‘Affordable luxury’ a tricky concept to define
24 OCTOBER 2014 6:34 AM
Hoteliers during a Lodging Conference panel attempted to clarify the concept of “affordable luxury” or “the hip budget hotel.”
PHOENIX—What would have appeared an oxymoron five years ago, the concept of “affordable luxury” has quickly become a panacea for hoteliers aspiring to capture the attention of today’s cost-conscious, demanding guests.
But while general consensus exists over that pursuit, defining “affordable luxury” has proven much more divisive, according to speakers during the “Affordable luxury: The hip budget hotel” panel at the 20th annual Lodging Conference.
Much of the 75-minute session was devoted to defining the fuzzy concept, which comprised a number of important characteristics:
Eschewing the idea of “budget” in the traditional tiered sense, panelists instead described the idea of personal budgets, or affordability, on a sliding scale.
Marriott International’s Moxy brand, for instance, was created as a low-cost entry point for Europe’s traveling youth who wanted a step up from the hostel experience, explained Eric Jacobs, the company’s chief development officer of select service and extended-stay brands.
That varies by customer and market, however, he added.
For instance, what’s affordable in New York City, where the cost to build is high, still might be priced well beyond some travelers’ pocketbooks.
“Each market defines what’s relevant for that market. What you can build in New York with the same brand might look very different in Orlando (Florida). That affordable luxury piece might be a small room and more celebrated lobby and experience in New York versus a bigger room because you have your family in Orlando,” said Julienne Smith, senior VP of real estate and development for Hyatt Hotels Corporation’s Hyatt Place and Hyatt House brands in North America.
The level of service also plays a role in affordability, said Paul Sacco, chief development officer for TPG Hospitality Group.
“We tend to think of really focused service rather than thinking of it in the traditional sense of budget or limited service—focused service meaning you’re designing a hotel or renovating a hotel to fit current needs vary specifically of that market,” he said.
Focused service typically translates to fewer full-time employees, which also helps save on costs, Sacco said.
“Experience” was a word uttered as much as any other during the panel.
“I agree it’s about the experience, but I think it’s a personal experience,” said Bill Hall, senior VP at Wyndham Hotel Group. “You need to provide the opportunity for each guest to connect in their own way. So it’s very experiential, but it’s also personal.”
Experiences in hip hotels should be authentic, panelists agreed—which means they’re often tied into the hotel’s surrounding community.
“I think location is the most important thing. … It appeals to a younger group of people. The question is, where do they belong?” said Sumner Baye, president of International Hotel Network.
Hip budget hotels work best in the center of the action, panelists agree.
“It’s all about the right location. … You can’t kid yourself. You have to be based around ground zero,” Sacco said. “What we learned in the last downturn … even in some of the bigger markets like Boston, that whole Seaport District is thriving, but it took a big step back once 2007 or so hit. There was a lot there that was supposed to happen over five years that didn’t happen.”
Design is becoming more of a focus for hotels across every chain scale, Hall said.
“Some of the economy brands out there, at least from a design perspective, have really tried to become a little more relevant and contemporary,” he said.
“Design happens to be a very important word,” Baye said. “That’s the appeal. What does this look like?”
The major brand companies have become more flexible in their design constraints, allowing developers to create concepts more closely tied to the location, panelists agreed.
“As you’re designing something in a certain market that don’t make sense, I find that brands are more willing today to work to make sure it does make sense and there’s a return on investment,” Sacco added.
Not just for millennials
Affordable luxury is a concept that transcends demographics, panelists agreed.
“All demographics want to stay in a relevant hotel. You don’t need to be 25 to enjoy something that’s hip and cool. I don’t think it’s just about the millennials. The baby boomers and Gen X are still a huge part of our demographic,” Smith said.
Technology plays a major role in satiating guests’ evolving needs, she added. Hyatt, for instance, has incorporated car-sharing app Uber into its smartphone check-in process. A guest lands at the airport, checks into her hotel and hits the Uber button to arrange a ride to the property, Smith explained.
“It’s not just the experience in the hotel; it’s the experience when you’re checking into the hotel,” she added.
“It’s easy to say that some of the younger millennial travelers, they’re kind of born into the iPhone or born into technology … but we’ve all had to adapt to that,” Sacco added, stressing hoteliers cannot forget about more traditional tastes in the travel industry.
“We talk a lot about the millennial traveler and these new lifestyle boutique brands, but the reality is if you travel and go into different hotels across segments and across brand types, there are still plenty of travelers who enjoy … what Residence Inn or Homewood Suites has to offer,” he said.