The luxury hotel segment is growing faster than the midscale, according to Helena Amaral Neto, partner, LUXULTING, while over the last ten years luxury has become more accessible, more inclusive and less formal.
However, from an investment perspective, budget and economy hotels are often more profitable and give investors a quicker ROI.
“Luxury is just about charging a lot of money and hopefully making a lot more profit,” said Ramsey Mankarious, CEO, Cedar Capital Partners. “But, ironically, you can make more money in the limited service budget segment, percentage wise, much more money. You get your money back in seven years. If you own a beautiful luxury hotel, you get your money back in 20 years. It takes much, much longer.”
However, most luxury hotel owners invest for purely financial reasons and not for the glamour or their ego, he believed, and finding the best local partnerships was essential for successful luxury hotel projects.
The key reason for the increase in luxury hotel product is the doubling of global wealth since 2012. From 2012 to 2022, the number of adults with a net worth ranging from $1 million to $5 million grew from 25.6 million to 51.5 million, according to Visual Capitalist research.Despite economic challenges such as inflation, this growth in the millionaire population is a clear indicator of the expanding wealth at the upper echelons of society.
What do these luxury guests want? Unique, curated experiences, with a growing interest in sustainability, said Maud Bailly, CEO, Sofitel, MGallery and Emblems, Accor.
MGallery is a collection of boutique hotels each with a different story to tell, she explained. They tend to be conversions, with Domaine de la Reine Margot Paris Issy previously a monastery and The Porter House Hotel in Sydney formerly a tannery.Luxury guests are a demanding clientele who want “instant rewards, instant attention and instant personalization,” said Bailly.
Stephane Baghdassarian, senior vice president development – hotels and restaurants, Barrière Group, added: “It’s about discovering something that they don't know, that they haven't seen yet and that they can also easily communicate to their close ones. We try to put in places which are Instagramable.”
For example, Barrière Group has a restaurant in Dubai with a rooftop view of the Burj Khalifa where they have installed a typical Parisian streetlamp and bench, so customers can take photos and capture in their social media posts the duality of the restaurant’s location and its cuisine and heritage.
He added that Barrière tends to look for out-of-the-ordinary opportunities and is currently developing a resort in Lapland.
Bailly further underlined the importance to offer something distinctive, citing examples from Mexico City and Dubai where cultural fusion enhances the guest experience. Sofitel Dubai The Obelisk, for instance, merges modern French art de vivre and ancient Egyptian heritage.
Addressing the challenges in luxury food and beverage (F&B) operations, Mankarious questioned the viability of hotel restaurants: “It’s so hard to have a hotel restaurant that’s successful.”
Bailly acknowledged the lower margins of F&B compared to accommodation and the struggle to attract culinary talent.Baghdassarian of Barrière, however, said that because his group has experience of running casinos and theatre shows, they have been successful in injecting vibrant atmospheres into their restaurants with the right selection of music and performers.
He said: “By creating vibrant, entertaining atmospheres, people tend to drink more. So that generates beverage revenue on which you make more margin. People tend to have dinner later as well. So, you have one service, two services, sometimes three services per night.”
When it comes to training employees for the luxury sector, John Philipson, COO, Cheval Collection, noted a significant shift in the last five years. “We used to spend probably 90% of our time focusing on the customer journey, the customer experience,” he said. “We probably spend 50 / 50 now on the employee journey; creating the culture and the training because it is tough to find talent and it's tough to retain talent. So you really have to spend a lot of time and effort creating that culture. Hire the attitude, the positivity, and then we can train the skills.”
Co-branding of hospitality and luxury brands seeks to enrich the guest experience and create a sense of community, noted Neto. A prominent example is the recently opened Aston Martin Residences in Miami. The 66-storey tower features 391 ultra-luxury condominiums and amenities including a fitness centre, art gallery, cinemas and a spa.
Baghdassarian added that Barrière Group has partnered with Christian Dior for interior design, and with a high-end photography studio in Paris: “Guests can stay in the suite and have their family portrait shot by the professional photographers,” he said.
All the above quotes are taken from the IHIF EMEA 2024 panel: Limitless Luxury: Redefining the High-End Hospitality Experience