Top U.S. Hotel Chain Survey: Four Seasons Derails Ritz-Carlton's Six-Year Deluxe Reign

Four Seasons Hotels and Resorts bested Marriott's Ritz-Carlton in Business Travel News' annual U.S. Hotel Chain Survey, as travel buyers rewarded the luxury brand based on its service, its quality amenities and aesthetic properties—attributes that perpetually have personified the brand and gave it its eminent designation this year. Ritz-Carlton led the segment for the previous six years.

Mandarin Oriental and Starwood's St. Regis flip-flopped this year, as the former assumed the third slot and St. Regis fourth. Fairmont Hotels rounded out the group.

Four Seasons' high ranking in the corporate rate program category also contributed to its wresting the top spot from Ritz-Carlton. Although its rates are noticeably higher than hotels in other tiers—perhaps even in its own—travel buyers praised Four Seasons' price-value relationship.

"Yes, we are more expensive in our corporate rates than our competitors, but when we go into negotiations we always find that the corporate negotiators say, 'You provide the value to our employees and that is worth something to us,' " said Wolf Hengst, president of worldwide hotel operations for Four Seasons. "We are higher, but we give better value and the companies think so."

Conversely, Ritz-Carlton tends to price according to the market. "We enjoy a very healthy relationship with our clients and that doesn't change year to year, because the supply and demand doesn't," said Bruce Himelstein, senior vice president of sales and marketing for Ritz-Carlton. "We're in dialogue with clients all year long. Just like rates are increasing across almost every sector, this won't be any different. It's a matter of degrees and a matter of how much for which clients, and those are market-based, not corporate. We price to the market, not to the brand."

The resurgence of corporate profits has contributed to higher demand in the luxury sector, especially as guests trade up from the lower hotel tiers. According to Smith Travel Research, year-over-year demand in the luxury segment increased 4 percent in 2005, which contributed to an 11.9 percent bump in revenue per available room, highest amongst all the pricing tiers. The growth in RevPAR can be attributed to an average daily room rate that was $251 in 2005 and is expected to rise $18 this year. "For the first time, in 2005 we saw room rates in the deluxe tier increasing, not only by virtue of the lower-priced customers moving up their rates, but also the highest-priced customers started paying substantially more," said Sean Hennessey, CEO of Lodging Investment Advisors. "We saw the top going higher for the first time. They were willing to spend top dollar."

"Luxury in most major cities has done tremendously well and I don't see any signs on the horizon that leads me to think that there is any concern there," said John Fox, senior vice president of PKF Consulting. "There is a slight increase in supply, but we haven't added rooms as much as demand has increased."

Mixed-use development is an ulterior reason why supply remains at such low levels, especially in the luxury tier. Such properties as The Plaza in New York City are reconstituting to become a mix of both condos and guest rooms. The St. Regis in New York devotes three floors exclusively to residences, and—more than likely—condos will be erected in the footprint of New York's Drake Hotel, once it's razed. "Mixed use has been a staple of our development for years," said Hengst. "In today's world, it's becoming increasingly difficult to not do mixed use. I think it's here to stay." Four Seasons has mixed-use developments in both Miami and San Francisco.

Indicative of the hotels in the luxury tier is the high-caliber service and amenities that they offer. Above all else, Hengst cited that superior service as what sets Four Seasons apart and is an explanation as to why customers keep coming back. "Our focus as a company has always been—first and foremost—what do we provide for our guests on the service level, because in the end it really is what it's all about," he said. "You can talk about technology and design elements—in the end analysis, it really is about the service provided." For nine straight years, employees of Four Seasons have named the company one of Fortune magazine's 100 best companies for which to work, a distinction that Hengst said reflects the staff's pride in their work.

To Himelstein's surprise, Ritz-Carlton's travelers were most concerned with how they kick-started their day. "We looked at what our customers told us and the most important thing to them was in-room coffee makers—it actually came in number one. We always knew people wanted a good cup of coffee in the morning, we just didn't know they wanted to make it," Himelstein said, adding that higher thread-count sheets, upgraded bathroom amenities, Wi-Fi and flat-panel plasma televisions also ranked highly.

Because hotels in the luxury tier tend to be splendidly configured, it's often overlooked that they are geared toward the business traveler.

"Our bread and butter is the business traveler—that's really what represents the vast majority of our business worldwide," said Hengst. Four Seasons' most recent opening in Palo Alto, Calif.—in the heart of Silicon Valley—is streamlined to be as business-efficient as possible. "We gear to the businessperson not only a comfortable place, but an efficient place where they can work," said Hengst. Four Seasons plans to open properties soon in Moscow, Istanbul, Beijing and Shanghai.