Times are Tough ! - Will Luxury Hotels Survive?
For the last 5 or 10 years, the emphasis in developing travel has been on the upscale or luxury market. 97% of the new hotels developed have been in the upper end of the quality and rate range. But times have gotten tough. For most of us in the US, our asset base is shrinking with the deflating housing market, $4 a gallon gasoline and the accompanying inflation.
So I have a question: Now that times are tough who is going to fill all these expensive rooms? It’s common knowledge that upscale resorts rely heavily on the middle class living large on vacation. Will the middle class traveler still spend the big bucks, or will they search for value?
The prevailing thought is that the rich will still travel. But do they travel enough to fill the excess capacity? My guess is that the middle class will still travel, yet will only respond to value. Economics 101 tells us that in recessionary times, people move toward inferior goods in search of capital preservation. Translated to the travel industry, consumers will not respond to high airfare or hotel rates. They will search for the absolute best deal or value. It may be freebies like extra nights, meal or bar credits, it may also be lower rates, but the message is that travel suppliers will be offering something to entice travelers to part with some of their shrinking assets. It’s going to be tough.
George
