The Future of Luxury Hotels: Pay More, Expect Less
Increased demand for leisure travel during the pandemic has caused hotel rates to skyrocket across all market segments, and luxury chains have led the pack.
But with the world mostly adjusting to seeing the coronavirus more as endemic – which is akin to treating surges more like flu spikes as opposed to something requiring travel restrictions – the hospitality industry is settling into a new normal. This means an opportunity to pursue changes in business strategy – some of which you probably already sense when checking into a hotel.
The pandemic has accelerated industry trends already in place before the health crisis. Labor shortages resulted in less frequent housekeeping during a stay. Mini single-use shampoo and conditioner bottles are becoming increasingly rare in favor of more eco-friendly, refillable wall-mounted dispensers (so say hello to improving the soap supply in your bathroom). guests with the mini bottles of Le Labo from your last vacation). Companies are even trying to manage hotels more efficiently sometimes operating two different brands within the same building.
Subscribe to our daily newsletter
But most of these changes have occurred outside of the highest levels of hotel brands. Do not bet on the continuation of this trend.
Yes, even the best hotels are not immune to the changing hotel landscape.
For more TPG news delivered every morning to your inbox, sign up for our daily newsletter.
“I think we need to keep our ears open and understand what is really most important to [our customers] because some of our luxury travelers don’t want daily housekeeping,” Hyatt CEO Mark Hoplamazian said this summer at a New York University hotel conference. “So we need to pay attention to that same level of conscious decision-making about practicing empathy, attentive listening, and applying choice where it’s asked.”
Hoplamazian’s comments were made during a panel with Hilton CEO Christopher Nassetta as part of a discussion about daily housekeeping and the decision companies like Hilton had made to offer an opt-in model. -in during a customer’s stay at many of the company’s brands. You can always have your room cleaned during a stay, but you must call the front desk and make a specific request.
This doesn’t mean that a Waldorf Asotoria or a Park Hyatt does away with daily housekeeping during a stay (as I can attest to on a recent stay in Chicago), but the fact that Hoplamazian has indicated that it’s possible that even the move to an opt-in model for room cleaning marks the latest in a series of shifts in the guest experience mindset for the most premium brands.
And it’s not just the biggest hotel companies looking for ways to change the look of a five-star hotel stay. Ian Schrager, a hospitality legend – known for co-founding Studio 54 and being one of the architects of the boutique hotel movement – recently announced plans to go beyond his partnership with Marriott International on the Edition brand to focus on Public, which he describes as a luxury hotel brand with elements of a limited-service experience.
If you think luxury and limited service are mutually exclusive terms, you’re not mistaken. Last year, I wondered what executing such a wedding would be like once Public began to expand beyond its original hotel in New York.
Schrager has previously indicated that the limited-service touches at his luxury hotel would likely mean a greater reliance on technology to facilitate things like check-in rather than a fully staffed front desk. Think: mobile check-in and check-out as well as digital room keys – pretty standard stuff in today’s hotel orbit.
Plus, there could be additional efficiencies with restaurants that act almost like a modern automaton, with less customer-employee interaction and, therefore, lower labor costs. Just order your food from a kiosk and take it yourself, all with fabulous Schrager flair, presumably. (After all, his kind of hospitality attracts rock stars and A-list actors and actresses – and even Bianca Jagger on horseback.)
Beyond the workforce, even room amenities are changing at some high-end hotel brands. Many hospitality companies have moved to wall-mounted shampoo, conditioner and soap dispensers in recent years in an effort to be more sustainable than the old practice of using disposable plastic bottles. This practice, however, largely focused on more affordable brands, while mini-bottles remained in high-end hotels.
IHG Hotels & Resorts has gone further by including even its most expensive brands in its own shift, which is set to be completed by 2030. The company is taking a glamorous approach to this shift for certain brands, with hotels like Six Senses offering amenities baths in large ceramic distributors.
“My most cherished brand is Six Senses, which has a reputation for being sustainable, and when I would go to our teams and say, ‘We’re going to take a look at the toiletries’, which we all do now, they said, “You can’t do that in luxury hotels,” IHG CEO Keith Barr said this summer at the NYU conference. “I’m going, ‘Well, we do it at Six Senses, and we charge $5,000 a night for those hotels.”
That doesn’t necessarily mean you’ll have to lug a giant bottle of soap and shampoo from the shower to a tub if you find yourself in one of these revamped five-star hotel rooms. During my recent stay at the Park Hyatt in Chicago (okay, it’s part of Hyatt, not IHG), there were still mini bottles here and there – including smaller soaps and bathroom cleaners. bodies near the bath – while the more durable permanent bottles were available in the shower.
Cost limit does not exist
One of the biggest signs of a change in luxury hospitality is in pricing. Inflation is a thing, but you wouldn’t imagine it: high-end hotels are costing more than ever during the pandemic. Experts say it took time.
Luxury hotel rates are 25% more expensive today than they were in 2019, according to research by Bernstein. It’s actually a much-needed boost in terms of recouping price premiums from more affordable segments of the hospitality industry.
It may be hard for some to imagine that glitzy brands struggled over the past decade, but they certainly weren’t making as much money compared to other brands as they once did.
Luxury brands like Waldorf Astoria and Ritz-Carlton for years have generally maintained a healthy price premium over their more affordable albeit upscale siblings like Hilton and Marriott. But following the 2007-2009 recession, luxury hotel rates fell and the price gap between ultra-luxury and upscale brands remained below pre-recession levels until the pandemic.
“We view the strength in luxury prices as a price reset to a more expected premium for other hotels and expect prices here to be sustainable, given the resilience of the luxury traveler,” reads a report. Bernstein this summer. “If we extrapolate the pre-[recession] trending today, we can see that the current strength in luxury prices is actually exactly where it should be and that over the past decade luxury price growth has been slower than historical levels . At our recent conference, Hyatt called it the “great price reset,” with luxury pricing here to stay.
Growing demand for leisure travel has fueled pricing power, and Bernstein experts predict high costs will remain.
“If a Hyatt Regency costs $400 a night, should a Park Hyatt cost $800? No, it should be $1,100. This is the right price premium for Hyatt Regency,” said Richard Clarke, managing director of Bernstein which covers the hospitality industry, in an interview with TPG. “So they reset all their luxury prices higher, or their advertised prices went up a lot, because they realized that [luxury] The consumer has probably always been poorer in time than in money and could have afforded a more expensive hotel.
Luxury is in the eye of the beholder
If changing service levels are on the table and prices are rising, what does this even mean for the luxury hospitality industry?
Some might say that a hotel with a strong staff is luxurious simply because there are more people to attend to the needs of individual guests and enhance their overall experience.
“I see a lot of experiments and initiatives to create so many small, memorable, thoughtful, and authentic moments — without being overly contrived ‘Instagrammable’ moments that got a little forced and overdone before the pandemic,” Dan said. Ryan, host of the Defining Hospitality podcast. “Whether those little moments are fresh fruit in your bedroom, a fireplace with s’mores, handwritten notes, the music playing when you enter the room, or any other of those thoughtful touchpoints – luxury has so much to do with the attachment these little moments of reflection into a very memorable overall experience.
Given the push towards lifestyle hotels – more neighborhood-focused properties with an increased emphasis on dining and design – one could also argue that the latest push in luxury is more about unique experiences than standardization. Of the industry.
Ever since Holiday Inn entered the scene in the 1950s, the mantra of major hotel companies has been to provide consistent, similar service at properties around the world under the same flag. This means that your stay at a Marriott or Ritz-Carlton in Shanghai should be similar to that in St. Louis. We all know that’s easier said than done, but that’s the overall vibe the hospitality industry looks for in most brands.
Hospitality companies now see the future of stays as more individual experiences that reflect a surrounding area and serve the individual guest. This means there are no limits to how a five-star stay looks like.
“Luxury is a funny thing to me. Does anyone know what it is and how to define it? Ryan asked. “You know it when you see it, or, in the case of hospitality, when you feel it.”
In short: luxury these days is in the eye of the beholder, but it will cost more today than just a few years ago.