Good Times Keep Rolling For Hotel Industry: More Brands, More Luxury

Miami Beach Edition Hotel. Photo: Phillip Pessar

Although the positive cycle may have peaked for the hospitality industry, its leaders expect the good times to continue for at least a couple of more years, according to speakers at the NYU International Hospitality Industry Investment Conference this week.

That means more development, more brands, and more luxury product that travel agents will be targeting. As Choice Hotels President and CEO Steve Joyce pointed out, “just because the cycle has peaked doesn’t mean the cycle is over,” he said. “We’ve had demand outstripping supply for six years now.” Following are some highlights of the conference.

Brands proliferate 
Even at a hotel conference, there was no avoiding the Trump name. At a teeming event at Trump Tower, Trump Hotels CEO Eric Danziger and Donald’s daughter Ivanka Trump, who heads up Trump Hotels with her two brothers, announced a new lifestyle brand, though they provided few details. It will be a four-star brand, with the first conversions of existing properties to come later this year. Danziger said the new brand will take off from the “boom in social clubs” like Soho House, which are all about “connections.”

A panel on emerging brands showed that many non-lodging companies are seeking to enter the hotel space, seeing opportunity for specific niches. Carlos Becil, chief marketing officer for Equinox, the fitness club chain, said the brand’s first hotel will open in 2019 in New York’s Hudson Yards development. It will be attached to a 60,000-square-foot health club. The hotels will “seek to maximize guest potential” through fitness and other areas.

He noted the Millennials will be nearing 40 years old in the next few years, “and we think we can serve their needs by understanding what they want. For instance, we know that a workout is the new happy hour.”

Becil said Equinox has a million current and former members, providing tremendous data from which to draw. Aside from health clubs, the hotels will have spas and generous community spaces. Noting that a third of the population now wears fitness devices like the Fitbit, Becil said the hotels will be involved in planning and programming guests stays. “The data will be powerful for creating personalized experiences.”

Other panelists said there is space for new brands even in the face of industry consolidation, which has brought transactions like Marriott acquiring Starwood (the deal to be completed soon). Mark Keiser, chief development officer for the SH Group, led by Starwood founder Barry Sternlicht, said the company’s 1 Hotels are targeted at sustainability, which has been “undervalued” in the industry. He said the high-end customer has changed, and instead of a lavish bathroom is seeking more meaningful amenities and services. “It will be interesting to see how the ratings services respond to hotels that are not luxurious as we have known it,” he said.

And Ellen Brown, executive vice president, acquisitions and investment for Denihan Investments, which operates multiple brands, said the industry has learned that “each hotel has a different customer base. That enables us to provide a high-touch, high-customized experience.”

The challenge for some of these brands is to get consumers to accept that a well-known non-hotel brand is now in the lodging industry. Said Becil, “We have lots of work to raise awareness that we have hotels and not just health clubs.” And moderator John Melicharek, a partner in law firm BakerHostetler, said another non-traditional brand, Nobu, “has had to overcome guests thinking of that brand as jut a restaurant.”

Luxury reinvented: community focused residences needed
The face of luxury continues to change, according to a panel on Reinventing Luxury. It now involves significant community involvement, personalization, continuously connecting with guests and knowing everything about the guest’s needs and desires. Kevin Montano, senior vice president of global development for Edition Hotels, a joint venture between Marriott and hotelier Ian Schrager, said every Edition has a cultural director whose job is to create programming and events that generate buzz. “If a guest does not see locals in the lobby, they will leave.”

Richard Baker, executive vice president-operations director-Asia for Mandarin Oriental, said that while the Mandarin Oriental in Bangkok (the original Oriental Hotel, which is 150 years old) “will always have butlers, we are also spending $150 million on modernizing the hotel through technology so we can customize experiences, and updating our offerings in spa, wellness, and f&b. We may not have white tablecloths but we will have Michelin-starred chefs.”

Technology will be key to the new luxury. James Erlacher, vice president of development for Accor Hotels, said the company is spending $200 million on a new mobile platform to enable better communication with guests. And Yvonne Choi, chief development officer for the Cachet Hotel Group, a new Asia-based company, said the hotel industry is way behind on technology, and a new platform called Cachet World will allow travelers to totally control their trips with algorithms that predict behavior.

With all that, Kim Richards, president of luxury hotel developer The Athens Group, said “the basics of luxury haven’t changed much. You still need to create a certain environment. I recently met with Isadore Sharp, the founder of Four Seasons Hotels, who said every generation thinks it is unique. But as those generations grow older they still want the same things as their predecessors. It’s more a matter of style.”

Richards pointed out that luxury hotel brands are a relatively new product, born in the 1980s. “That’s why standard rules had to be written for them at that point. That was the first step in developing luxury lodging and now we can move beyond that. I don’t know how many times I’ve heard that golf is dead or tennis dead. But they’re not.”

Choi said there is great opportunity in hotels that are serious about being green. “It’s not just LEED certification,” she said; “it’s about being totally committed to being green, as is the case with our URBN brand

Also on the luxury front, there has been a return to the days before the downturn when almost every luxury hotel project requires residences, retail, or offices to make it economically viable. Richards said, “Residences are critical in most situations. There may be four markets in the U.S. that can support a luxury hotel on their own—Manhattan, Miami, Napa Valley, and on the beach in southern California. A standalone luxury hotel would be very difficult. Almost all of our development includes residential and retail. The hotel is often an amenity for the development.”

But the strength of the luxury hotel market is clear, according to Montano. He said Marriott, which does not usually own hotels, invested $1 billion in the first three Edition hotels, which were all sold before they even opened.