We both see this difference in projects as a reason for owners and investors to consider leveling up existing properties or putting extra effort into developing within luxury hospitality real estate compared to other classes. pointed out.
Even though we have been feeling this growing chasm in behavior, especially since the pandemic, there are some historical fragments that allow us to dig deeper. In this case, a colleague was sorting through some old files and found a 1983 corporate rate list for a hotel in Montreal, Canada (the corporate name had been removed).
The most interesting thing here is that the gap between luxury and luxury properties and affordable properties is narrow. The spread between the top and bottom of the market could be $45, but that spread pales in comparison to current prices.
Of course, to put hard numbers behind our argument that the gap between luxury and non-luxury goods is many times larger than it was in 1983, we can adjust interest rates in Excel and sample the current ADR. and it takes at least a dozen hours of work to develop the inflation. – Adjusted market average and takes into account hotels that have since closed or been rebranded. This is a task we perform when you are hired for a feasibility study or competitive set analysis, so until then you just have to trust us.
More important than having accurate quantitative results that show what the luxury multiplier will be for a gateway market like Montreal is understanding why this trend is happening and why it won’t stop. is.
The shortest answer behind why is what Gilmore and Pine termed the “experience economy.” In a world where time is more important than money, people with disposable income are willing to pay a premium for time well spent. And in the basic economics of supply and demand, as demand for special experiences increases, prices will rise unless supply can keep up.
Luxury means privacy. Luxury is exclusivity. Luxury is about proactive, personalized service. Luxury is about seeing a destination through a lens that others don’t see. Luxury calms the mind. While this is true hospitality, it still requires a large dedicated team and FF&E capital investment to make it a reality, making it still quite expensive compared to operating in other categories. That said, luxury goods can be advantageous in terms of overall profitability if operations are managed effectively.
With so much emphasis on quarterly returns, it’s easy to lose sight of the long-term trends that influence interest rate increases over five years or even decades when measured against market comparisons and inflation. Created in 1983, this rate card helps provide perspective to break out of short-term thinking.
The exclusivity and timeless nature of luxury goods allows them to withstand the test of time and maintain steady growth in virtually any market environment. Consider leveling up and investing in luxuries. It all starts with a unique experience.
Larry Mogelonski, MBA, Doctor of Engineering. – Hotel strategist, industry commentator, veteran marketer, and speaker. Adam Mogelonski is the company’s chief engineer and has a comprehensive understanding of the intricacies of hotel technology stacks as well as the vendors that are paving the way for improved labor efficiency and new revenue growth opportunities.
With more than 40 years of experience in the hospitality industry, Hotel Mogel Consulting helps hotel owners maximize property performance and technology vendors overcome industry barriers to entry to achieve financial success. Visit our contact page to start a conversation.
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