Service levels will determine the success of the top luxury hotel

Luxury hotels must transcend their brands to be everything that the most demanding guests require.

As memories of the pandemic fade somewhat and revenge travel continues to fill high-rate, high-occupancy luxury hotel rooms, these hotels need to stand out and be unique, said Timo Gruenert, chief executive of Oetker Collection, which includes hotels such as Le Bristol, Paris; Lanesborough, London; and Jumby Bay Island, Antigua.

“Guests appreciate that it shows 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 the Alvarez & Marsal European Hospitality Investment Conference.

He said his guests could stay at one of his hotels for five days or more and still not realize they were staying at an Oetker property.

Roeland Vos, Belmond’s president and chief executive officer, said that even if guests are brand loyal, “every hotel is on the path of its own brand positioning.”

“For guests, the first thing is the hotel,” he said. “For example, the Cipriani. They seek this and pay for this. First is the property, then the brand.

Ian Livingstone, chairman of London & Regional Properties, said that if the future of luxury is experiential, and most agree it is, then a hotel’s name is crucial.

“A big problem we had with the operators is that they wouldn’t let us run it the way we wanted to,” he said of his hotels in general.

Vos de Belmond said the hotel brand does not have a secondary position in any association, just a slightly different role.

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He said that an individual luxury hotel should be a better storyteller than hotels lower on the price scale.

“Guests don’t want a home away from home, they want the experience they don’t get at home,” he said.

Sarmad Zok, chief executive of Dubai-based sovereign wealth fund Kingdom Hotel Investments, said his company owns the widest range of hotels represented on the panel, including 23% of Four Seasons Hotels & Resorts; 6% Accor and ownership in individual iconic hotels like The Savoy, which is managed by Accor.

He said that for owners of larger and broader portfolios, when “you try to look for an element of growth, there are limitations on individuality. We have positions in hotel, brand and management companies, so there are conflicts”.

Zok said that in the case of the Four Seasons Hotel George V in Paris, the hotel bears its own logo, not the Four Seasons’.

“We have the best of all worlds. The Four Seasons brand is a bar for quality and loyalty, while the George V brand is individuality and something truly special.

“Lifestyle is not fully determined by the standard of the product. Luxury is determined by the price of any product, ”he said.

Vos added that “the lifestyle is the person, not the brand.”

Performance in luxury hotels in 2022 was remarkable, but even the top hotel segment may not sustain those levels next year and beyond, the panelists said.

Livingstone said he wouldn’t be surprised if the last two quarters of 2022 stand out.

“We had a rate driven recovery with little pullback. The rate seems to be holding, but I think 2022 will be the high water mark in net operating income. As an investor I would be very cautious, but as a trader you should still do well. However, if service levels are not excellent, [operators] we will have more difficulties next year,” he said.

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Gruenert agreed that 2022 has been extraordinarily strong in terms of most, if not all, key performance metrics.

“It didn’t take a lot of managerial brilliance to get good results, but we’ll get to a point where we’ll see the differentiation. People will have a memory of where they overspent, but I think for us in 2023, we don’t see any change in the [general] trend, I’m happy to say. I watch this every day, I watch carefully what happens around the world, but in some of our hotels we are already full by 2023. The luxury market could be the last to be affected, ”he said.

“Paris only started to recover in April, and the demand will continue until next year, but then we will see who did a good job and who didn’t,” Gruenert added.

Zok said the recovery for luxury hotels has been monumental, with strong demand removing initial fears that it would take four to six years.

“Yet here we are. Traveling is a basic need now. It really is,” Zok said. “The pricing power now is remarkable. Once you get to a [average daily rate] level, you stay there, but it’s the costs that are increasing, so the challenges will be in the bottom line. The margins we saw in 2022 will not be sustainable.”

Livingstone said the energy and labor economic crises must be managed carefully to help retain high incomes.

“We had terrible problems getting people back to work, but that is being done now. We gave bigger bonuses, instead of higher salaries. Also, it is difficult to drive energy inefficiencies in luxury hotels,” she said.

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Vos said guest expectations are becoming more pronounced.

“The staff must be exceptional, as must the offers, even if they are more expensive to offer. Capital will have to be put in,” he said.

Vos added that inflation has not affected all consumers or employees equally.

“In terms of staffing, in luxury hotels you have staff who are proud chefs and proud concierges, but in some places like California it’s almost impossible to find staff. We will have to provide accommodation and transportation for them, or we will not be able to operate a hotel,” she said.

Gruenert said hoteliers should view charging high rates as a privilege and therefore should pay staff accordingly and with high tips.

You better get it. If you got away with it in 2022, you won’t get away with it in the future,” she said.

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