The robust hotel market (particularly for luxury properties) has spawned more than a few luxury hotel launches. The latest entrants include Hilton Hotels with the famed Waldorf-Astoria name being used as its entree into the Orlando market and JMJ Hospitality with its acquisition of the Knable Group. Rapid growth in the luxury market post 9/11 has exceeded most other segments and has also fueled a rash of hi-tech devices in all areas of the guest room as reported recently in USA today. But is the luxury market as resilient to a downturn as some of the new entrants expect it to be? A look at one overbuilt luxury market (Dallas) today would lead one to the opposite conclusion. Most everyone in the industry knows that the Hotels market is more susceptible than most to market cyclicality and has only recently recovered from a host of disasters from 9/11 to Avian flu.
In each of the preceding “extraneous” event driven downturn, it was the luxury market that was hit the hardest. The difference though, in many of the new players is the diversified nature of their entry both from a geographical and product standpoint. Pure luxury hotels, other than uber names like Aman are less likely with most being hybrid condo-hotel developments ostensibly to shield them from the worst aspects of the downturn. Creativity in product and service will be the key to survival for luxury players but little can be done to stem rate pressure – as in Dallas – resulting from oversupply and a potential market contraction.