Luxury hotels – the silent war at the top
Many leading international luxury hotels, especially historical and heritage locations, have been failing to adapt to the current needs and demands of today’s ”turbine” economy. A decade ago, they were the last luxury hotels to realize the importance of the internet and the modern ways of communication. Some of them, are now only launching Twitter or Blackberry applications and still do not master them like modern hotels. Then, 2007 brought the current economic crisis, with unprecedented effects on luxury, irrespective of the industry sector. The impact on hospitality cannot be looked purely from a financial point of view but from the core definitions of luxury.
The current world financial crisis is yet to show deeper and deeper effect on luxury hotels, especially when it comes to their ”DNA”, which, in many cases, took decades of continuous investments in branding, marketing and customer service. Now the rules need to be re-written !
One of the fathers of luxury hospitality has been Mr Isodore Sharp, founder and chairman of Four Seasons Hotels, one of the top three leading luxury hotel brands worldwide, writes, in his recently launched book, about how he took the brand to the top. A lot of the features introduced, at the time, by the Four Seasons hotels were common sense – concierge, free large size amenities, comfortable mattresses and not to mention the swimming pool (especially in city hotels). Mr Sharp’s brilliant philosophy of ”relaxed formal” and ”understated luxury” hasbeen part of the essence of the Four Seasons brand since the first property was opened. For almost half a century, Four Seasons Hotels have identified as a unique luxury brand by perfectly blending local cultural and heritage features with modern ones.
However, for more than a decade, Four Seasons hotels have been gradually losing their leading position, giving in to Mandarin Oriental Hotels. With the exception of Hong Kong, in all the destinations that Mandarin Oriental is present, Four Seasons no longer manages to stick to the top. Although ”warned” of each Mandarin Oriental new opening, Four Seasons seem not to have learned any lessons or simply cannot compete. The second option is more likely, given the crucial differentiation factor which is ownership. But why would this be so crucial?
The financial crisis which made its debut early 2007 has, indefinitely, changed tha relationship between owners and hotel management chains. Regardless of property types, historical or modern, the financial crisis, has generated panic and confusion among owners, who are changing the way they work with the hotel chains which manage their hotels. The early termination of a management agreement which was impossible less than half a decade ago, is now the most important tool which owners use against hotel management chains. Here are just some of the crucial issues which owners face these days: investment in renovation – rooms, technology, construction (sound proofing); cutting marketing costs; cutting staff. Already some Four Seasons hotels have given in to owners demands, for example, by cuting the number of staff in concierge, front office and housekeeping. It would have been unacceptable just a few years ago for housekeeping services to be offered after 9 or 10 am, depending on location. Hotels have cut spending in amenities, some hotels no longer offering an amenity on turndown service.
While most competing luxury chains offer organic and natural cosmetics in their rooms, Four Seasons have maintained their exclusive arrangements with several cosmetics brands, most probably driven by lower costs because of large volumes. L’Occitane, Bvlgari and Acqua di Parma may have the ”snobbish” brand recognition, yet, more and more discerning travellers have been aware of the poor quality of these products. In the days when Mr Sharp was opening the first Four Seasons hotels, such an important detail would not have escaped the top management and would have been fixed in no time. I doubt few managers of Four Seasons hotels are aware of the amount of preservatives and artificial ingredients that these brands use in their products, not to mention their toxic packaging. And this is totally understandable from the part of the brands themselves. The house of Bvlgari has very limited control over its branded cosmetics, most being produced under licencing arrangements. For instance, the bathroom line is produced by Ada of Germany, a company which produces many other luxury branded cosmetics, most of them using the same ingredients and production facilities.
Yet, given the financial crisis, you may wonder how Mandarin Oriental are able to offer unsurpassed service, latest technology and maximum comfort ? First of all, it is the winning aspect over the Four Seasons, which is ownership. Mandarin Oriental controls ownership of many of its top properties and this is a huge competitive issue over Four Seasons. That is why, I would even consider this as unfair competition between the two brands. Some may argue that the Four Seasons indirectly controls some properties through its partnership with Prince Al Waleed of Saudi Arabia, who is also an important shareholder in the Four Seasons company. Yet, in most of these properties, the relationship between the Four Seasons and Kingdom Hotels remains that of management chain with owners.
The best example to illustrate this, is George V, the flagship property of Four Seasons in Paris. Although more than 10 years from its re-opening as a Four Seasons, the George V have not made essential renovations and refurbishments. That is why, the George V will not be able to compete with the Mandarin Oriental Paris (due to open late 2010) in some key areas: SPA, technology, amenities, bed comfort. Its current leading position on the Parisian luxury market must have been the main reason behind the fact that George V has been ignoring the imminent opening of the Mandarin Oriental Paris. However, there are also several advantages which George V can use to their advantage: the unique architecture and design of the building, its unrivalled location and an impecable service level. That is why, in Paris, probably the biggest ”battle” will be fought on SERVICES.
What about the other chains? Unfortunately, many of the other international luxury hotel chains can no longer be considered as being in the same category or level as Mandarin Oriental and Four Seasons. Very few of the international locations of Ritz Carlton, Peninsula, Taj or Park Hyatt are of the same standard as Mandarin Oriental or Four Seasons, in most of their ”unfortunate” locations blaming disagreements with owners for the poor standard. The only exception would be Shangri La, which have recently opened an exceptional property in Hong Kong and are opening two spectacular projects in Europe this year in Vienna and Paris, both historical palace locations beautifully restored and renovated.