• Luxury back in favour

The luxury segment appears to be rebounding strongly after being severely shaken during the recession. The bounce back of corporate demand has been the main driver.

But the attraction of luxury brands, particularly amongst consumers from the emerging markets, has been mirrored in the hotel sector. This has seen Marriott International's JW Marriott and Ritz-Carlton brands and Hilton Worldwide's Waldorf Astoria Collection all announce additions to their estates this month.

Hilton Worldwide is to add the Caledonian Hilton Edinburgh hotel to its Waldorf Astoria Hotels and Resorts brand, following a £24m investment. When the hotel opens in October 2012 it will mark the debut of the brand in Scotland.

John Vanderslice, global head of luxury and lifestyle brands at Hilton Worldwide, said: "The introduction of the Waldorf Astoria Hotels and Resorts brand to Scotland demonstrates the realisation of our aggressive growth strategy which brings these authentic and unique products, and guest experiences, into markets where we believe there is significant growth potential in the luxury sector."

The announcement followed the launch of London Syon Park, A Waldorf Astoria Hotel in March this year, seven miles from Knightsbridge in London, which will be joined by Waldorf Astoria Sevilla at la Boticaria, which opens in Spain later this year. The brand's estate includes 24 hotels, with a further nine due to open between now and the end of 2014, including European additions will appear in Berlin and Jerusalem in early 2012.

Marriott International announced that it expected to have a portfolio of 77 hotels under its JW Marriott brand by the end of 2015, adding a further 25 sites to its current portfolio.

Mitzi Gaskins, VP, JW Marriott brand management, Marriott International, said: "The majority of our properties are less than eight years old and we continue to expand the brand with the addition of some beautiful new hotels and resorts in some of the world's premier locations."

Providing additional luxury choice, Ritz-Carlton has also announced an expansion and development initiative in which it plans to add 36 hotels and residential projects, to bring the total number of properties in its portfolio to over 100 around the world by 2016. This plan will expand the brand to urban capitals and emerging tourist destinations, and representing an estimated investment of more than $2bn by owners.

Ritz-Carlton's president and COO Herve Humler told CNN: "We're still down 16% from 2007, but this year, I am up an additional 12%. We're hoping by the end of the year to close the gap. But when we look at the fourth quarter, we're seeing a bit of a slowdown." He did, however, add that group business, which for Ritz-Carlton is financial institutions, was "back 100%".

The period during the downturn when it wasn't the done thing for the business traveller to be seen to be staying in high-end hotels at the shareholders' expense has now passed and the Louis Vuitton luggage is coming out again.

For many leisure consumers, however, the recession represented the chance to stay in luxury hotels at greatly-reduced rates, as owners and operators fought for occupancy. The challenge for the top-end brands now will be to pursue growth in rates as well as global coverage.

 

HA Perspective: Luxury hotels exhibit all the characteristics of other luxury goods. They have high elasticity of demand meaning when the economy is strong, they rise stronger than the market and vice versa.

Before the recession there was an argument that luxury goods, including luxury hotels, would prove more resilient as high net worth individuals would not need to adjust their spending. This was confounded by the reality of the downturn and revpars of luxury hotels dropped by significant double digits.

Now the converse is true. The one cloud on the horizon for luxury hotels is the muted recovery. If the economic recovery proves long and winding, so too will future trading performance for luxury hotels.

The bounce back has happened. The difficulty trading starts now.

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