BITAC Luxury Panel: A Look at Today’s Luxury Challenges
While the luxury side of the hospitality industry is currently in a prosperous period, challenges still remain for luxury owners and operators.
Three executives from top hospitality firms spoke on issues facing luxury at the 2023 BITAC Luxury conference on Tuesday at the Caribe Hilton in San Juan, Puerto Rico. The panel was the final of three industry panels at the conference — the second BITAC conference of the year. Speaking in front of a sold-out audience, the panelists gave their perspectives on the panel topic during the 25-minute session.
As with the panel from Monday, this panel began with a question about the shifting boundaries of luxury.
Rich Cortese, Sr. VP Caribbean Development for Aimbridge Hospitality, mentioned the rapid inflation in luxury property acquisition costs.
Rado Ivanov, VP Global Design US & Canada for Marriott International, said that luxury used to be mostly about the “hardware” — the physical design elements such as marble floors and pool size and design. Now, he said luxury guests aren’t just paying for the physical space.
“They’re paying for these bespoke and unique experiences that we’re creating for them, and that’s what drives the higher rates,” Ivanov said. “That’s what drives the higher occupancy. And at the end of the day, if you have to put it in a single word, it will be seamless.”
In the American market, consumers mostly now spend on one big vacation, said Jak Severson, CEO for Experience Resorts, LLC.
“Especially since the pandemic, the ability and desire to spend into a much more expensive, much more bespoke vacation is off the charts,” he said.
Getting into some of the major challenges facing the luxury space, Ivanov feels the biggest challenge is satisfying the demand for luxury. He said average daily rates and revenue per available room are well above pre-pandemic levels, but there aren’t enough luxury destinations to keep up.
“Luxury deals take a lot longer to happen,” he said. “They need special locations, they need much bigger sites, they need higher budgets. And at the end of the day, getting from point A to point B to balance the demand is where the challenge is.”
With the pandemic in mind, Cortese said the luxury boom was in part fueled by pandemic-related travel impacts.
“It’s just that the wealthy community during this period, they just started to take longer trips,” Cortese said. “They weren’t tied down to their offices as much. And then nobody cared about what they paid anymore. You know, these hotels that I’m familiar with, they’re all in excess of $3,000 rates.”
The group was asked about the frequency of using local suppliers in designing a luxury hotel. Severson said many properties he knows of use local suppliers, adding to the authenticity of experiencing a place through the hotel.
“When we walk into a hotel room, and we see the same painting that we saw in another hotel or even in a magazine, you know, you start to realize how homogeneous the hotel industry can be unless it tries really hard to break out of that,” he said.
To wrap up the panel, the trio talked about where they see luxury going in the next few years. Ivanov said that hospitality is going beyond hotels into “branded residences.” Severson believes experiential luxury is everything in the age of Instagram. Cortese thinks spending will continue to be high as amenities are added and enhanced.
“They’re enhancing the assets that they’re providing the person, whether it’s the guest room, or the surroundings that they rent or the environment that they have … I think that’s the direction to keep people spending money,” he said.