INDUSTRY REPORT
Rethinking Luxury
in Hospitality
MAY 2018
Rethinking Luxury in Hospitality Industry Report - May 2018
Global luxury market continues to grow
The worldwide luxury market was estimated at €1 trillion (+4,25%) and the forecasted growth rate of luxury travel
in 2016, with an average annual growth of 4%. Over a is also higher (+6,2%) than overall travel (+4,8%).2 This
six-year period (2010-2016), High Net Worth Individuals growth has been followed by an increase in competition,
(HNWI) grew in number by 52%, in addition to their due to both an increase in the number of luxury properties
wealth, which increased by 49%. The Asian and North as well as improvements in the service delivery to luxury
America regions are primary drivers of the growth.1 guests in existing operations.
In addition to the luxury market and customer base Together, Horwath HTL and Soul Luxury are helping
growth, the world has changed, and the pace of change clients navigate this fast-changing environment and have
is continuing to grow. In the previous period luxury travel decided to combine our project experience and insights to
has been growing faster (+4,5%) than overall travel rethink ‘New Luxury in Hospitality’.
Number and wealth of High Net Worth
Individuals (HNWI) 2010 - 2016
Europe
6.2% 6.3%
N. America
7.2% 7.5% Asia
7.6% 9.7%
M. East
6.4% 6.5%
S. America Africa
4.8% 5.1%
2.6% 1.7%
Average annual growth of HNWI
Average annual growth of HNWI wealth
Note: HNWI – High Net Worth Individuals: People with financial assets
(apart from their primary residence) above 1 million USD
Source 1: Capgemini World Wealth Report 2017
Source 2: Tourism Economics 2016
[Link] 2
Rethinking Luxury in Hospitality Industry Report - May 2018
Luxury customer mindset is shifting • Key for guest retention is how they have felt
throughout the stay, with an emphasis on emotional
The market for luxury hospitality is growing at a steady resonance. Creating emotional connection is not
pace, but it remains lucrative. With 700 thousand luxury something new, but the hospitality industry has
rooms in the global pipeline1, increased guest mobility started to target emotions more efficiently, and actively
and a flood of quality online marketing, the competitive manage the customer journey. Emotional value
landscape is intensifying. enhancers (EVE) are defined, as they need to be unique
to each brand and delivered continuously along each
Today, luxury hospitality is under the influence of an guest journey. Why should your clients care and how
evolutionary shift. Fast technological advances drive can you touch their lives are the fundamental questions
society to develop at an unprecedented rate, impacting to be asked.
the human condition as never before.
• As guests are becoming more demanding, the average
Hoteliers are facing a critical challenge that will be the expected standard for their future stays has risen
significant battleground for growing the HNWI market significantly, and guests even expect their ‘unspoken’
in the long-term – how to continuously deliver on the needs to be fulfilled. Digital technology is increasingly
expectations of a shifting customer mindset. used to address this challenge. Soon, advancements
in artificial intelligence (AI) will enable comprehensive
While HNW travellers still expect every detail of their travel tracking of client behaviour.
to be taken care of - the thread count of their linens, the
temperature of their plunge pools - what is new is the 2. Digitization:
aspiration behind the journey, not just experiences, but • The crucial role of digital technology in today’s society
transformational experiences, self-actualisation, more causes a paradox of connected disconnection which
profound meaning and sincere human connections. attempts to reconcile two opposites:
Going to a spa and moving from one room to another
doesn’t create a narrative for genuinely transformational • Digital intensity and the need for a digitally aversive
experiences. This shift is triggered by 2 key factors: experience.
1. Changes in lifestyle habits: • The tech-obsessed always-on culture surrounds
• New and deeper awareness of personal wellbeing customers, requiring state-of-the-art digital solutions.
is shaping a trend referred to as ‘health is the new On the other hand, the possibility to completely
luxury’. disconnect becomes a privilege of its own. In a future
of 5G mobile networks, we will see more offline or
• Globally there has been a substantial shift towards wi-fi free areas within hotels as well as a total digital
stronger self-consciousness both in terms of leading a free hotel experiences. Balancing between these two
healthier lifestyle as well as minding the surroundings opposites and choosing the level of focus is becoming
(both social and ecological), true sustainability. strategically important.
Connected Disconnection
Digitally Intensive
Digitally Aversive
• 45% of the market will be Millennials in 10 years2 • Backlash against the tech-obsessed, ‘always-on’ culture
• Fast digital adoption of the ‘Non-Millennial’ generations • Stronger well-being consciousness
• 17 hours/weekly spend on internet on average 3
• Searching for a purpose in a fast everyday life
• 80% of luxury sales are digitally influenced • Care for belonging, human connection and sustainability
Sources: 1) [Link] 2) PMX agency;
3) USC Annenberg’s Center for the Digital Future
[Link] 3
Rethinking Luxury in Hospitality Industry Report - May 2018
What is the ‘New Luxury in 2. Personalisation:
Hospitality’? The brand should develop a genuine interest in
the guest’s lifestyle to create an understanding
‘New Luxury in Hospitality’ means that the traveller of preferences. Only with this understanding is
is seeking a more transformative and soul-enriching personalisation possible, thus as a consequence must
experience. have the potential to evoke feelings of appreciation and
surprise. This is the opportunity to develop an intimacy
The emotional impact on guests, therefore, needs to be with the guest and as a result, generate trust.
a strategic focus. The strength of emotional touch points
is in direct relation to brand engagement. 3. Experiential:
This perspective pushes us to rethink guest experience
Luxury hospitality is traditionally known as a human- and take it to the next level by focusing on the
centric, and we believe it will always stay human-centric. emotional value and the potential to transform ‘me’.
However today we need to be aware of one significant The evolved mindset of travellers is to seek lifestyle
difference: it must have a transformational impact on the solutions while travelling. This shift concentrates
individual. increasingly on experiences that address the physical,
mental, spiritual and emotional needs.
We have defined ‘New Luxury in Hospitality’ through
five perspectives needed for a transformational impact: 4. Balanced Disconnection:
The opportunity lies in focusing on an approach
1. Purpose: to balance between digitally intensive and digitally
Customers are in pursuit of a better, more fulfilled - aversive experiences. Ironically, technology can
lifestyle, increasingly turning their backs on spending serve as an enabler for a personalised and seamless
on superficial brand experiences. experience leading to a transformational impact.
Brands must address (in business terms) - Maslow’s 5. Seamless Journey:
‘Self-Actualisation’ as a business strategy. Visionary Impeccable service has always been the core of the
brands recognise that society is in the midst of a major luxury hospitality, and today new methods and
paradigm shift which is not a trend; it is evolution. technologies support delivery of the service. This
increased complexity requires detailed planning
including scenario planning approaches.
3. Experiential
2. Personalisation
4. Balanced
Disconnection
5. Seamless
1. Purpose
Journey
[Link] 4
Rethinking Luxury in Hospitality Industry Report - May 2018
How to deliver ‘New Luxury in • Comprehensive integration
Hospitality? From brand promise to technology integration, every
aspect has an impact on delivery. Thus understanding
To deliver ‘New Luxury’ to customers, two perspectives how to provide the right amount of each component,
should be addressed: at each touchpoint is crucial.
• C
ustomer journey and emotions as the To ensure comprehensiveness in the approach, we have
essence developed a 360o framework for delivering ‘New Luxury’.
To understand how to provide luxury, hoteliers need
to follow the customer journey of each segment (in
the future we will be able to follow each individual
guest and achieve one-to-one marketing) as well as
the emotions correlated to each touchpoint (even well
before the physical hotel experience starts).
Horwath HTL 360o New Luxury framework
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[Link] 5
Rethinking Luxury in Hospitality Industry Report - May 2018
How to deliver ‘New Luxury in Hoteliers should try to identify the potential
Hospitality? transformative objectives within each of the customer
segments and integrate emotional triggers within
1. Core Brand Values and Story the customer journey. Examples may be a feeling
The definition of a clear hotel concept is an essential of achievement for a MICE guest, or the sense of
ingredient of long-term success - whether offering disconnection for a leisure guest.
medieval luxury experience in castles or luxury escape
retreats, the customers expect more of the hotel than Desired goals should match with aligned offerings
a great asset and excellent service. such as transformation programs for busy business
lifestyle guests, individual destination/community
The concept should act as a baseline for brand experiences for the explorers etc.
development. It is crucial to get to core brand values,
as well as a clear brand essence and brand identity, 4. Service
backed up with appealing storytelling – upon which Impeccable service has always been and remains one
everything within the property should be aligned of the critical pillars of true luxury. But the new age of
(from service, design, communication etc.). luxury sets new demands with one key remark in mind
For long-term success, consistency in the brand - there is no ‘silver bullet’.
delivery is fundamental.
Delivering the perfect service starts with a set of details
2. Gourmet and small gestures serving as the baseline for the
Influenced by the global increase in gourmet curiosity experience. But several guidelines should be used to
(following shows like Chef’s table and No Reservations, set an excellent platform to enhance the service:
the rise of food Instagram etc.), customer expectation
of F&B has risen significantly. While a high level of More personalisation - Stronger utilisation
standard in gourmet delivery has always been an of technology solutions to provide additional
integrated element of luxury, there is now a stronger personalisation (especially in predicting guest
emphasis on the experiential component, sometimes behaviour to tailor the service accordingly.
extending beyond the kitchen and restaurant.
Take on the role of experience builder -
The key to delivering these experiences is clear Educate and motivate staff to support the guest in
gourmet concepts, aligned with the whole hotel/ developing their experience throughout the whole stay
destination surroundings and with relevant global through a proactive, recommendation based approach,
trends (especially concerning significant shifts in in experience offering. But to manage this approach,
eating preferences, healthy eating etc.). At the end it the hotelier needs to integrate structured guest data
is essential that the gourmet concept is a logical and collection and analysis, thus increasing the suitability
seamless extension of the desired hotel experience and effect of the offered experiences
(e.g. transformation of guest’s eating habits).
Offer a stronger touch of human sincerity -
3. Purpose/ Deeper Meaning Acknowledge the staff as a crucial part of the success.
The thought behind core lifestyle values has In terms of management of the staff it is of essence
significantly shifted in the last couple of years. that all of the staff are emotionally attached to the
To deliver on expectations the hotels first needs to hotel and to other team members.
clarify the key customer segments.
Currently, popular lifestyle segmentation is often a
buzz word which it is not entirely understood and
implemented. The future will enable much more
precise segmentation and targeting once we get
closer to one-to-one marketing.
[Link] 6
Rethinking Luxury in Hospitality Industry Report - May 2018
5. Technology 6. Digital
The critical challenge for technology for hoteliers is With the continual growth of digital channels relevance
to strongly consider the type and level of technology for luxury (OTA’s, impact of social networks etc.) the
integration based on the concept (i.e. escape vs city) critical challenge can be defined as providing a digitally
and customer segments, with particular consideration enhanced experience throughout the journey.
to:
The problem is in providing an authentic and unique
• Guest technology platforms - The hotels need ‘look&feel’ in the digital world and removing frictions
to consider integrating most of the technology and between the phases (i.e. the transition from inspiration
platforms that guest may use at home in order to offer to reservation). To address this, hoteliers should rethink
a seamless transition between their home/ business their digital approach, especially concerning the
and their stay. following :
• B
ack office technology as a support for • G
reat mobile experience throughout the
experience building - The luxury approach will whole journey - As mobile bookings have risen
become more fact-based due to the maturity of data 26.7% in 2017 (yoy)1 it is unquestionable that the
management technology. Hoteliers should prepare mobile promotion-to-booking process needs to be
their IT landscape in order to learn as much about optimised. Most of the guests are still attached to their
their guests as possible in order to deliver all the other devices during the stay, and mobile device should
elements at an even higher level. be an integral part of the experience (for those who
choose to use these options).
• T
echnology as solution for higher operational
efficiency - Innovations in this area are occurring on a • Prepare your digital story - It is tough to tell
daily basis, thus hoteliers should consider options that your story in a digital world saturated with examples.
would put stronger focus on to value added activities. Hoteliers need to consider how to stand out in the
process, possibly by creating a structured funnel of
messages with the mission of first hooking the potential
guest to the story and afterwards revealing exciting
details and curiosities that will finally lead to a booking
conversion at the end. An excellent way to approach
this is by considering the possible emotions you should
be addressing and creating the content to reflect those.
• Digital content creation – Hoteliers should
consider how to motivate their guests by providing
user-generated content to confirm their perceived
value from a third party perspective. Examples
include giving relevant hashtags in the hotel (both
permanent and trending), professional communication
and management of social networks, and offering
incentives to guests based on different activities online.
Sources: 1) eMarketer
[Link] 7
Rethinking Luxury in Hospitality Industry Report - May 2018
Change in order to win
The luxury market and customer base are growing. The
world has changed, and the pace of change is continuing
to grow. Luxury travel is following this trend, and the
luxury customer is evolving.
We consider ‘New luxury in Hospitality’ as still essentially
human-centric but with a transformational impact on
the individual. This is why we define it through five
perspectives needed for the transformational impact.
To fully deliver ‘New Luxury’ to customers we are
focussing on the customer journey and emotions as
the essence, combined with the complete integration
of critical elements.
Our 360o framework for delivering the new luxury
ensures comprehensiveness by covering:
1. Core Brand Values and Story
2. Gourmet
3. Purpose/ Deeper Meaning
4. Service
5. Technology
6. Digital
Finally, to come back to the fundamental trigger of the
change, we have to acknowledge the mindset of the
affluent consumer which continues to evolve.
Luxury is taking on a new meaning: Consumers are
turning their backs on mindless extravagance. We are
saturated with the accumulation of possessions. Luxury
is shifting from possession and experiences to health,
wellbeing and the mind. The most significant luxury of our
times is ‘not having to worry’.
The traditional economic value is upside down. Revolution
of the luxury hospitality is happening. Whether a global
brand, a niche player or an individual luxury property, no
one will be able to avoid the reality of the new paradigm.
As always, those who are rethinking, planning and
implementing and fundamentally changing, will be the
winners. The others will have to think of good excuses.
Sources:
eMarketer - [Link]
Capgemini World Wealth Report 2017
PMX Agency – Digital marketing agency
Top Hotel Project - [Link]
Tourism Economics, 2016
USC Annenberg’s Center for the Digital Future
[Link] 8
AUTHORS:
Emanuel Tutek Claudia Roth
Managing Partner Founder & Managing Director
Strategic Advice Business Line Leader Soul Luxury
Horwath HTL Croatia claudia@[Link]
etutek@[Link]
Claudia is a former senior executive in luxury hospitality
Emanuel is Managing Partner at Horwath HTL Croatia, lately working as Vice President for The Leading Hotels
focused on strategy and operations consulting in the of the World, the world’s largest luxury hotel collection.
hospitality and tourism and leading Horwath HTL’s Global Her international career served as an inspiration for Soul
Strategic Advice business line. Luxury.
Due to his dedication to value creation and strong belief She is a unique voice understanding the deeper insights
in importance of customer centricity, from the numerous into the evolutionary shift in luxury lifestyle and is a
projects in hospitality and tourism, he is particularly pioneer in the Transformation Economy. Claudia founded
passionate and hands on when it comes to the luxury Soul Luxury to help visionary brands create a new
topics. Emanuel’s consulting expertise in hospitality and paradigm of success where emotional connection and
tourism: Strategy; Marketing & Sales; Restructuring, deeper meaning underpins business strategy.
Organization, Operations and Process optimization.
Andrej Šimatic
Senior Project Manager
Horwath HTL Croatia
asimatic@[Link]
Andrej is a Senior Project Manager with Horwath HTL
Croatia, focused on strategy and operations consulting
in the tourism & hospitality sector. Andrej’s primary
engagement focus has been on end-to-end transformation
engagements offering consulting support from strategy
development through operational optimisation, and
all the way to “hands-on” implementation & change
management.
Andrej’s consulting expertise is: Growth Strategy, Digital
Strategy, Transformation & Restructuring, Organisation
& Process Optimisation, Data Analytics, Project
Management and Implementation
[Link] 9
AFRICA EUROPE LATIN AMERICA
Ivory Coast Andorra Argentina
Rwanda Austria Dominican Republic
South Africa Croatia
Cyprus MIDDLE EAST
ASIA PACIFIC France UAE & Oman
Australia Germany
China Hungary NORTH AMERICA
Hong Kong Ireland Atlanta
India Italy Denver
Indonesia Netherlands Miami
Japan Norway Montreal
Malaysia Poland New York
New Zealand Portugal Norfolk
Singapore Serbia Orlando
Thailand Spain Toronto
Switzerland
Turkey
United Kingdom
[Link]