Hotel
development experts discuss how the luxury customer has changed, luring
independents and focusing on organic growth.
LOS ANGELES — In an era of
bifurcation, when luxury hotels are seeing unbridled growth compared to the
rest of the hotel sector, it’s fair to ask whether any segments are undeserved.
Raul Leal, CEO of Miami Beach,
Florida-based Starwood Hotels, said it’s not so much that luxury customers are
underserved as much as the type of luxury customer coming to hotels has changed
in the past few years, as have their expectations.
“We're definitely seeing that
there's more of what we call new money versus old money,” he said. “When you
talk about your traditional legacy, luxury hotel customers that have
been coming for years (compared to “new money” customers), they obviously want
the same thing. They want a high level of execution and service and making sure
that you deliver on that promise.”
As Starwood continues to gather
more customer input, Leal said, the company wants to ensure it offers a variety
of “activations” beyond previous offerings, including wellness, F&B, and
offerings from local partners that can curate different experiences.
“They're just looking for
different things,” he said. “It may be maybe the same thing as 10 years ago,
but the experience has be to more curated. You have to take into consideration
the youth and a lot of money that’s out there right now that want experiences.”
While the panel lodged
complaints about the “hundred” of different brands offered by the biggest brand
companies and whether customers understood what they were and who was offering
them, Leal answered a query about the opportunity to add a new brand to Starwood’s
current offerings of 1 Hotels, Baccarat and Treehouse. He said that opportunity
might exist, but the conversation made him wonder if it was necessary.
“There’s probably an opportunity
for us to create another brand. But if you listen to this conversation, we
probably shouldn't,” he said. “We are very deliberate about the brands that we
are growing… I think there will be some opportunities with some brands out
there and assets that have reached a level of losses… and we can step in
and acquire the hotel, and if it's a good box and good market that fits one of
our brands, that's a big part of our plans, especially for Treehouse.”
Leal was part of the “Boardroom
XXV: Growth Gameplans” panel on the second day of the ALIS by Northstar
conference at the JW Marriott/Ritz-Carlton Los Angeles L.A. Live in Los
Angeles. The panel included Joseph Bojanowki, president of Chevy Chase, Maryland-based
PM Hotel Group; Christopher Hartley, CEO of Dubai-based Global Hotel Alliance
(GHA) and John Murray, president and CEO of Newton, Massachusetts-based
Sonesta International Hotels Corp. Daniel Peek, president, Americas for JLL and Mark
Owens, vice chair for Colliers, co-moderated the panel.
The risk of
‘generic’ luxury
For Hartley and GHA, the world’s
largest collection of independent hotel brands, his biggest concern is luxury
hotels that don’t offer anything extra or special.
Generic luxury is a risk where it becomes very difficult to justify the rate premium if you're just offering a standardized luxury experience and it’s somewhat superficial.
Christopher Hartley
“Generic luxury is a risk where
it becomes very difficult to justify the rate premium if you're just offering a
standardized luxury experience and it’s somewhat superficial,” he said. “You have this huge luxury segment and you have to have a completely different type
of experience, and it's very difficult to deliver that... There's only so many
people who are willing to pay $1,000 (a night) if they’re only getting a
generic experience.”
That creates a real opportunity
for the types of hotels in GHA’s network, or for the types of hotels it is
trying to get to join its network.
“We have a list of about 300
independent brands around the world sitting out there, operating on their own.
They're trying to figure it all out… They want to stay independent,” Hartley continued.
“Our growth comes from the opportunity to expand into markets that are becoming
popular internationally. In Japan, we're going to be adding assets via the
independent route there this year.”
Those growth opportunities for
GHA aren’t limited to top international destinations with favorable exchanges
like Japan, Hartley said.
“In other emerging markets that
we don't talk about as much, like Brazil, Indonesia, India, they've got huge
middle-class wealth that's expanding rapidly now, and you're going to see these
markets starting to move, and they're going to create their own hotel brands
and they’re going to have independents there,” he said. “We see that
opportunity to expand.”
One of the draws for his
organization, Hartley said, is the opportunity to help independent brands
expand their customer base.
“The challenge for us is how do
we get that message to consumers,” he said. “Does AI make an opportunity for us
to continue to promote independents?”
Meanwhile, Murray said there are
numerous growth opportunities for companies like Sonesta in more affordable
hotel segments.
“The vast majority of Americans
are not staying in ultra-luxury or luxury hotels,” he said, noting that most of
them are staying in lower-priced or economy hotels, “So, there's a lot of growth
opportunity there.”
That’s why Sonesta continues to
lean so heavily into its franchise business, Murray said.
“The margins are good. There are
a lot of family-owned and operated hotels that are profitable, which is why our
partners have been gradually selling select-service or mid-priced hotels,” he
said. “We've been converting them from managed to franchise. Keeping them in
the brand is enabling us to become a little bit more fee-generative and expand
profits.”
Growth through
outperformance
Bojanowski said PM Hotel Group
is focused primarily on organic growth over the next few years, mainly because
of the three companies it has acquired or merged with in recent years.
“The foundation of stability is
to be able to deliver growth via the owners that
we're working with through those acquisitions,” he said.
For us, it's operational outperformance. It’s RevPAR through market share… It's customer loyalty. It's the things that drive organic growth.
Joseph Bojanowki
The other things PM is focused
on are outperforming its peers, especially in an environment where RevPAR
declined without a recession last year and is projected to decline again in
2026.
“For us, it's operational
outperformance. It’s RevPAR through market share… It's customer loyalty,” he
said. “It's the things that drive organic growth. Outside of that, we will be
focused from an acquisition perspective on where we might be able to accelerate
market penetration in a geographic area that we are not in.”
But organic growth in an anemic
revenue environment is challenging, Bojanowski said.
“You have to outcompete. You have to grow market share,” he said. “There's money
for some, but there's definitely not business enough for everyone and there'll
be some winners and losers.”