Mar202009

Loyalty Traveler’s Economic Stimulus Plan for Luxury Hotels

Luxury Hotel Marketing Gurus: Use Loyalty Programs to Boost Occupancy

The Double EQM offers from American Airlines and United Airlines this week are the kinds of promotions I think Tim Winship of Frequentflier.com had been expecting to see from the industry for the past couple of months. Here is a link to Tim’s SmarterTravel blog from March 5.

I am still surprised to see few remarkable offers from the hotel industry loyalty programs thus far this year for travel in the USA.  The loyalty program deals seem better for hotel stays in Europe.

Double stay promotions were rampant last year with Hyatt and Starwood offering frequent guests the opportunity to earn top elite status with just 13 hotel stays, yet nothing for 2009.

Joe Sharkey At Large recently posted on BoardingArea.com the dour news for the luxury hotel segment.

“As has been the case for months, luxury hotels have been the worst clobbered. In the luxury niche, occupancy was down 20.3 percent; room rates were down 15.5 percent and RevPAR (gulp) was down 32.7 percent.”

This March 2009 data from Smith Travel Research indicates luxury hotels are taking a beating as reduced occupancy and falling room rates hurt hotel profitability.

As a frequent guest I like to check data to learn more about hotel rates in different market segments. I will use more of the STR data Joe referenced and then present my idea for helping the luxury segment maintain higher daily rates. I think I have a win-win idea for the hotel industry and consumers.

Smith Travel Research Hotel Industry Data for Week Ending March 14, 2009

Data compares hotel industry rates and occupancy from the week of March 14, 2009 to the week of data from one year ago in March 2008.

I have added examples of hotel brands in the different market segments. STR may have a slight variation in placement of hotel brands within these segments, but I think this is fairly close to their alignment.

Average Daily Rates (ADR) per Market Segment    

Luxury Hotel Segment

(St. Regis, JW Marriott, Waldorf-Astoria Collection, Four Seasons, Ritz Carlton)

ADR $255, down 15.5%,

Occupancy  61%, down 20%  

 

Upper-Upscale Hotel Segment:

(Westin, Marriott, Hilton, Hyatt Regency, Hotel Indigo)

ADR $150, down 12.4%

Occupancy 64%, down 16%

 

Upscale Hotel Segment

(Four Points, Hilton Garden Inn, Courtyard by Marriott)

ADR $112, down 10.9%

Occupancy 63%, down 15%

 

Midscale with Food & Beverage Hotel Segment

(Holiday Inn, Holiday Inn Express)

ADR $83, down 7.7%

Occupancy 50%, down 17%

 

Midscale without Food and Beverage Hotel Segment

ADR $87, down 5.7%

Occupancy 57%, down 16%

 

Economy Hotel Segment

ADR $52, down 6.7%

Occupancy 48%, down 15%

 

Independent Hotel Segment

ADR $94, down 14.7%

Occupancy 54%, down 16% 

 

Ritz Carlton San Francisco

Ritz Carlton San Francisco

 

Here is a Loyalty Traveler creative marketing idea from a hotel loyalty program frequent guest. 

Luxury Hotels are taking a big hit to occupancy despite the luxury hotel segment having the greatest rate declines of any hotel segment.  A friend of mine laughed at me a few years ago when I told him I travel to luxury hotels on the cheap. He commented that his brother manages luxury hotels and the hotels I stay at are not luxury hotels.

He was correct. I have only stayed at a few luxury hotels over the years. Four Seasons, Ritz Carlton, Oberoi Hotels are not where I typically stay as a frequent guest.  Look at the average rate of $255 per night for the luxury hotel segment, over a 15% drop in rates from a year ago, and that is still well above my economic comfort level for a hotel night.  The few times I have spent over $250 per night for a hotel were due to an incredible loyalty program promotion that I could rationalize the expense due to the value added benefit of the hotel stay.

Loyalty Traveler’s Economic Stimulus Plan for Luxury Hotels

Hotel chains with loyalty programs offering elite membership could offer a luxury hotel targeted promotion for double elite credit for stays within the luxury and/or upper-upscale hotel segments. If points promotions are not working, the opportunity to earn elite status faster through more expensive hotel stays may be a motivator to guests currently staying away.

For example:

Starwood Preferred Guest could offer double stay credit targeted for stays at properties in the St. Regis, W Hotels, and Luxury Collection.  Hilton HHonors could award double stays for Waldorf Astoria Collection, Marriott for JW Marriott Resorts (double night credit).

A leisure traveler like me just might be willing to spend $275 for a luxury hotel night that will get me closer to my elite status goal more quickly.  Given the choice of two stays at a Four Points or one stay at a St. Regis that counts for two stays, then many frequent guest loyalty program members would probably schedule a luxury hotel stay for double stays credit.

This type of promotion would allow luxury hotels to maintain rates while offering a valuable incentive to loyalty program members who are willing to pay more for the elite qualifying stay that counts double at a more expensive hotel.

This allows the luxury hotels within the hotel chain to offer a targeted incentive at little cost while distributing the cost (more elite members in the hotel loyalty program getting complimentary upgrades) across all the hotel brands in the hotel chain.

In past years frequent flyer programs often restricted double elite miles to the higher fares. The recently released promotions from United and American allow double elite credit on any fares. The airlines are getting desperate.

Hyatt and Starwood Hotels offered double stays in 2008 for any hotel stay within the chain. Perhaps offering double stays for the upper tier hotels will be more effective in maintaining room rates.

 

Related posts from Loyalty Traveler on Hotel Consumer Economics

Sep 3, 2008: Hotel Travel Going Down, Down, Down. It’s the Economy, Stupid!

Oct 10, 2008: Luxury Hotels – “Show Me the Discount”

 

 

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About Ric Garrido

Ric Garrido of Monterey, California started Loyalty Traveler in 2006 for traveler education on hotel and air travel, primarily using frequent flyer and frequent guest loyalty programs for bargain travel. Loyalty Traveler joined BoardingArea.com in 2008.

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