Different futures for luxury market discussed at NYU forum


NEW YORK — Anyone seeking to understand the evolving definition of hotel luxury needed to look no further than the 38th annual New York University (NYU) Hospitality Conference here earlier this month.

In one spot, the father-and-son team of Alan and Michael Fuerstman were preparing to discuss their luxury Montage brand and Pendry sub-brand on separate panels. On stage, meanwhile, AccorHotels America's chief, Christophe Alaux, was explaining how his company's acquisitions of Fairmont parent FRHI Holdings and high-end home rental service Onefinestay fit into his expansion plans.

The bottom line is that the luxury hotel sector is fracturing and being reinvented to target diverse generational markets. As millennials increase their influence on luxury travel spending and high-end visitors become more time-constrained, the luxury hotel is no longer only about white facades, marble bathrooms and butler service.

Today, architecture and interior design must compete with sheer comfort, lavish service and unique experiences for the attention of potential upscale clients.

And because those two worlds of luxury can't always be accommodated within a single brand, conference panelists found themselves discussing how their hotel companies were either adding brands or tweaking the priorities of the existing ones.

Nowhere was this approach better exemplified than with AccorHotels. In December, the Paris-based hotelier, whose brands include Sofitel and Pullman, agreed to pay $2.9 billion for FRHI Holdings, which in addition to Fairmont counts Swissotel and Raffles among its badges. Four months later, the company paid $169 million to acquire Onefinestay, the London-based accommodations service that specializes in renting upscale homes.

Under AccorHotels, Onefinestay, which has an inventory of about 2,600 homes in five cities in various parts of the globe, is planning to expand to about 40 more cities within the next five years.

"It will be a complement to our position with Fairmont," Alaux said. "When you [pay hotel prices] but for a different experience, you should have VIP services. So they may pick up, they may organize housekeeping and they may facilitate the cooking."

Montage Hotels & Resorts is taking a similar, two-pronged approach in adapting to the changing preferences of established luxury travelers while simultaneously increasing its appeal to newer ones. On a panel, CEO Alan Fuerstman spoke of "stripping away the pretentiousness" while discussing initiatives such as improving the quality of his hotels' gyms, broadening healthier menu choices at the restaurants and, in the case of Maui's Montage Kapalua Bay, adding ukulele lessons.

Meanwhile, on a separate panel, co-founder and creative director Michael Fuerstman discussed the launch of Montage's Pendry brand, which will debut with properties in San Diego and Baltimore this year and is planning a West Hollywood, Calif., presence.

"We look at what the rising luxury customer is doing, and we're looking at where their parents stay," Michael Fuerstman said on a panel. "We're all circling around the programming."

Two more examples of luxury stratification could be found a short walk from the conference, where Barry Sternlicht's SH Group opened two hotels last year: the ultraluxury Baccarat and the wellness-via-green-luxury 1 Hotel Central Park.

"There was an opportunity to shake up the luxury space and the lifestyle space," said NYU panelist and SH Group chief development officer Mark Keiser. "The sustainability aspect is really undervalued in the hotel space. No one had really done it from thought to finish."

Noting that most of 1 Hotel's bathrooms don't have bathtubs, he said, "We're looking for what the people truly want, rather than what the industry says it needs."

Such hotels are competing in a luxury sector in which both supply and demand have risen faster than the rest of the industry.

Between 2010 and 2015, the U.S. supply of luxury rooms rose 5.6%, to about 238,000, while the overall industry's inventory rose 3.2%, to about 5 million rooms, according to STR.

Meanwhile, the luxury sector's RevPAR surged 43% during the same period, while the average luxury room rate of $280 a night was more than double the industry's $120 average.

For other emerging examples, that higher rate does not imply formal trappings. Margaritaville Holdings CEO John Cohlan used the conference to discuss how his brand, inspired by Jimmy Buffett's 1977 hit song, "Margaritaville," is in the process of doubling its resort footprint and readying its largest project in Orlando.

While the name implies the informality of flip-flops and fruit drinks, the asking rates at its 9-month-old Margaritaville Hollywood Beach resort in South Florida, running from $315 to $1,000 a night for mid-July stays, suggests a higher-end target.

"People come to a Margaritaville resort to experience their form of paradise," Cohlan said. "Now the challenge is delivering on those expectations."

Higher-end hotel operators insisted that the more-relaxed informality did not include lax service or lower product standards.

"The fundamentals are still great architecture, great service, value and attention to detail," said NYU panelist Homi Vazifdar, managing director at Canyon Equity. "You don't see brands like Gucci or Maserati scrambling to meet a certain demographic."

Still, said panelist Michael Glennie, COO of FRHI Hotels and Resorts, with wealthier travelers having now experienced many of the items formerly associated with luxury hotels, lodging operators now need to provide services and experiences that set them apart from the rest of the industry.

"The consumer in the old days often came to the luxury hotel to marvel at the product," Glennie said. "Now, everyone's got a [rainfall showerhead] in their own bathroom and a bigger TV."


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