she is a charming lady.

Many of those let go were leftovers from the Westin era, including the general manager and director of marketing. Others who left were Mrs. Trump's own choices, reflecting, some say, her hotel-management naivete.

The most pronounced example was her hiring of culinary superstar Alain Sailhac, formerly chef of Le Cirque and the 21 Club, as director of culinary arts. Sources say Mrs. Trump would reverse his decisions, and that he was overwhelmed by the size of the food and beverage department.

Mr. Wilhelm, however, says Mr. Sailhac left because his one-year contract ended, and that he now serves as a consultant.

Beyond the frills and staff travails, many wonder how the Trumps plan to make the Plaza profitable, since no one believes Mr. Trump's claim that he bought the hotel to restore its grandeur and doesn't expect to make any money from it. At issue is whether the hotel can raise room rates without hurting occupancy.

"Moving up the rate is going to be hard," says Thomas P. McConnell, a hotel consultant with Laventhol and Horwath. "If the rates go up too high, the hotel will be much harder to fill."

Sources say the Plaza would have to push the average rate up to about $350 to make the profit Mrs. Trump is predicting for this year. Industry observers insist it will take at least three years for the Trumps to see any return, given the high price tag of the hotel and its renovations.

Some maintain room rates are already too high, given the city's many options. For example, the best double room at the Plaza costs $540 a night, while the top-of-the-line double at the Hotel Plaza Athenee, considered by many New York's best hotel, is only $395.

Plaza's target unclear

"Some of my customers are saying the rates are up too much at the Plaza, and that the people at the front desk are really snooty. I'm sending more people to the Plaza Athenee. It's cheaper, it's in the same location, and the service is better," says Timothy Krenzien, a vice president at Paul L. Klein Travel Service Inc. in Chicago. "There are a lot of Trump-haters who won't stay there anymore because they don't want to give him any more money."

Just whom the Plaza is aiming to attract remains unclear.

When Mr. Trump bought the hotel, he boasted he would turn it into a five-star lodging, a rating only the Carlyle can claim in New York. Mr. Wilhelm says the hotel is marketing broadly from the well-heeled tourist to those who spend more moderately, to celebrities, top- and mid-level executives and even groups. Industry experts point out that such a scattershot approach is difficult, if not impossible, to pursue.

There remains one group that requires no marketing effort. Last week, a blonde woman of about 35 entered the Plaza, approached an employee and anxiously inquired "Is the picture of Eloise still here?" She was directed to the portrait of the title character of the beloved children's book that details the adventures of a 6-year-old who lived at the Plaza. She then smiled a wistful smile at the little imp, and walked out the door.

All visitors should be so easy to please.