Reimagining the Luxury Segment

Discerning travelers understand that true luxury is boundless. On one hand, it is sophisticated, extravagant, and opulent, yet it is also relaxed, effortless, and unpretentious. As hoteliers increasingly face unprecedented demand for luxury accommodations, balancing it with higher operational costs and reduced staffing remains a formidable task. Historical rates for luxury properties have ranged from the mid-$200s to over USD 1,000 per night for entry-level rooms; however, in the post-Covid era, hotels have set record ADR compared to the same period in 2019. Whilst consumers may be willing to pay higher premiums, they will not accept lower standards, especially during longer stays at destinations that require long-haul travel. Basic amenities and services, including room service, plush bathroom amenities, and skilled staff that can quickly solve problems shall never be overlooked as key elements of a luxury hotel’s DNA. 

To reimagine the luxury segment, we must develop an immersive approach that integrates traditional high-end offerings with user-friendly tools and applications that will enable guests to navigate through a hotel or resort’s experience roadmap without requiring additional staff. These may include interactive in-room televisions that allow guests to view menus and place room service orders, and mobile apps that facilitate spa or restaurant reservations on-demand, suggest local tours, request additional toiletries, et al., regardless of whether the guest is on-site or elsewhere. Today, more and more affluent travelers are working remotely. Companies have learned that top talent demands flexibility and hotels can take advantage of this by better tailoring technology-driven customizations to guests. Moreover, instead of learning about specific customer needs at check-in, hotels should consider short pre-arrival surveys to collect their guests’ primary preferences well before they even arrive. At luxury properties with unique room types, certain guests may seek a specific location and/or feature that would only be available in mid-tier room classes, and hence, upgrading them to a higher room category with a significantly different layout may not be necessary and can lead to guest dissatisfaction. By investing in both the pre-arrival and in-house guest experience, luxury hotels will deliver great value to their guests through intuitive and personalized service. 

Loyalty Devaluations

Between 2021 and 2022, the loyalty devaluations of global hotel chains imbued contradictory strategies. Guests must now study complex charts just to acquire a basic knowledge of how the new, or more realistically, modified benefits vary by brand, as a result of the most severe devaluations. Redemptions at luxury properties may cost up to ten times those of mid-range hotels since more hotel chains are using dynamic models to price award inventory, and in some cases, artificially setting rather questionable minimum off-peak rates when occupancy falls below forty percent. Thus, if guests have no choice but to use a greater number of points for free hotel nights, then at the very least, loyalty benefits should remain consistent. Vexed guests are far less likely to be loyal and hotels should acknowledge recent travel surveys which highlight that despite brands striving to grow their loyalty base and enhance customer retention. Nearly a quarter of respondents indicated that brands are not delivering substantial rewards whilst almost a third believed that brands’ earning and redeeming options are overly complicated. Unequivocally, there is a huge opportunity for hotel brands to execute a simplification of their respective loyalty programs with a stronger emphasis on quality and consistency, even if qualification requirements for top loyalty levels are modified to compensate for skyrocketing costs. 

“To reimagine the luxury segment, we must develop an immersive approach that integrates traditional high-end offerings with user-friendly tools and applications that will enable guests to navigate through a hotel or resort’s experience roadmap without requiring additional staff”  

Increased Competition with Other Hospitality Verticals

Across the entire hospitality industry, it is imperative to attract high-yielding guests. In recent years, airlines have impressed their premium passengers through game-changing “private suites” with doors in both first and business class along with exquisite five-course menus. 

Meanwhile, the latest vessels delivered to cruise lines boast dedicated suite class areas (lounges, sundecks, restaurants, etc.) and expansive accommodations that set new gold standards, e.g., two-story villas with private plunge pools even on short itineraries of three nights. One can argue that the newest airline and cruise line products are not available on every market, and that would be true, but the material point is that airlines and cruise lines will either retrofit their older fleets or retire them as they progressively acquire brand-new fleets that will feature equally extraordinary products. Consequently, hotels need to better differentiate themselves to be competitive. Properties worldwide have experimented with the concept of a “hotel within a hotel”, ranging from stand-alone overwater suites to private islands within one resort complex; at face value, hotels remain competitive hard product-wise, yet their soft products are on a steady decline. For instance, in the post-Covid era, many hotels have not reopened club/concierge-level lounges typically reserved for suite guests, on-site restaurants operate under reduced hours, and housekeeping shortages cause frustrating downgrade situations, particularly for travelers arriving late at night. The good news is that hotels have a myriad of options that are not costly to implement, yet they can have a powerful impact on the guest’s stay—from guaranteeing early check-in/check-out for customers booking the finest accommodations to scheduling top-performing staff to be on duty to look after select guests with whom they have previously interacted. 

Final Thoughts

The Covid pandemic brought to light the alarmingly fragile nature of the global hospitality industry. Iconic luxury brands that opted to follow the status quo and to a certain degree took their customers for granted paid the ultimate price: going out of business overnight and later having their few remaining assets auctioned. As hospitality professionals, we cannot be oblivious to the fact that high-yield guests may not give us a second chance if they don’t feel valued or appreciated; we must do everything we can do to keep them in an ever-evolving competitive world. Modern luxury encompasses new facets that require hotel brands to be both creative and innovative. Demand for luxury travel will eventually stabilize in 2023 and companies that deploy a comprehensive customer-driven strategy will have the best chances of successfully attracting this lucrative segment.