What defines a luxury hotel?

Five stars is a start, but most of us are familiar with the variations in star rankings across different websites and organizations.

The main differentiation between luxury hotels and the lesser tiers of hotels is generally price.

Defining Hotel Class

Knowing how hotels compare themselves to each other makes analyzing paid hotel night and reward night opportunities easier. Price and hotel loyalty program reward category do not necessarily have a tight correlation with regard to average price for specific hotels. The reward category for hotels in Las Vegas is generally quite high relative to the published price for many of the days of the year, whether you look at Starwood or Hilton or Marriott.

Most hotel loyalty programs require the same reward value in points whether booking in the hotel’s high-season dates or low-season dates. Published rates for many high-end hotels can be discounted more than 50% in low season periods.

Some ski resort lodges with $500 per night rooms in February may be less than $200 per night in July. When the luxury beach resort with the perfect water in one season is too cold to swim in the ocean in another season you may find the hotel pools are still warm and open without enormous crowds and the beach is still there for viewing. And the room nights can be discounted hundreds of dollars per night.

Smith Travel Research

There are a few major hotel data research firms in the U.S. with Smith Travel Research, PKF-Hospitality Research, and PricewaterhouseCoopers being some of the major companies who produce reports and press releases cited frequently in hospitality publications.

Smith Travel Research is based in Hendersonville, Tennessee. The website http://www.strglobal.com/ is the industry report side and HotelNewsNow is the hotel data news side. The 2010 Hotel Data Conference is taking place this week at Loews Vanderbilt Hotel Nashville. The Gaylord Opryland Hotel was the planned host for the annual conference until the devastating Nashville floods in early May wrecked the convention hotel. The Gaylord Opryland is scheduled to reopen November 15, 2010.

Smith Travel Research (STR) has a glossary of hotel data terms that I find useful as a language tool when reading hotel research. Luxury Hotels in the industry can be defined as a Hotel Market Class category or Chain Scale segment category and is based on the average daily room rate of the hotel.

This is how STR defines luxury hotels in three definitions.

Chain Scales

Chain scale segments are a method by which branded hotels are grouped based on the actual average room rates. Independent hotels, regardless of their average room rates, are included as a separate chain scale category. The chain scale segments are:

Luxury Chains

Upper Upscale Chains

Upscale Chains

Midscale Chains with F & B (Food & Beverage)

Midscale Chains without F & B (Food & Beverage)

Economy Chains

Independents

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Market Class

Class is an industry categorization which includes chain-affiliated and independent hotels. The class for a chain-affiliated hotel is the same as its chain scale (see chain scale). An independent hotel is assigned a class based on its ADR, relative to that of the chain-affiliated hotels in its geographic proximity. There are six class segments: 

Luxury

Upper Upscale

Upscale

Midscale with F&B

Midscale without F&B

Economy.

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Market Price Segments (U.S. Only)

The five categories of a metro STR market which are defined by actual or estimated average room rate. The five price categories are shown below: 

Luxury – top 15% average room rates

Upscale – next 15% average room rates

Mid-Price – middle 30% average room rates

Economy – next 20% average room rates

Budget – lowest 20% average room rates 

In rural or non-metro STR markets, the luxury and upscale segments collapse into the upscale and form four price segment categories: 

Upscale – top 30% average room rates

Mid-Price – next 30% average room rates

Economy – next 20% average room rates

Budget – lowest 20% average room rates

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Another definition can be used to illustrate Loyalty traveler strategies

Price Tier is a glossary term applicable to U.S. only. I imagine the currency exchange fluctuations make it much more complex to compare room rates internationally.

Basically I see hotel loyalty programs as a way to focus purchase power in the economy and midprice room rates and with the use of loyalty promotions earn free nights and points to redeem for hotels in the upscale and luxury price tiers.

STR Glossary: 

Price Tier (U.S. Only)

The three categories of a state, STR market or submarket which are defined by actual average daily room rate or average published rate. The three categories are:

Upper Tier – top 33% room rates

Middle Tier – middle 33% room rates

Lower Tier – lowest 33% room rates

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Here is a Loyalty Traveler example to illustrate the value of hotel loyalty programs.

Let’s assume some average hotel room rates

  • Upper Tier – $225
  • Middle Tier – $140
  • Lower Tier – $90

Assume 20 hotel nights in a calendar year.

  • Upper Tier – $4,500 hotel spend in 2010
  • Middle Tier – $2,800
  • Lower Tier – $1,800

A hotel loyalty program promotion like Best Western Rewards, Carlson Goldpoints Plus or Hyatt Gold Passport’s stay 2 and earn one free night, or Starwood’s stay 3 and earn one free night could earn 7 to 10 free nights after 20 paid nights.

Concentrate your lower and middle tier paid stays within a large hotel company like Carlson, Starwood or Hyatt with hotel brands in multiple market price and class segments to maximize the free night promotions and points bonuses.  Use free nights earned to maximize upper tier hotel stays. Redeem free nights at hotels above your price point to increase the value of $2,000 to $3,000 in hotel spending annually to $4,000 to $5,000 in hotel rooms with several free or highly discounted stays at upper-upscale or luxury hotel properties made available to you through the hotel company’s loyalty program.

Earn seven free nights on $2,400 in hotel spending and redeem your free nights for a hotel with $300 per night published rates (7 x $300 = $2,100) and you have received $4,500 total hotel rate value for your $2,400 in spend. You have increased your hotel spend value by almost 90%. 

Priceline is a bit opposite in strategy. You may pay an overall lower cost with Priceline or Hotwire, but you also likely receive inferior rooms compared to what you can have as an elite hotel loyalty program member. And 20 paid nights will get you top elite in some programs if you plan your stays for that purpose.

So which market class do a Holiday Inn, W Hotel, Hyatt Place, Fairfield Inn, and Hilton Garden Inn fall when calculating where your price point and comfort level lies in the economy to midscale to upper-upscale and luxury chain segments?

Smith Travel Research does not have a listing that I could find showing which hotel brands are in which chain scale or market class.

Here is a pretty comprehensive link to MarketMetrix.com listing of hotel brands in different Hotel Chain Scale/Market Class segments of luxury, upper-upscale, upscale, midscale with F&B, midscale w/o F&B, and Economy.

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