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Brands target a new luxury traveler
March 26 2013

Luxury today has less to do with formality and more to do with customized and personalized service, according to brand executives.

Highlights
  • “It's not just the wealthy and the super wealthy who are traveling and staying in high-end and luxury hotels,” said Starwood Hotels’ Frits van Paasschen.
  • “Customers will continue to drive towards more customized and personal service,” said Starwood Capital’s C. Scott Rohm.
  • Marriott’s Edition is positioned as a “lifestyle hotel.”
By Jason Q. Freed
News Editor
jfreed@HotelNewsNow.com

GLOBAL REPORT—The idea of luxury in hospitality is slowly but steadily evolving from a picture of glamour and opulence to an inspiration of comfortable class, and luxury hotel brands have taken notice, tweaking their offerings to accommodate wider groups of travelers.

Also, a number of new luxury brands that launched in the past few years are taking a different approach—focusing more on lifestyle than wealth.

It’s making the luxury hospitality experience seem approachable to a much wider group of consumers, hotel executives said.

“We raised the concept here of the mega traveler, and the idea that it's not just the wealthy and the super wealthy who are traveling and staying in high-end and luxury hotels; it's, in fact, many professionals who are spending 50, 100, 150 days a year on the road,” said Frits van Paasschen, CEO of Starwood Hotels & Resorts Worldwide, which has three luxury brands under its umbrella and is considering adding a fourth.

Van Paasschen said Starwood’s W brand—which he said wasn’t launched as a luxury brand but was able to capture high enough rates to catapult into the segment—is capitalizing on a “clear trend in luxury, which is towards each individual defining what luxury means for them.”

“If there's a social change going on here, it's that today luxury has less to do with formality and what one is supposed to do and more and more to do with what I want to do,” van Paasschen said. “Because I—and I am saying I as a traveler—have the means and the desire to enjoy a luxurious experience, but I have no desire to wear a tie. I want to wear my jeans. I want to enjoy myself. I want to partake in popular culture and design.”

Starwood Capital Group, a private investment firm that manages more than $19 billion in assets, will open in 2014 the first hotels under its two new luxury brands—Baccarat Hotels & Resorts and 1 Hotels & Resorts. The first two 1 Hotels—in Miami and Central Park in New York—opening in 2014  will be conversions; the Brooklyn* property opening in 2015 will be a new build. Additionally, the first two Baccarat properties—in New York and Rabat, Morocco—will be new construction.

Starwood Capital recently appointed C. Scott Rohm as president of SH Group, the company’s hotel brand management company that runs the branding, marketing, sales and operation of the company’s assets.

The Baccarat Hotel and Residences New York will have 114 hotel rooms and 61 condos over 50 stories.**
 

Rohm told HotelNewsNow.com that, although it will have unique positioning, the 1 Hotel brand will compete with other lifestyle, upscale brands. Baccarat, he said, is a “true luxury brand.”

“Customers will continue to drive towards more customized and personal service,” Rohm said of the evolving luxury space. “The model of having beautiful rooms and nice staff that treats everyone in the same manner is dead in the true luxury space. It’s all about the individual’s wants and needs.”

Luxury recovery
Jan Freitag, senior VP of global development with STR, parent company of HotelNewsNow.com, said today’s luxury brands are moving to a “more accessible luxury” to target the Generation X and Generation Y traveler.

“Gen X and Gen Y travelers are more interested in sustainability and green everything,” he said. “The 1 is trying to attract that,” he said.

Freitag said the luxury segment in the United States is one of the only segments in which revenue per available room has not returned to pre-recession levels. The segment is experiencing strong year-over-year growth in all performance metrics, but the fact that it fell so far during 2008 to 2010 means its recovery was longer.

The luxury segment decline during the recession “was pretty harsh,” Freitag said.

"(President) Obama’s point that luxury travel was frivolous really hurt,” he said. “On the business side, people were just afraid they would end up on the cover of the “Wall Street Journal” so they curtailed incentive travel. If you went to Vegas, it looked like you were wasting money no matter the fact that Vegas rates were half the price of other places. People just didn’t want to be seen as wasting money.”

In February, the U.S. luxury segment reported occupancy at 74.3%, average daily rate at $287.12 and RevPAR at $213.24, according to data from STR.

Globally, the luxury segment RevPAR for the month of February in Europe was $170.22; in the Middle East/Africa region was $203.21; and the Asia/Pacific was $153.13,according to STR Global, sister company of HotelNewsNow.com.

Luxury brand update
Marriott International has more than 50,000 rooms worldwide in the luxury segment, which for Marriott consists of Ritz-Carlton, Ritz-Carlton Reserve, JW Marriott, Bulgari and its newest brand, Edition Hotels.

Edition is positioned as a “lifestyle hotel,” according to the brand’s website, and the hotels are expected to combine a “personal, intimate, individualized and unique lodging experience.”

Up next for Edition is the first company-developed hotel, which is expected to open in London in mid-2013, with Miami and New York to follow. Over a five-year period, Marriott is investing roughly $900 million to “jump-start” the brand, Marriott CEO Arne Sorenson said on a recent earnings call.

“We currently have seven hotels in our development pipeline and a half dozen more in early discussions,” he said.

In the U.S. as of February, there were 20 luxury hotels representing 7,665 rooms in the total active pipeline, which includes the in construction, planning and final planning stages, according to STR. Ten are currently under construction. The luxury segment accounted for 0.7% of all hotels in the pipeline.

Both Starwood Hotels and Accor are most active outside of the United States with their luxury offerings.

“We've expanded our luxury brands at a much faster rate,” van Paasschen said. “I think it speaks not only to the strength of our platform in supporting our three luxury brands but also at the same time the growth in demand for luxury that we've seen come back in an exponential way certainly since the crisis.”

Accor’s focus lies with the luxury and upscale segments, evidenced by the fact that the company intends to expand from 300 to 400 hotels in those two segments by 2015, according to a company news release.

Accor’s top-tier brands consist of Sofitel (luxury) and Pullman, MGallery and Grand Mercure (upscale).

Currently, 42% of Accor’s luxury and upscale hotels are located in Asia/Pacific and 35% are in European cities, the company said. Growth will come in emerging markets, including Latin America, Middle East and Asia/Pacific.

The Trump Hotel Collection also remains active in the luxury space, currently renovating the Doral Golf Resort & Spa in Miami and the Old Post Office Pavilion in Washington, D.C.

Designed by Ivanka Trump in cooperation with WATG’s Wimberly Interiors, guestrooms at Doral will be “elegant and luxurious, with rich accents, blended with patterns and imagery inspired by the sport of golf,” Ivanka Trump, executive VP of development and acquisitions, said in a news release.

And finally, as a hotel brand headquartered in one of the most luxurious places in the world, Jumeirah Group’s President and CEO Gerald Lawless recently discussed what luxury means in hospitality.

Dubai-based Jumeirah positions itself through its tagline, “Jumeirah stay different,” which Lawless said is a more powerful and accurate descriptor than the word “luxury.”

“The company’s service philosophy is to look at each guest as a unique, important guest; thus, the service they receive is also unique, which in and of itself makes for a luxurious service experience,” he said during the recent International Hotel Investment Forum in Berlin.

*Correction, 26 March 2013: The original version of the story incorrectly stated the 1 Hotel in Brooklyn was a conversion.

**Correction, 26 March 2013: In the caption of the Baccarat's image, the number of condos and stories was incorrect.

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