Even in a recession, the Delano blanches at cutting prices.

The famously hip and expensive hotel has resisted discounting rooms, with prices down about 10 percent from a year ago to $538 a night. When the summer slowdown arrived, it held the line even more, offering only a 7 percent break from what travelers were paying a year ago.

``It continues to be [the] market leader, as it should be,'' Fred Kleisner, chief executive of Delano owner Morgans Hotel Group, told analysts Monday. ``We do not feel it's in the interest of our shareholders to create a rate war.''

The strategy has walloped the Delano, where occupancy plunged from 83 percent a year ago to 62 percent, according to Morgans' third-quarter earnings report. While Kleisner said he's seeing a rebound from affluent travelers in New York, London and Los Angeles, South Beach is not yet showing signs of recovery.

An analyst questioned the Delano's big occupancy drop, saying it was worse than what would be expected from Miami Beach, where occupancy is down about 10 percent, according to the Greater Miami Convention & Visitors Bureau. Room rates are down about 12 percent from a year ago in Miami Beach, the bureau said, though analysts said luxury hotels saw bigger rate cuts.

Kleisner said price cuts can only do so much as the Delano and other hotels face a glut of new rooms thanks to a building boom that brought a wave of new properties, particularly in the luxury sector.

``The most important thing that is hitting the entire South Beach market is a 15 percent increase in supply in the Greater Miami area,'' Kleisner said.

The Shore Club, one of three hotels Morgans manages in South Beach, offered twice as many discounts as the Delano, with rates down 20 percent from a year ago to $240 a night. But occupancy suffered about the same, down from 64 percent to 43 percent.

While the Delano posted a $1.8 million operating profit in the third quarter, the Shore Club lost $17,000, Morgans said.

Scott Brush, a lodging analyst in Miami, said the Delano's plan reflects a more prudent approach to a downturn. He said cheaper rooms don't drive enough demand to make up for the lower prices but they do train guests to pay less at the hotel.

``It's what hotel pundits have been screaming about since the middle of last year,'' Brush said. ``Don't drop rates precipitously. You're only reducing the amount of money you can make in later years.''