USA Today
When I spoke with Rosewood Hotels CEO John Scott, I first asked him about the state of the luxury hotel business. It's widely know that luxury hotels - Rosewood's specialty - have been suffering more than any other type of hotel.
The most-expensive hotels and resorts are hurting more than, say, the Holiday Inns of the world because they're facing a double whammy - the recession coupled with the so-called AIG effect. The term was coined last fall after it was revealed that bailed-out insurance giant AIG hosted a lavish, spa-filled $400,000 corporate retreat at a St. Regis resort just days after receiving billions in federal aid. News about the trip sparked a national debate about corporate entertaining habits and, ultimately, drove an untold number of companies to cancel their five-star hotel gatherings, and luxury cruises.
Q. What is the state of luxury lodging right now?
A. Certainly luxury has come under a lot of pressure, both economic pressure or perception related. (Before the downturn) it was almost a badge of honor to have stayed in the biggest suite and to have paid the most for it.
In the current environment, people are redefining themselves by discretion. Conspicuous consumption is dead, at least in the near term. People are trying to find value. They're still traveling to luxury hotels, but they're looking for really unique experiences. In many instances, they really do want to seek out value and they may not be traveling quite as often.
Industry data shows that the luxury segment has been disproportionately hit vs. the other segments, (with revenue per available room) down 25% and even higher in some markets for 2009. We have 18 hotels that are geographically dispersed.
Q. What does the environment mean for Rosewood since you only operate top-rated hotels?
A. How I compare myself in a difficult environment is how we're doing vs. our competitive set. So, (our revenue per available room is) down overall 20%. If I look at the industry average, it's usually down 22% to 25%. And then, really what I focus on is not that big economic indicator. I look at each one of my hotels and ask: How are you performing in a down market? Are you continuing to hold your share?
We look at (revenue per available room) on individual hotels compared to their market competitors (for instance, The Carlyle vs. New York City hotels, Rosewood Mayakoba vs. other luxury resorts in Playa del Carmen, Mexico). In each market, we are holding or growing our revpar. I'm quite pleased to say that we are holding or growing against the competitors.
Q. Rosewood isn't exactly a household name, so does that in some way help you in today's world?
A. My team and I talk about that. It's good news, bad news for us. One, we are an emerging brand. We are reasonably well known to a select group, but we're certainly not Ritz Carlton or Four Seasons. We're trying to get there, but we're not there yet.
(Last year) we began to see companies red-line top brands as an easy way to save money. They said, "I don't want to see on your expense account Ritz Carlton or Four Seasons or maybe Mandarin Oriental." From that perspective, it's not entirely rational because the prices may be the same (as a Rosewood hotel), but it's certainly political. A lot of these (companies) are under external pressure, be it from the government or their employees. If you just laid off people and now you're staying at the Four Seasons, how does that look?
We've been broadly painted by the same brush. But that's part of the story.
Q. What's the other part of the story?
A. The other side is that there were a lot of aspirational travelers - people from lower levels within organizations who were trading up because of the exuberance of the times. The expectation of readily available credit, of a big year-end bonus. The expectation that the US economy was always going to be strong.
This aspirational group of travelers now has less ability to travel and stay in luxury hotels. We had some of them, and that piece of business has been hurt. But our core traveler tends to be a little bit older, tends to be the most senior and tends to be more affluent and more worldly.
The most-expensive hotels and resorts are hurting more than, say, the Holiday Inns of the world because they're facing a double whammy - the recession coupled with the so-called AIG effect. The term was coined last fall after it was revealed that bailed-out insurance giant AIG hosted a lavish, spa-filled $400,000 corporate retreat at a St. Regis resort just days after receiving billions in federal aid. News about the trip sparked a national debate about corporate entertaining habits and, ultimately, drove an untold number of companies to cancel their five-star hotel gatherings, and luxury cruises.Q. What is the state of luxury lodging right now?
A. Certainly luxury has come under a lot of pressure, both economic pressure or perception related. (Before the downturn) it was almost a badge of honor to have stayed in the biggest suite and to have paid the most for it.
In the current environment, people are redefining themselves by discretion. Conspicuous consumption is dead, at least in the near term. People are trying to find value. They're still traveling to luxury hotels, but they're looking for really unique experiences. In many instances, they really do want to seek out value and they may not be traveling quite as often.
Industry data shows that the luxury segment has been disproportionately hit vs. the other segments, (with revenue per available room) down 25% and even higher in some markets for 2009. We have 18 hotels that are geographically dispersed.
Q. What does the environment mean for Rosewood since you only operate top-rated hotels?
We look at (revenue per available room) on individual hotels compared to their market competitors (for instance, The Carlyle vs. New York City hotels, Rosewood Mayakoba vs. other luxury resorts in Playa del Carmen, Mexico). In each market, we are holding or growing our revpar. I'm quite pleased to say that we are holding or growing against the competitors.
Q. Rosewood isn't exactly a household name, so does that in some way help you in today's world?
A. My team and I talk about that. It's good news, bad news for us. One, we are an emerging brand. We are reasonably well known to a select group, but we're certainly not Ritz Carlton or Four Seasons. We're trying to get there, but we're not there yet.
(Last year) we began to see companies red-line top brands as an easy way to save money. They said, "I don't want to see on your expense account Ritz Carlton or Four Seasons or maybe Mandarin Oriental." From that perspective, it's not entirely rational because the prices may be the same (as a Rosewood hotel), but it's certainly political. A lot of these (companies) are under external pressure, be it from the government or their employees. If you just laid off people and now you're staying at the Four Seasons, how does that look?
We've been broadly painted by the same brush. But that's part of the story.
Q. What's the other part of the story?
A. The other side is that there were a lot of aspirational travelers - people from lower levels within organizations who were trading up because of the exuberance of the times. The expectation of readily available credit, of a big year-end bonus. The expectation that the US economy was always going to be strong.
This aspirational group of travelers now has less ability to travel and stay in luxury hotels. We had some of them, and that piece of business has been hurt. But our core traveler tends to be a little bit older, tends to be the most senior and tends to be more affluent and more worldly.
