Mike Deitemeyer (center) of Omni Hotels & Resorts makes a point while Tom Prins (right) of Gemstone Resorts International and Dennis Nessler of Hotel Business listen during last week’s Lodging Conference.
PHOENIX—Luxury hotels were arguably the hardest hit segment in the hotel industry during the recession. While operators have been able to experience some level of recovery, the luxury landscape as it once stood no longer exists, according to industry executives speaking during a panel discussion at last week’s 18th annual Lodging Conference.
“Previously there were a lot of aspirational luxury guests,” said Matt Sparks, senior VP of luxury and corporate development for Hilton Worldwide, while speaking on “The New Benchmarks for Luxury” panel. “The true luxury guests that stay in a luxury brand without exception never went away, but there was a significant amount of business, a measureable amount of business, there (that left). With regard to group business, we’ve seen a tremendous change. I don’t know if I’d call it irreparable, but we haven’t had it come back to where it was.”
“Not only has the customer changed, but also corporate America changed,” said Jim Petrus, COO for Trump Hotel Collection. “Conspicuous consumption is no longer in vogue.”
Tom Prins, principal, Gemstone Resorts International, said the level of recovery depends upon on the market.
“The luxury market in the major markets is coming back, but it’s slower in the secondary and tertiary markets,” he said.
“There are markets that have hit peak, but the majority are generally not there,” added Mike Deitemeyer, president of Omni Hotels & Resorts.
During a separate session covering data trends in the industry, Vail Brown, VP of global business development & marketing for STR, parent of HotelNewsNow.com, said the luxury segment during the 12 months ending with August 2012 had a 72.8% occupancy rate—a full 1-percentage point increase over the peak in 2007. However, average daily rate during the same period was $269—$17 lower than the peak in 2007.
With a stop-and-start recovery in progress, there are additional challenges ahead for the luxury segment, according to the panelists. Petrus said more innovation is needed—and fast.
“There’s a lot of sameness in our industry,” he said. “The brands that are able to create and recreate and differentiate themselves will stand out.”
Sparks pinpointed a challenge more near and dear to the number of investment- and development-related attendees in the crowd.
“We really need the residential markets to come back,” he said. “Hotel economics on the luxury side for free standing hotels just doesn’t work. Where they do work is mixed-use projects.”
Deitemeyer said the consumer’s thirst for value is a challenge the sector can overcome.
“Price value and understanding customer expectations (are the big challenges),” Deitemeyer said.
Meanwhile, Prins said evolving property-level issues are the biggest challenges.
“We’re always looking for ways to create (return on investment) through our services and elements of design,” he said.
The panelists agreed unique and indigenous design is one of the essential elements of a successful luxury hotel.
“Design is the first element that allows you to connect emotionally with the guest,” Petrus said. “(Developers) use design as the starting point (for a project) after location.”
Sparks said the design begins with an essential sense of arrival—especially as luxury guests are becoming younger and have high expectations from the moment they step onsite.
“It seems like the overall palate of luxury travelers has gotten more finicky,” he said. “The younger generation is traveling in luxury now—they’re very discriminating in what they’re looking for.”
That means a more intense level of service as well.
“People have become more experience-driven on the luxury side,” Sparks said. “The areas that you do provide, you have to do flawlessly.”
“There’s a formal luxury and there’s the affluent young travelers who might put a jacket on,” added Deitemeyer.
“We spend a lot of time looking at what the luxury market wants,” Prins said. “We have a brand-of-one type of attitude. Our focus is on that market, that community.”
That uniqueness can be somewhat of a problem for brands trying to present a consistency throughout all of its properties.
Trump Hotel Collection
“Whenever you have a brand you want to have a common thread,” Petrus said. “The challenge for us in the industry is making sure the hotel has a sense of place … that it feels like it belongs. That’s more difficult as you grow a brand.”
The varying degrees of luxury are also something to consider. Petrus said drilling down to discover the demographics and psychographics of guests and prospects is an integral part of establishing a successful luxury hotel.
“Luxury is something different to everyone,” Sparks said. “How many people in this room would consider white space on a Wednesday afternoon a luxury? Luxury is an uncompromising achievement of what you want right then.”
The one constant for successful luxury is impeccable service, the panelists said.
“It really comes down to the overall ethic you have with your associates,” Sparks said. “You almost have to put your associates first in front of your guests. They have to be empowered to deliver (quality service).”
Deitemeyer said hoteliers shouldn’t mistake a luxury experience as having to be a white-glove experience.
“It’s about understanding (guests’) body language,” he said. “We try to anticipate what their expectations are.”
Petrus agreed, saying the key is being able to read the customer.
“For instance, some guest like servers to hover over them; others want them to be invisible,” he said, adding that luxury guests expect their wants and needs to be met immediately. “How do you deliver that? Be absolutely certain we are respectful of every single second of time we are consuming.”
The food-and-beverage experience at luxury hotels is evolving in large part because consumers’ expectations have dramatically risen thanks to the onslaught of television cooking shows, Sparks said.
“People are learning to not expect crappy food in restaurants,” he said. “High quality ingredients are mandated.”
Luxury properties are moving away from formal restaurants to multiple outlets, especially at luxury resorts, the panelists said.
“The day of fine dining establishments in hotels is pretty much long gone—the customer has changed in the process,” Petrus said. “Fancy schmancy restaurants are no longer the trend and are only applicable in isolated cases.
“The luxury customer is looking for value-oriented, great food, great service that’s comfortable and is (delivered) within a reasonable time frame.”
Sparks said even traditionally formal global environments have become more casual.
At the end of the day, personalized experiences are where luxury hotels need to direct their attention—beginning with the arrival experience.
“I have often wondered why we need front desks at all,” Sparks said, adding that proper hospitality is to greet the guest with their room key in hand as they walk in the door.
Deitemeyer agreed the check-in experience is a game-changer, but cautioned that luxury hotels should always maintain human interaction in the process.
“There’s a real opportunity for personalization,” Petrus said. “Personalization for the masses, not just for VIPs. Whoever does that could break away from the rest.”