SYDNEY—Luxury hotels weathered the global economic crisis just fine, according to a number of speakers at Wednesday’s Luxury HotelsWorld gathering. One of the segment’s biggest hurdles, however, might just be figuring out exactly how to define it.
Deciphering this definition weaved its way through five general session panels at the event.
Conference chair John Smith, managing director and principal of Horwath HTL Australia, said luxury is not just about the wealthy—there’s a middle-class affluence in countries such as Australia, China and Indonesia that make luxury lifestyle components more attainable. He pointed to the HENRY consumer—high earners, not rich yet—as prime targets for luxury hotels.
“These are new forces in the marketplace,” Smith said during his opening remarks.
Smith said luxury means different things to different people and generations view it completely different as well—noting that indoor plumbing, elevators and air conditioning were once considered luxury.
“Luxury has evolved,” Smith said. “What was the height of luxury at one time is now considered a basic element.”
Other speakers agreed.
“Service is one of the fundamental touchstones of luxury going forward,” said Jeffery Copolov, interior design director for Bates Smart Architects, during the “Luxury redefined and the new luxury consumer” session. “It’s invisible service where the staff understands the nuances of each and every individual guest. A talented and capable staff should be able to read those things.”
Copolov said genuine luxury is now about understated elegance.
“There’s no doubt luxury is subjective,” Copolov said.
Andrew Williams, CEO of Voyages Indigenous Tourism Australia, said during the “Luxury accommodation concepts” panel that the luxury market is unique and requires specialized skills, focus and attention to detail to meet the expectations of the luxury guest.
“People don’t travel to destinations like this to sit in their room,” he said. “The physical product is an important investment, but it’s about the experience.”
“The luxury consumer is becoming a lot more diverse,” added Christopher Wong, managing director, development, Asia/Pacific for Four Seasons Hotels & Resorts, during the “The luxury branding challenge” session. “We’re at a point where it’s a challenge meeting the different needs and expectations of different customer groups.”
Luxury isn’t easy
In a perfect world, providing that experience comes naturally, but that’s not always the case, according to Marc von Arnim, GM of the Park Hyatt Sydney.
“It’s an easy thing to say; it’s not an easy thing to deliver,” von Arnim said during the “Concepts” session. “We all have a very different type of luxury customer. That’s one of the very important things we all have to consider—we can’t think the luxury traveler is what it was 20 years ago.”
He cited the emergence of the growing luxury demand from young families—a huge market that many luxury hoteliers have tried to steer clear from over the years—as an example of the changing demographic of the luxury traveler.
Williams agreed the changing demographic is changing the face of luxury.
“Guests in a luxury resorts aren’t necessarily all wealthy,” he said. “In today’s world, luxury in a small quantity is accessible.”
Michael Levie, chief operating officer for CitizenM Hotels, said during the “Affordable luxury – the new normal?” discussion that more travelers expect a luxurious experience regardless of the hotel’s price point.
“Affordable luxury sits in the midscale market but it definitely has an aspiration to be upscale,” Levie said. “In reality, there is always space for the crystal chandelier and the white-glove service. But today, maybe luxury is also opening your laptop and having instant Wi-Fi access for free.
“Affordable luxury is a state of mind, luxury as defined is very personal,” he added. “What works for one doesn’t work for another.”
Panelists agreed throughout the day the experience defines the definition.
Justin King, GM at the Saffire Freycinet resort in Tasmania, said during the “Concepts” session that creating lifelong memories for guests is what his property strives for, and he empowers employees to do whatever it takes to achieve that at the property, which fetches between 1,200 Australian dollars ($1,123) and 1,800 Australian dollars ($1,684) per night during peak season.
He said there are three rules for employees: “Every decision (they) make has to be authentic, it has to be luxurious, and anything (they) do has to be surprising to the guest,” King said. “They are broad, and they are open to creativity. We’re able to give a sense of the unique experience we’re trying to create. … We’ve been given the world class building but we need to give it the culture.”
Roland Jegge, executive VP Asia/Pacific for Worldhotels, is a proponent of the luxury segment, but said during the “Challenge” session it can be exaggerated at times.
“Unique has been overused,” Jegge said. “I like this element of discovery, surprise, when you go into a hotel. We are in the age of experience. Now it’s about having this experience where you can brag to your friends.”
Dean Dransfield, managing director of Dransfield Hotels & Resorts, agreed during the “Luxury guests, luxury products … luxury profits? Does luxury Pay?” session.
“The funny thing about luxury is the word ‘unique,’” Dransfield said. “Using an average (to measure the segment) when talking about ‘unique’ is inherently wrong.”
That boils down to giving guests what they desire, according to Wong.
“Guests want to be empowered now—they want to do what they want to do when they want to do it,” he said. “You have to design space to allow guests to use it the way they want to use it.”
That, of course, doesn’t always meet expectations either, according to Smith.
“The truth of the matter is luxury guests want too much,” he said. “They just want everything.”
The numbers don’t lie
Data providers painted a positive picture for the segment.
Simon Haigh, managing director, Asia/Pacific for Market Metrix, said during the “Redefined” session that his company’s research indicates the most loyal guests in the hotel industry fall into the wealthy category in large part because of the level of personalization the segment provides.
“High-wealth individuals like loyalty clubs because it’s part of their recognition program,” Haigh said.
Meanwhile, Jesper Palmqvist told the audience during his presentation during the “Luxury guests, luxury products … luxury profits? Does luxury pay” session the luxury segment is holding its own around the globe as it has experienced 3.7% year-over-year growth in revenue per available room.
“This is a very healthy number; there have been 18 months of very consistent RevPAR growth,” Palmqvist said. “We’re seeing rates globally growing. There’s a very good mixed balance between supply and demand. In luxury overall, it’s very balanced and it’s been going like that for two years.”
All of which paints a positive picture for the luxury segment, speakers said.
Robert Williams, partner with Ryan Lawyers and chair of the “Does luxury pay?” session, said every big real-estate development announced in Australia features a luxury hotel component.
“It costs a lot more than people think it would but they keep pressing on,” he said.
After all, it does boil down to whether investors can make money on a luxury hotel, Dransfield said.
“It has to be about the experience, not the building,” he said. “We can’t build buildings cheaply. If you cannot come up with the whole experience, you can’t get the top dollar (when it’s time to sell).”