Beyond the stars – luxury hospitality trends

6 June 2016

EHMA president Hans Koch examines the drivers and trends of luxury hospitality as a result of the rise of ultra high-net-worth individuals.

According to a July 2015 report published by Transparency Market Research in the US, the global luxury hotel market was worth $148.62 billion in 2014 and is anticipated to reach $195.27 billion by 2021.

A main reason for this development is the worldwide growth of the ultra-high-net-worth individual (UHNWI) population, especially in Asia.

Star ratings still remain a trusted guarantee for luxury hotels. However, as people are more connected than ever worldwide, and a multicultural clientele can easily reach any destination across the globe, the definition of a luxury hotel experience is diversifying. Hence, the star rating concept is not necessarily the only criteria anymore.

What increasingly differentiates luxury hotels from each other are individual guest preferences and needs, service, value for money, interior designs, room size and personal but discrete attention. Subsequently, hotel management companies and general managers are progressively challenged to keep their properties up-to-date, and in line with trends and drivers in the industry, and adapting facilities and services to different expectations and needs of their clientele.

Get with the times

It is a fact that today's travellers are getting more demanding, and that they know exactly what they can expect from published rates and offers. They are used to publishing their verdicts and their impressions via social media and review sites. The earlier 'word-of-mouth' exchange of information has shifted to platforms like TripAdvisor, HolidayCheck and others. It is through such platforms that a hotel finds out how well or badly received it is by its guests. Thanks to the internet, travellers can find out everything they need to know for their next hotel booking with one click - instantly - via smartphone, tablet or laptop, regardless of where they are on this planet.

It is a fact that today’s travellers are getting more demanding, and that they know exactly what they can expect from published rates and offers.

In today's highly competitive business environment, there will also be more pressure on room rates and profit margins. Fast-changing customer needs and expectations will put more pressure on hoteliers' efforts to keep up with hardware maintenance and improvements. Service requirements, as well as fast-developing communication and digital technologies, will add to the challenges and the sustainability of future success. Substantial investments will be required to meet the expectations for comfort and service.

A hotel's accessibility and location are no longer the only critical factors. Individual experience, services offered and personal attention are becoming more important. Also of importance is what's available around a hotel, such as shopping, cultural and entertainment facilities, and offers that cater to different segments of a hotel's clientele. Such services can include individually designed shopping experiences or destination-related travel arrangements obviously included in respective room rates (for example, individual agreements with luxury shops and brands, or private jet packages).

The best value

In line with today's revenue management practices, such added values lead to a new concept of 'total guest value' (TGV). This includes room revenue and traditional services, as well as specially designed arrangements offered by a hotel. The clear target behind this is to cater, to win and to bind wealthy guests through such unique arrangements and services to a hotel, and subsequently create new revenue sources. Hence, this becomes a more important part of success for today's luxury hospitality business.

Also to be taken into account as a driver and trend of today's luxury hospitality, is a new generation of UHNWI from the Middle East and Asia in particular, which is increasingly attracted to invest in luxury, and high-potential-value hotel properties and chains. Such investments are often traditional luxury hotels in unique locations, where former owners missed out or were no longer able to invest in their properties.

To succeed in the future, investors and hotel management companies in luxury hospitality must have a clear strategy and a vision to make smart investments. General managers must have lots of charisma and empathy, excellent guest contact, and the passion to lead and inspire their team to deliver the best product and maximise profits, thus keeping all stakeholders happy.

Hans Koch is president of EHMA and official delegate for EHMA’sSwiss chapter. Throughout his 35-year career, he has worked at hotel operators all around the world, ranging from Hilton Internationalto ITC Hotels. He is also CEO of KKL Luzern Management.

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