In these challenging times, what extras are the five-star hotels offering to retain or grow their share of the business travel market? Catherine Chetwynd investigates
With room rates in luxury properties starting at around £500 a night in the UK and heading north to levels in the region of €1,000 in Paris, it might seem surprising that any of these hotels has much corporate business.
But as consultant to the industry Melvin Gold points out: “Corporate rates are relatively low. They have to bolster mid-week occupancies with business from good brand name companies. If an organisation is putting enough volume into a particular hotel, they probably achieve a reasonable rate and get the benefits of keeping people happy without compromising on austerity policies or location.”
He says corporate rate discussions are ongoing even at the five-star level, and companies are given incentives to bring in the requisite amount of business.
Location is a key factor and luxury properties are by nature in city centres. Looking at total cost of trip is an important part of keeping costs down and that means keeping collateral spend to a minimum – it is cheaper to put travellers in a hotel from which they can walk to their appointments than have them racking up taxi fares on top of a lower room-rate in a less convenient hotel.
Added-value packages can be negotiated but are not a given. “If a hotel has a commitment to the business traveller, it will give free wi-fi, for example, but you don’t get that normally,” says Gold.
Rocco Forte Hotels tailors packages to client requirement. “If someone is doing a huge number of presentations that require a big media feed, internet is a particularly important element,” says brand managing director Richard Power. “If they are staying at our Manchester hotel and the office is just the other side of the bridge, they could go to the office for breakfast. There is a lot of give and take.”
At Relais & Chateaux property Chewton Glen in the New Forest, “one of the things we major on is the things that are included: wi-fi, water, business services and even our service charge,” says managing director Andrew Stembridge. “We want to make sure guests don’t end up with a huge bill of extras. Corporates object to that – it grates.” Elsewhere, UAE group Rotana provides free internet access to Club Rotana Executive guests, corporate clients and those booking on Rotana’s website.
Nick van Marken is global head of Deloitte’s travel and hospitality advisory practice. He says: “Wi-fi should be treated as a utility in the same way as water and electricity. Why expect anyone to pay extra for accessing the internet? It can have a disproportionate impact on the experience because people think it is penny-pinching. The industry is going to have to catch up with consumers. Players need to invest in the product to remain ahead, particularly in technology – it is an essential element in a hotel stay.”
Rotana recognises this. “It is one example of how we are differentiating ourselves from other luxury brands,” says the company’s executive vice president and chief operating officer Omer Kaddouri.
“Technology is an essential part of the evolution of the industry. However, the purpose of investing in it is to bring added services to the guest and enhance their experience. This can only be achieved if hotels are responding to guest needs and not to the latest technology available in the market.”
Even in the rarefied atmosphere of the luxury hotel, operators are having to be increasingly competitive to attract and maintain market share, and an inherent part of a luxury stay is stellar service. A recurring theme is the desire to offer the kind of service that removes the burden of administration from guests, so that they can fulfil their business objectives unencumbered, which is important for the senior level of business guest likely to be staying in luxury properties.
“The people who are staying with us are probably cash rich and time poor – their time is valuable and they expect everything to be done for them, creating a stress-free environment so that they can maximise their time.
That comes at a price and people are willing to pay for that,” says Rupert Radford-Hardy, regional director of sales for Rocco Forte Hotels.
London’s Royal Garden Hotel has similar aims. Outstanding service comes in many forms and, during the recession, it has been offering regular guests the chance to store toiletries, shirts and suits at the hotel. “That way, they did not need to put their luggage into the hold and their clothes were in their room when they arrived. It was a problem solver,” says director of sales and marketing Mark Anderson.
Rate of attrition
Rates are a thorny issue. Managing director of hotel booking agency BSI, Trevor Elwood, points out that there has not been a big rise in room rates in the luxury sector: “They have reduced in real terms year on year and, in London, additional five-star hotels have come on-line, making competition even greater,” he says. Many luxury properties see reducing rates as undermining the brand image; they do, however, have to be realistic.
“Hotels have got much cleverer at managing their mix of business,” says Rocco Forte Hotels’ Power. “Five years ago, a lot of luxury hotels dealt only with the individual leisure traveller, but they learned that at times there are not many leisure travellers about and so have attracted business travellers.
Revenue management is not just about moving prices, it is about moving the business mix.” To that end, the company has been developing stronger relationships with travel management companies to tap into the small- and medium-enterprise market.
Kempinski Hotels aims to compete on service rather than price. “When it comes to business travel, we have people in the team who are negotiating with corporate companies on RFPs [requests for proposal],” says the company’s vice-president of sales, David Sparrow. “We try to be as competitive as we can but we want to maintain our position in the market. Sometimes, we will include breakfast and add value but it is not about rate cutting. We do not compete on price.”
The Royal Garden Hotel recently completed a four-year £45 million refurbishment. “We have corporate rates that are part of a partnership with people who have been staying here for 10, 15 years," says Mark Anderson.
"We have grown with them. We offer good rates with last room availability, but we don’t have too many. Some hotels have a strategy of doing a lot of corporate rates but cannot fulfil them.”
Part of that partnership is good communication and, during the building works, the hotel contacted customers to warn them about the noise. “It did not affect corporates because they tend to be out of the hotel during the day, but we did see a drop in entertainment business,” he says, adding that the honesty policy has paid off for the long term.
PricewaterhouseCoopers’ (PwC) travel programme is “very rate driven” according to head of UK hotels & venues for PwC Sam van Leeuwen. “We have a rate cap and we have got five-stars that come in under that – one of them lost one of their core clients, so they were prepared to negotiate on rate, but it keeps out hotels like The Savoy and Four Seasons. We don’t have a directive that says you cannot stay in luxury hotels but they don’t feature as part of the transient programme.”
Ultimately, five-star luxury is not a serious option for PwC’s travellers: “It is still not the climate where we should be staying in five-star hotels and for the type of work we do – working on insolvencies and administration – it would not be deemed appropriate,” says van Leeuwen.
It may require dedication and creativity for luxury properties to attract corporate business but the levels of investment in luxury hotels since the financial crisis tell the story. “Several billions have been invested into the luxury sector since the crisis – there is a significant appetite to invest,” says Deloitte’s Nick van Marken. “This is driven by two things: there are plenty of people able to spend for a stay in these properties; and the investment community believes hotels at that end of the market provide a great opportunity for putting in serious money.
“There is no recession in London, Paris, New York or Geneva – there’s no shortage of interest in major gateways.” W London – Leicester Square.
Hotel openings and refurbishments in western Europe are legion:
- London, the Corinthia Hotel, Savoy, Bulgari, 45 Park Lane, Four Seasons London, 10 Trinity Square, Shangri-La and W illustrate the point;
- Paris, there’s Le Royal Monceau – Raffles Park, Shangri-La, The Peninsula and Mandarin Oriental;
- Amsterdam, the Hotel de L’Europe and the Conservatorium Hotel;
- Madrid, the Hotel Ritz.
There is considerable interest in the French capital from Far Eastern hotel groups. This is in direct response to the appeal of these cities to the newly mobile classes in China and elsewhere in Asia.
“They want to make sure they are in places where these outbound markets are travelling to,” says global head of Deloitte’s travel and hospitality advisory practice, Nick van Marken.
Conversely, those travellers will seek the reassurance of brands they know and are comfortable with. “And the reason why they are about to refurbish the Ritz in Paris is because competition has arrived – the consumer will have a choice,” he says.
In fact, there has been considerable refurbishment activity throughout western Europe, including The Stafford London by Kempinski; Kempinski hotels in Bruges and Geneva, plus seven in Germany; and the Kempinski Palais Hensen in Vienna.
The Mandarin Oriental Geneva has undergone a ChF25 million renovation, and the group opens a property in Milan in 2013. Starwood has also been upping the ante, with Ws opening in London and Paris, plus refurbishments of Les Méridiens in Paris and Nice; and Fairmont spent £220m on refurbishing The Savoy in London, as well as investing in its properties in Montreux, Monte Carlo, Hamburg and St Andrews.
This is all proof that luxury properties are operating in as competitive an environment as any other segment – which is all to the buyer’s advantage.
This article was first published in ABTN's sister title Buying Business Travel, the award-winning magazine for company travel & meetings buyers and arrangers.
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