Luxury brands are recognizing a shift in the industry as a younger consumer type is driving the segment, and brands aren’t afraid to branch out and develop in new markets for the first time.
GLOBAL REPORT—Leaders of luxury hotel groups continue to tap into the experiences that luxury travelers desire, and selecting the right markets to enter is key.
J. Allen Smith, president and CEO of Four Seasons Hotels and Resorts, said millennials are playing an important role in defining future innovations and trends because they have “tremendous spending power.”
On an annual average, he said, millennials spend more than $2 billion on travel since they place a greater value on experiences.
Sources agreed the location of where they choose to build a hotel or convert an existing property is a major factor in catering to today’s consumer.
Where development is hot, how it’s evolved
Smith said Four Seasons currently operates 110 hotels and resorts across 46 countries and has a pipeline of about 50 properties at various stages of planning and development, equally divided among the Americas, Asia/Pacific, Europe and Middle East/Africa regions. By the end of 2019, he expects 10 more Four Seasons hotels and resorts to open.
Four Seasons will continue to grow in markets where Smith said the brand already successfully operates like London, New York and Dubai, United Arab Emirates, but it will also begin to enter new markets for the first time, he said, such as São Paulo and Athens, Greece.
W Hotels has 54 properties open and about 33 in the pipeline, with an emphasis on markets with a “very youthful, affluent audience,” said Anthony Ingham, global brand leader for W Hotels at Marriott International.
He said W Hotels performs well in big gateway cities with a prominent music, fashion and creative arts scene, both internationally and in the U.S.
Maintaining a relevant, youthful and vibrant lifestyle hotel “has a lot of implications for where we’re building and looking for the new hotels,” he said.
W Hotels is spread across the Americas, Europe, Asia/Pacific and China, Ingham said, and brand developers spent a lot of energy over the last four years beefing up the new-build pipeline in the Americas.
“Once we’re already in the major cities of the U.S., (we) start to look at secondary cities where there’s a sufficiently sophisticated audience,” he said, such as New Orleans and Scottsdale, Arizona.
As far as new markets, Smith said Four Seasons will open the 303-room Four Seasons Astir Palace Hotel Athens in March 2019*, which is the brand’s first foray into Greece. Another first for the brand will be the Four Seasons Hotel São Paulo at Nações Unidas in Brazil later this year.
“We have been looking for the right opportunity to open in Brazil as this is an important outbound market for our global guest base,” he added.
Ingham said W Hotels just entered Central America for the first time with its 203-room W Panama on 1 March and will be adding the 150-key W Costa Rica - Reserva Conchal this November. Other firsts for the brand—hotels either already open or under construction—include W Brisbane, W Bogota and W Kuala Lumpur.
Radha Arora, president of Rosewood Hotels & Resorts, said luxury development has evolved and it’s all about the new traveler type creating the global shift in “ultra-luxury hospitality;” one he calls “affluential explorers.”
“This demographic is less concerned with opulence, pampering and traditional luxury and instead seeks deeper connections, profound authenticity and life-changing insights into the cultures they enter,” he said.
Rosewood Hotels & Resorts currently manages 24 properties in 15 countries worldwide with an additional 16 new hotels under development, Arora said.
In the past year alone, Rosewood has opened four properties in Asia—including Rosewood Sanya; Rosewood Phuket; Rosewood Phnom Penh; and Rosewood Luang Prabang—with an additional six scheduled to open in the next five years, he said. The company plans to open three hotels in Europe.
Arora said the brand is looking to new, undiscovered destinations to shift the “epicenter of culture and ‘cool.’” Rosewood has long had an excellent reputation among North American travelers, he said, but the brand hasn’t always been well-known on a global scale. Over the past several years, Rosewood’s strategy has been to thoughtfully expand its global footprint.
One successful example of this strategy is in Puebla, Mexico, he said.
“While Mexico City has seen a resurgence in popularity recently, very few luxury travelers were aware of the incredible colonial city located just 75 miles east, until Rosewood helped put this special destination on the map,” Arora said.
W Hotels’ current pipeline is 100% new-build, Ingham said, though conversions aren’t completely out of question.
“We’ve (seen) it challenging to make a conversion work and really fit the future model of what a W is,” he said. “Most conversions, in order to create structural changes that we need to make a great W, it doesn’t stack up from a cost perspective. It’s doable, but it’s definitely very expensive to do.”
Smith said Four Seasons grows its portfolio through a combination of new builds, conversions and adaptive-reuse projects.
Conversions in particular, he said, have become a critical part of Four Season’s growth strategy over the last few years.
“We have a proven track record of successful conversions, most recently in the Bahamas where we partnered with owners Access Industries on the conversion of the legendary Ocean Club into a Four Seasons,” he said.
Other recent conversions for the brand include the Four Seasons Resort The Nam Hai, Hoi An, Vietnam; Four Seasons Resort Anguilla; and Four Seasons Resort Oahu at Ko Olina, he said.
According to May pipeline data from STR, parent company of Hotel News Now, there are 14,813 luxury-scale rooms under construction in the Americas, 19,571 rooms in the Middle East/Africa region, 6,058 rooms in Europe and 42,513 in the Asia/Pacific region.
Challenges of entering new markets
When entering a completely new market, Four Seasons generally works with developers who are based in and familiar with that destination, Smith said. And plenty of research is done to ensure the brand’s team is confident in each market it chooses to operate in.
“No Four Seasons property is the same, and there is no set formula for what we can do,” he added. But in many cases, “our entry into a new market helps establish the market as a luxury destination for global travelers.”
Ingham agreed that it’s not so much of a challenge than it is an opportunity, though it still requires plenty of attention on brand outreach.
“Coming new into a market, we have to do a little bit more work than we would in the U.S.,” he said. “For example, to drive publicity and to drive hype, we do a lot of pre-opening activity in these markets.”
*Correction, 20 June 2018: This story has been updated to correct the opening date of a Four Seasons Hotels and Resorts property.