If you want to know what our industry will look like in the future, look no further than at what hotel developers are talking about now, for they take into consideration the anticipated trends in consumer behavior, design and sustainability, and incorporate all that and more into their blueprints. At the International Hospitality Investment Forum (IHIF) in Berlin in May, investors and developers met to forge new relationships and make deals for future hospitality projects. One panel at the conference, which is produced by Questex, caught our eye, “The Evolution of Luxury, from Hotel to Residential.” The panel comprised executives from several major hotel companies. It was adeptly moderated by Ömer Isvan K., president of Servotel, a consultancy in global hospitality and real estate development, based in London and Istanbul, servicing Western and Eastern Europe, the Americas, Africa, the Middle East and Asia.
Panelists included Willemijn Geels, VP of development for Europe for IHG Hotels & Resorts; Daniel Wakeling, VP development of luxury & residential, Europe and Africa, Hilton; Jaidev Menezes, VP, mixed-use development (EMEA), Marriott International and Ingo Schweder, CEO of GOCO Hospitality and managing director of Horwath HTL Health and Wellness.
We’ve provided an abbreviated version of the lively discussion to provide you with this most international view of what’s to come on the luxury landscape.
Ömer Isvan K., president, Servotel: Luxury, in its own, is a very elusive word. Perhaps in our industry, it’s one of the most overused — rightly or wrongly — but I can bet you if we had a competition to define luxury with 10 people, we would definitely have 10 definitions, and they will not be very similar.
So, one of the attempts that we want to make, also, here is to define what luxury actually means so that it is in context. Otherwise, luxury is quite meaningless on its own.
So, my name is Ömer. I’m the founder and president of Servotel. We’re basically advising investors around the world, particularly in the development of hotels, resorts and residential.
Willemijn, we’ll start with you, and if you could kick off the introductions.
Willemijn Geels, IHG Hotels & Resorts: I’m VP of development for Europe for IHG Hotels and Resorts. We’re one of the global leading hotel operators, mainly in the business of franchising and managing hotels on behalf of our owners.
Our portfolio currently spans 17 brands, ranging from the essentials category with Holiday Inn, Holiday Inn Express through premium, Crowne Plaza, all the way into luxury and lifestyle portfolio. It’s the luxury and lifestyle brands in the last couple of years where we’ve really rounded out our portfolio.
The most familiar is the InterContinental brand, but in the past few years, we have added to that through either acquisition or brand launches. We’ve added Kimpton; that originated from the U.S. and we’re now developing that globally. We’ve added Regent and Six Senses on the uber-luxury level. We’ve recently launched a more entry-level luxury brand, which is called Vignette Collection; that is more of a soft brand for conversion of existing properties that seek affiliation. So, with all that, we’re really present and willing and keen to grow in the luxury and lifestyle segment.
Daniel Wakeling, Hilton: My role is focused on growth of our luxury brands, which include Waldorf Astoria, created after the original in New York, which is currently undergoing a pretty major refurbishment, and will open in a couple of years; Conrad, a more contemporary version of a luxury brand and the newly created LXR, a soft brand targeting hotels that have their own brand equity and unique story behind them, that want to join our system to leverage the power of the booking engine.
We’re a big company with 18 brands and over 6,000 hotels globally. But in the luxury space, we’ve started to try to create a little bit more of specialization.
When my role was created six years ago, it was really out of necessity. We’ve got developers right across EMEA, but luxury deals tend to take a lot longer. They’re a lot more complex. There’s a lot less franchising [in Europe], so we separated the two from a development function. Then, that also follows throughout the business with sales and marketing, and the engine that supports all of our brands. On top of that, we have what we call the “luxury advantage,” which is that all the people focused on the commercial part of our business just do luxury.
The other thing that I do are any projects that have a branded residential component, whether that’s one of those three luxury brands, or any of the other brands, which we have with Hilton. We’ve even done some Double Tree residences.
I lead those deals, and work with our developers to help them navigate those types of contracts, which are, I think, a really growing part of our industry and our business. We’ll talk about that, I’m sure. But, you know, the fact that Jaidev is up here, and he’s focused on mixed-use projects I think tells you that residential and branded residential is becoming a bigger part of the hospitality space.
Ömer Isvan K: Indeed. Jaidev, pick up from there.
Jaidev Menezes, Marriott International: I look after mixed-use development for Marriott for Europe, Middle East and Africa. Essentially, looking at growing our branded residential business—a super exciting part of the business—and effectively looking after any projects that have a mixed-use component, whether residential pieces co-located with the hotel, as well as standalone branded residences.
Of Marriott’s 30 brands, we use residential for our luxury brands and our premium brands. We have more than 200 projects in the portfolio at the moment, about 110 open and about 90 in the pipeline. About three-fourths of those, as you would expect, are in the luxury space. So [that includes] Ritz-Carlton, St. Regis, JW Marriott and Edition. The remaining one-fourth are premium: Westin, Marriott, Sheraton, Le Meridien, etc.
Ingo Schweder, GOCO Hospitality: I’m the founder and managing director of Horwath Health & Wellness. Horwath is one of the largest and oldest consulting companies in the world. We started seven years ago, a dedicated subcompany, which only deals with health and wellness-related facilities. We are very active in the market of destination wellness resorts, entire wellness communities. Right now, our strongest market is really the Middle East, where there is a huge amount of extremely large, complex and diverse destination wellness resorts under planning and development, as well as in China and in Indonesia.
We also own a company called GOCO Hospitality, which is the owner and manager of America’s largest hot spring resort (Glen Ivy Hot Springs in Southern California). We have projects in development in China, Thailand, Indonesia, and most probably—and hopefully next week—in southern Germany.
Ömer Isvan K: Let’s kick off with the word “luxury.” It is an elusive and overused terminology. One of the classic understandings of luxury in our industry was related to hardware, in terms of the space, and the marble, and the glitz, and the gold, and the velvet, and the silk, and the intensity of service, the amount of staff to guest ratio, or the array of services, and the number of facilities you can tick off. Does it have a swimming pool? Does it have this? Does it have that? So, that was a comfortable definition to position a property or brand.
Nowadays, we’re seeing more of an esoteric definition of luxury that is more personal. It is more to do with the final experience, and the satisfaction of personal desires, a reduction of effort.
Ingo, what does it mean, when somebody just simply says, “I have a luxury resort or luxury destination spot”?
Ingo Schweder, GOCO: Today, the key is bespoke and authentic services. Nobody wants to travel anymore to a destination that looks the same as other destinations. I was recently at a conference in a city in India. I looked around, and I could have been in Minneapolis—and that was at a high-end luxury hotel. I was very disappointed when I looked around. So, I believe luxury is being true, offering bespoke services—that are tailor made to my needs.
Ömer Isvan K: True to what?
Ingo Schweder, GOCO: True to the location, true to my individual needs, and true to my desire to feel authentic in that location. In India, I want to feel like I’m in India, and I don’t want to feel like I’m in Minneapolis or in Berlin. I want to be authentic there. I want to touch the cuisine. I want to have authentic wellness services. I want to have an interior that reflects the true elegance and culture that I’m in. I think that’s very important.
Ömer Isvan K: Willemijn, if the demand is shifting and the perception of luxury is shifting to such bespoke, almost curated individuality, how does that clash or correspond with the need of scalability in the sense of international brands or megabrands, basically? I think there is a bit of an oxymoron that we do bespoke authentic, localized, super individual properties, and I’m 150 strong brand chain.
Willemijn Geels, IHG: You said something really interesting. It’s going away from the hardware, and I really agree with that. It’s going to something much more esoteric, or much softer than purely the hardware. It may sound a bit cheesy, but as I was thinking about this, I came up with three Ps.
Basically, it’s personal. These are personal experiences that people want to create, and they don’t want to live the same experience as another customer.
The other one is private. I think they may choose to be really private, secluded, and have the opportunity to go out and do something more outgoing, but in a luxury place. You would like to have something really private, where it’s a private villa, where it’s even an island, where it is a private boat and travel. It’s this whole idea of being with the people you want to be with, but in a private surrounding and not necessarily having lots of other customers around.
The last one, which I think is actually really important, is purpose. What we see a lot of in our customer base is that people are starting to travel much more with a purpose, what does travel do to the environment. Right? It is about the planet. Luxury travel used to be very populous. Now it’s all down to “what is the impact that I, as a luxury traveler, will have on the planet?” People are much more mindful around these things.
That’s what we try to bring into our hotels as well because yes, surely, we are a big company. We have lots of brands, but each of the brands is different. By no means is it a cookie-cutter, here’s-your-standards book, you have to roll it out in each hotel in the same way across the world. We’re much more into developing something that is fit for the location and offers what our customers are looking for.
Ömer Isvan K: Jaidev, how does the word “luxury” translate into residences?
Jaidev Menezes, Marriott: On the residential side, we start looking at it from the developer’s perspective first. So, there are three stakeholders that we look at. There’s the developer on a residential deal who’s looking to build, develop, market, sell, exit. You’ve got a buyer who’s in it for the long-term, who’s acquiring the unit, who’s going to either live in it or potentially rent it out and is concerned about resale. And you have the operator to make sure that it stays within the brand guidelines.
So, on the residential side, we start with a blank canvas. Each location is unique. Each market is unique. Each developer is unique. So, it’s easier for us to start with a blank canvas and look at designing the product to suit that market from a residential perspective. So, looking at things like unit mix, unit sizes, we, as the brand, should not dictate what the unit mix and size is for that project.
So, for example, in our luxury brands, we prefer to do no studios. We’ve got minimums so that a one-bedroom should be X square meters. But if that market demands more one-bedrooms or two-bedrooms versus three-bedrooms, we allow the developer to do that. Because if you don’t, the product won’t sell.
It’s in the common areas where we bring in the design elements for the brand, whether it’s Ritz-Carlton, St. Regis or W.
Ömer Isvan K: Dan, in terms of the individuality that people are looking for versus scalability, do you see any conflict between the two? How do you actually address the conflict?
Daniel Wakeling, Hilton: In the luxury segment, you have to be reflective of the area you’re in. That’s how you ensure you’ve got authenticity. The expectation from luxury travelers now is that they want something different. They don’t want to spend the amount of money they’re going to have to spend to travel halfway around the world and not feel the location that they’re in. That’s why they’re traveling.
There is still a place for the cookie-cutter hotel model. Otherwise, we wouldn’t be sitting up there, the three of us, with the amount of hotels we have. But when you are buying luxury, your expectation is that it’s going to be authentic, it’s going to be reflective of the place I’m in, and the product is going to be of a certain level of quality.
Ömer Isvan K: The title of this session is “Evolution of Luxury.” Everybody here is identifying pretty strong trends that, all of a sudden, emerged during the pandemic, got amplified during the pandemic. Which of these have staying power and how much of it will fizzle away?
Daniel Wakeling, Hilton: Like everybody’s going to be on Zoom, right? No one’s ever going to have an in-person meeting again, yet there are two-and-a-half thousand people here [at IHIF] right now.
Ingo Schweder, GOCO: A trend I can see is that the wellness industry is a $4.7 trillion industry. Right now, every hospitality company that is not already in it is trying to move in there. But we can also see that there is a real issue of “well-washing,” where companies like to jump on it, but their model is really a small pampering facility, that is not really meaningful and not profitable and it’s managed in that manner. You can see this in those brands that have their wellness facility managed by somebody who reports to the front office manager, but they’re billing it as a $10 million wellness center, and they don’t know how to really profit from it.
Then you can see other companies that buy others and want to quickly jump on the wellness bandwagon, but they do it half-heartedly. So, I think one needs to be careful of “well-washing” because wellness is such a strong influencer, and it will influence more and more urban centers as well as destination resorts.
Ömer Isvan K: Dan, what strong trend do you think will move ahead in the next 10 years?
Dan Wakeling, Hilton: I think in the luxury space, it’s certainly privacy, particularly for resorts. Having your own sense of place where you can have your family, you can have your own pool. So, the sense of space whilst being in a location, where if you want to you can go to the restaurant and interact with people. You can go to the beach, but you can also retreat to your space. That’s one of the trends in resort design that we’re seeing.
Ömer Isvan K: Tracking the luxury market as we do around the world...we saw the [private accommodations with access to hotel amenities] formula go through the roof in terms of occupancy, ADR and for average length of stay.
Willemijn Geels, IHG: I fully agree. I think there is definitely staying power in that. I do think, we will see an increase in demand, not only relating to the pandemic. There is still a large number of people who actually have the money to spend, and they will want to spend it.
If you look at booking patterns and search engine research, “luxury travel” is one of the most searched for keywords, which is quite impressive.
The other point I wanted to pick up on is the length of stay. I do think that [will be extended] to a certain extent, because people may go further for travel. We’ve been kind of confined to Europe for a bit, and it was nice to do the city trips and the English countryside and all of that. But, at some point, people will want to go further, and they will want to stay longer as well. Which is, then again, linked with the residential piece because you want to have that mix of units for your different types of clients.
The other big trend we see is that luxury customers are getting younger and younger, and people have the money to spend, and they want to go in luxury hotels. They really want to have that curated experience.
Ömer Isvan K: I want to throw out something very quickly. It once was, in the luxury consumer market, when it came to hotels, there was more price sensitivity for luxury travel than with luxury goods. I’m feeling the recent trend that we’re plotting is that there’s now less price sensitivity for hotels. Are you seeing that?
Willemijn Geels, IHG: That is true only for upper luxury. In my portfolio, that is true for Six Senses and Regent. It’s not necessarily true for InterContinental. And there is much more price sensitivity at entry level.
Daniel Wakeling, Hilton: You see that when a new hotel opens in a market where it transcends the experience and the product of what was currently available. Then, your feasibility team will look at the existing best hotel in the market, maybe it’s charging $500 a night. If this new hotel is going to be better than that one, what is the [nightly rate]? It could be $550, it could be $1,000. You don’t know until you test it. That’s, I think, down to how aggressive your salespeople are, and how much people really want to come and stay with you. I think, through the pandemic, we saw that because there was only a certain number of these types of [luxury]products. There’s only so many hotels in the Maldives where you can escape the world. They all did very well. So, there’s supply and demand.
Ömer Isvan K: I’d like to look into the audience to see if we can answer any questions.
Audience Member: How are the brands thinking about the luxury all-inclusive space?
Willemijn Geels, IHG: We’re not yet very present in the all-inclusive space. It is a segment we’re keenly looking at and exploring. I want to tie it back to one of our brands. What we’ve found out with Regent is actually if you pay that level of price, you kind of expect a lot to be included. So, with Regent, we stopped charging for all the extras people don’t want to pay for because they’re paying 2,500-3,000 euros a night. So, I do believe that on the luxury, there is really something around all-inclusive. Having said that, for IHG as a company, we’re not yet very present [in that market].
Ömer Isvan K: A lot of companies now are actually moving into it. Only today, Accor announced a whole new division, basically looking at luxury all-inclusives.
Jaidev Menezes, Marriott: We’ve made a few recent acquisitions in the Caribbean/Latin America region in the all-inclusive space. We’re also looking at additional platforms. We’re looking at selective markets in EMEA. So, it’s definitely an area that we’re looking to grow.
Ömer Isvan K: There’s a redefinition of all-inclusive, let’s not forget, because all-inclusive had a connotation that it was associated with mass tourism to operate a type of packaging.
Whereas if you go to the Maldives to a private island resort, I mean, yes, it is all-inclusive, whether you’re signing a separate check each time you drink a coffee or not. It’s just an academic exercise.
Ultimately, the day you check out, you’re going to pay a price. Whether somebody charges that price to you at once or by collecting signatures from you is basically academic.