Healthy High-End Hotels Raise The Bar On Club Floors
<B> Healthy High-End Hotels Raise The Bar On Club Floors</B>
By Cheryl Rosen
As the harbingers of a softening market begin to appear in the hard data of the hotel industry, the uppermost segments remain strong. Buoyed by a solid economy, a less cost-conscious customer base and a tight market for the gobs of investment capital necessary to compete at the high end, the deluxe segment is racking up the industry's best performance of limiting supply and increasing demand.
Occupancy in June 1999 was down just half a percentage point from last year, to a still respectable--and profitable--76.9 percent, and average daily rates were up 4 percent, to $198.48.
That's not to say, though, that competition isn't fierce as ever within the top tier. From Egyptian linen sheets to bathroom amenities to high-speed Internet access, guest rooms in first class properties seem already to have it all. Perhaps that's why this year the fray seems to have moved to the public space at the top, the club floor lounge.
In the hot pursuit of the most frequent travelers, hotel executive club floors are increasing the value of their premium prices by adding more amenities. "Club floors are becoming the ultimate example in luxury, and we're all trying to outdo one another," said Ritz-Carlton Hotel Co. spokesperson Vivian Deuschl. "It's a huge competitive thing."
"We're seeing a full circle with amenities," agreed Robert Mandelbaum, director of research information services for PKF Consulting. "Where in the 80s they were fancy soaps in the bathrooms, in the 90s they became business services. What's happening now is that business services are becoming standard, and the comfort amenities are back in fashion."
Among the Ritz properties, the upward spiral in club services began in Osaka, Japan, when the breakfast buffet was upgraded from scrambled eggs to complete omelets cooked to order by a chef right in the lounge. Along with the traditional snacks and drinks, the St. Louis Ritz club floor lounge now features live entertainment--either a jazz musician or a magician--every night but Sunday. And since demand for the floor often exceeds supply, the hotel about six months ago began allowing guests staying in rooms on other floors to pay a daily surcharge that allows them Club Lounge access.
Sales and marketing vice president Jim Schultenover said Ritz is working on a "chainwide plan to upgrade our club floors. Research is going on now, along the theme of 'relevant luxury,' and we should be ready to share the plan with the public by the end of the year."
The sights are aimed even higher at the new Ritz in Philadelphia. When the hotel opens in spring 2000, it will feature not only 40 Club level rooms, but also the Ritz-Carlton Penthouse suite.
"This is a high-cost segment to get into, and basically there's a pretty good balance between supply and demand. We're not suffering from oversupply," said Schultenover, noting that Ritz's 1999 occupancy rates in North America are running at about 80 percent through July. Indeed, he said, in one of the nation's tightest labor markets in recent years, "more companies are backing up what their HR departments have been saying about people being their best asset as they look to retain their employees. And that bodes well for the tier. As long as we can show value, if it's relevant to the business purpose or the meeting, it's okay again to say 'luxury.' "
Not to be outdone, Starwood's top-of-the-line St. Regis hotels, which include a number of former Ritz-Carltons, are providing personal butler service to all guests on their Astor floors, which opened over the past two years in Aspen, Colo., Washington and Philadelphia, and will be added by the first quarter of 2000 in Houston and Los Angeles.
"The standard here is that you are met at the elevator by the butler, who offers to unpack your luggage, shine your shoes, or get you anything from a water taxi in Venice to tickets to The Lion King in New York," said spokesperson Margaret Vodopia. "And these aren't 'Jeeves, bring the tea' butlers. Each butler pantry has a computer where they get daily briefs on each guest, including everything from the time they arrive to whether they like milk in their tea."
On a more practical level, guests whose plans include stops within a 50-block radius of the hotel are offered a lift in a Rolls Royce at no charge.
The upward service spiral on club floors is not limited to the United States, either. The recently renovated Horizon Club at the Shangri-La in Singapore, for example, has its own private health club right in the lounge.
Like the Ritz, the Argent Hotel in San Francisco (the former ANA) is allowing guests to pay for club lounge access even if their room is not technically on the executive floor. The upgrade, which includes an expanded continental breakfast, afternoon hors d'oeuvres and cocktails and evening desserts and coffee, which will go for $40 beginning in January, now is available at a $20 introductory rate.
"In the past we offered fewer amenities and more free upgrades to the executive level, but now we've decided to go with enhanced amenities at a fee," said marketing communications director Marilyn Kilcrease. "People like to have everything included in one price."
Indeed, said Bjorn Hanson, hospitality and leisure industry leader at Manhattan-based PricewaterhouseCoopers, "deluxe and five-star hotels are having a very good year, but all hotels recognize that occupancy peaked in 1997 and revenue per available room is slowing. So they are starting to look for other revenue areas, like club floors."
That's not necessarily a bad thing for the corporate traveler's expense line, either, he acknowledged. That $20 or $30 extra a night, "if you use the meeting areas in the club lounge and eat the free breakfast, can come out much cheaper than paying for everything separately."
For the hotels, the extra revenue is a bolster against the flattening of rates that already is beginning to occur in other tiers of the hotel industry. "We are going to see a decrease in occupancy in the luxury segment, if not the deluxe, at the end of 1999, and that will lead to less aggressive rate increases and more willingness to negotiate with corporate customers for next year," Hanson said. "Meeting planners and corporate travel planners are saying, 'Last year it was $250 a night and we went with it, but now it's $290 and that's just too much.' Once one hotel lowers its rates, it leads to price competition. We're at the very beginning of that, but clearly we're starting to see discounting.