I read a great feature in May’s issue of “Runner’s World” that made me think of the hotel sector’s race to recovery. (See that? Race! The correlations have begun already.) Anyway, this particular article outlined the curious habits of “rabbits”—those men and women who are hired by other runners to set a race pace in the hopes of yielding faster times on the course.
“In distances as short as the 800 meters and as long as the marathon, the rabbit is tasked with leading the race to a certain point (usually about halfway), doing the hard work while the other runners save their energy, then exiting (stage left or right, depending on what's less intrusive to the rest of the field) and watching the finish from the sidelines,” writes Jack McCallum, the feature’s author.
Setting pace is a key component in any upward and downward swing of a business cycle. We saw evidence of the latter two years ago, when otherwise savvy hoteliers inexplicably followed the discounting patterns of the market laggard.
In recent months, fortunately, we’ve seen a reversal of this trend, as hoteliers begin to push rate to maintain pace with the market leader—the “rabbit,” so to speak: luxury.
The segment isn’t just setting the pace, quite honestly; it’s pulling away like Usain Bolt at a high-school track meet. Have you seen April’s performance metrics from STR (the parent company of HotelNewsNow.com)? Luxury ended the month with an average daily rate of US$258.34. Upper upscale? US$147.41. That’s a rate premium of US$110.93!
Granted, none of the other segments is going to compete with luxury in absolute ADR terms. We segment the industry for a reason—different product yields different price points. But the rest of the industry can and should compete in terms of growth.
In this respect, the luxury segment has clearly done its job, and it’s up to the rest of the hotel industry to try to make ground. Because unlike the rabbits of the racing world, I don’t think the luxury segment’s going to exit stage left or right any time soon. It’s got its eyes on the proverbial finish line, and there’s only air in between.