Luxury hotels face headwinds
By Jan Freitag
As I prepare for the annual meeting of the owners and operators of Leading Hotels of this weekend, I am struck by the rapidly changing performance of luxury hotels in the U.S. During the last upturn, between 2004 and 2006, we reported that hotels in this chain scale achieved double-digit RevPAR growth in all three years. During these heady days the notion of luxury hotels as “recession proof” came into being. Now that a real recession is shaking the U.S. economy and consumer confidence, we observed that RevPAR year-to-date through September dropped 0.8 percent. This drop is a function of the decrease in occupancy (-2.9 percent) and the increase in ADR of around +2.1 percent. While demand continued to increase (+1.4 percent year-to-date), the past performance of this chain scale has attracted a slew of new luxury hotels over the last couple of years. Through September, the number of luxury hotel rooms increased 4.4 percent. And several luxury projects are still under development are slated to open in 2009.