Luxury hotels must transcend their brands to be all that discerning guests require.
As memories of the pandemic blur just a little and revenge travel continues to fill luxury hotel rooms at high rates and strong occupancy, such hotels must stand out and be unique, said Timo Gruenert, CEO of the Oetker Collection, which includes hotels such as Le Bristol, Paris; The Lanesborough, London; and Jumby Bay Island, Antigua.
“Guests appreciate that you show a very strong focus on the individuality of the asset. How much authenticity is left once you’ve put [any hotel] within a corporate environment?” he said during a panel of speakers at Alvarez & Marsal’s European Hospitality Investment Conference.
He said his guests might stay at one of his hotels for five days or more and still not realize they stayed at an Oetker property.
Roeland Vos, president and CEO of Belmond, said even if guests are loyal to the brand, “each hotel is on a journey of its own brand positioning,”
“For guests, it is about the hotel first,” he said. “For example, the Cipriani. They search for this, and they pay for this. It is the property first, then the brand.”
Experiential Élan
Ian Livingstone, chairman of London & Regional Properties, said that if the future of luxury is experiential, which most agree it is, then the name of a hotel is crucial.
“One big issue we had with operators is that they would not allow us to manage it in the way we wanted,” he said of his hotels in general.
Belmond’s Vos said the hotel brand does not have a secondary position in any partnership, just a slightly different role.
He said an individual luxury hotel must be a greater storyteller than hotels further down the ladder in price point.
“Guests do not want a home away from home, but the experience they do not get at home,” he said.
Sarmad Zok, CEO of Dubai-based sovereign wealth fund Kingdom Hotel Investments, said his firm owns the widest array of hotels represented on the panel, including 23% of Four Seasons Hotels & Resorts; 6% of Accor and ownership in individual iconic hotels such as The Savoy, which is managed by Accor.
He said for owners of larger, wider portfolios, when “trying to pursue an element of growth, there are limitations in individuality. We have positions in hotels, brand and management companies, so there are conflicts.”
Zok said in the case of Paris’ Four Seasons Hotel George V, the hotel bears its own logo, not the one of Four Seasons.
“We have the best of all worlds. The Four Seasons brand is a level of quality and loyalty, while the George V brand is individuality and something truly special.
“Lifestyle is not determined fully by product standard. Luxury is determined by the pricing for any product,” he said.
Vos added that “lifestyle is the person, not the brand.”
Performance and Sustainability
Performance in luxury hotels in 2022 was notable, but even the highest hotel segment might not sustain those levels next year and beyond, panelists said.
Livingstone said he would not be surprised if the last two quarters of 2022 stand out.
“We had a rate-driven recovery with little pushback. Rate looks to be holding up, but I think 2022 will be the high watermark in net-operating income. As an investor I would be super cautious, but as an operator should still do well. If the service levels are not great, though, [operators] will have more difficulties next year,” he said.
Gruenert agreed 2022 has been extraordinarily strong in terms of most, if not all, key performance metrics.
“It did not need a lot of management brilliance to achieve good results, but we will reach a point where we will see differentiation. People will have a memory of where they overspent, but I believe for us in 2023, we see no change in the [general] trend, I am happy to say. I look at this every day, look cautiously at what is happening around the world, but at some of our hotels, we are already full for 2023. The luxury market might be hit last,” he said.
“Paris only started to recover in April, and demand will continue into next year, but then we will see who did and who did not do a good job in service,” Gruenert added.
Zok said the luxury hotel recovery has been monumental, with strong demand brushing away the initial fear that it would take between four and six years.
“Yet here we are. Travel is a basic need now. It really is," Zok said. "Pricing power now is remarkable. Once you reach an [average daily rate] level, you stay there, but it is costs that are increasing, so the challenges will be on the bottom line. The margins we saw in 2022 will not be sustainable."
Livingstone said the economic crises in energy and labor need to be managed carefully to help retain high revenues.
“We had terrible problems getting people back to work, but that is coming through now. We gave larger bonuses, rather than higher wages. Also, it is hard to drive energy inefficiencies in luxury hotels,” he said.
Vos said guest expectations are getting more pronounced.
“Staff need to be exceptional, and so do offerings, even if they are more expensive to provide. We will have to put capital in,” he said.
Vos added inflation has not affected all consumers or employees equally.
“In terms of staff, in luxury hotels you have staff that are proud chefs and proud concierges, but in some places such as California it is almost impossible to find staff. We will need to provide housing and transportation for them, or we will not be able to operate a hotel,” he said.
Gruenert said hoteliers should see it as a privilege to charge high rates and thus should pay staff accordingly, and with high tips.
“You better get it spot on. If you got away with it in 2022, you will not get away with it in the future,” he said.