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By ALEX ROTH and TAMARA AUDI
One of the nation's most historic and lavish resorts -- the Greenbrier -- appears to be at the mercy of two separate economic forces: plunging railroad freight volumes and a sharp drop in customers looking to stay at luxury hotels.
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The resort had an emergency shelter for Congress during the Cold War.
CSX Corp., owner of the resort, said Friday it tapped Goldman, Sachs & Co. to help figure out what to do with the famous West Virginia resort, whose features include a massive bunker once meant to serve as a secret nuclear bomb shelter for members of Congress. Despite its popularity as a high-end resort, the Greenbrier lost $35 million last year.
The announcement comes as CSX and the railroad industry are grappling with some of the most severe drops in freight volumes in decades. The third largest U.S. railroad by revenue also has five new directors on its 12-member board, the outcome of a highly contentious proxy battle last year between CSX and some activist hedge funds that questioned the company's investments and called for a management overhaul.
It wasn't clear whether CSX's move is a result of changes to its board. Michael Ward, CSX's chief executive, said in a statement that the 230-year-old hotel -- a well-known getaway for corporate titans and powerful politicians -- is "at a crossroads." He added that the resort "faces even more difficult challenges in 2009. It is imperative that we respond to this situation without delay."
"It doesn't surprise me now that you have a new board in place that this is one of the first things they would look at," said Arthur Hatfield, an analyst with Morgan Keegan & Co.
A CSX spokesman emphasized Friday that CSX isn't necessarily planning to sell the hotel, nestled on 6,500 acres in the Allegheny Mountains, with more than 700 rooms and suites plus 96 free-standing "estate houses." Rooms start at $275 and activities include falconry.
A Goldman Sachs spokesman declined to comment on options under consideration or the potential value of a deal to purchase the resort.
The resort was purchased in 1910 by the Chesapeake and Ohio Railway, which eventually became part of CSX, based in Jacksonville, Fla.
The Greenbrier's troubles reflect the severe beating that luxury hotels and resorts, which rely heavily on corporate events and business travelers, have taken in the withering economy. After five years of growth, high-end hotels saw a decrease in occupancy to about 61% during the first week of December from about 74% a year earlier, according to hotel industry watcher Smith Travel Research.
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The front entrance of Greenbrier Resort in White Sulphur Springs, W. Va.
The entire hotel sector has "entered the initial stages of one of the deepest and longest recessions in the history of the domestic lodging industry," PKF Hospitality Research warned last month.
Meanwhile, the railroad industry has been experiencing its own dramatic loss of business, although railroad companies have been able to offset the volume drops by instituting a variety of revenue-salvaging measures, including raising prices.
Along with economic woes, CSX has also been grappling with a continuing labor dispute at the Greenbrier. The railroad's management is in contentious contract negotiations with hotel employees, who have been operating without a contract for nearly a year. A union official representing hotel employees didn't return a call seeking comment. The resort lost more than $15 million in 2007.
Selling the resort in the current financial climate would be a major challenge, as hotel owners and companies already have been forced to abandon projects due to a lack of cash and dwindling demand. But a buyer might be attracted to a storied property at a bargain price.
The resort also may soon institute gambling, making it a more attractive investment. In November, local residents approved a county measure that would allow casino table games at the Greenbrier. The ballot measure was championed by the union representing workers at the hotel, who worried that plummeting revenue could result in massive job losses. During peak season, the resort employs 1,600 people.
The resort hasn't yet implemented gambling, a CSX spokesman said. But it is working with a gambling consultant and is considering allowing table games like poker and blackjack