ARE MILLENIALS MAKING A MOVE INTO LUXURY?

ARE MILLENIALS MAKING A MOVE INTO LUXURY?

Younger travelers, who traditionally have favored travel at a more affordable price point, could be making a foray into higher-end travel and staying at more luxury hotels, according to speakers at the 2017 Americas Lodging Investment Summit.

Chris Cahill, of AccorHotels; Eric Danziger, of Trump Hotels; and Robert Warman, of Langham Hospitality Group, discuss the state of the luxury sector at the 2017 Americas Lodging Investment Summit. (Photo: Sean McCracken)

LOS ANGELES—The image of millennials within the hotel industry often hasn’t kept up with the reality of that generation. For example, speakers at the 2017 Americas Lodging Investment Summit said, hoteliers can no longer expect millennials to confine themselves to lower-end product.

“We tend to think of millennials as being two years out of college,” said Robert Warman, CEO of Langham Hospitality Group, during the luxury-focused portion of the Boardroom Broadcast panels at ALIS. “Now they’re as old as 35 years old with jobs and a lot of income.”

While that has enabled many millennial hotel guests to stay at more luxury properties, Warman said, their behaviors are still not the same as those who would be viewed as more typical luxury travelers.

“We find them jumping in and out of luxury unlike our previous customers in the past, who kind of spent their life trying to attain luxury and, once they got there, they became luxury customers,” he said. “Today we’re finding as we’re opening new hotels, particularly with a younger brand, that our millennial customers kind of jump in when they want and they’re not consistent users.”

Chris Cahill, CEO of luxury brands for AccorHotels, agreed.

“They tend to, in general terms, be less loyal in terms of brand or product,” Cahill said. “I think for them it’s more purpose of trip.”

Cahill said that’s why his company is putting work into differentiating in the luxury space with things like its recent acquisition of luxury sharing-economy platform Onefinestay. Cahill described that business as a “pretty highly curated product,” which appeals to those seeking slightly longer stays and wanting more experiential travel.

“They’re just looking to get more into the community and further away from tourist areas,” he said. “They push pretty hard to get as deep into the experience as possible, and we try to facilitate that by providing a complete neighborhood guide.”

Warman did note that, despite millennials’ relative disloyalty as customers, they have a more innate sense of what it means to work at luxury hotels as employees than their predecessors, which is actually changing the environment at luxury properties.

“Most of them have grown up having visited luxury hotels in the past because their families went to luxury hotels, whereas their parents never stayed at luxury hotels so we had to teach them the business,” he said. “We don’t have to teach millennials luxury and service. It has created a service level that is a little bit less aggressive than what we practiced 20 or 30 years ago when some of the companies—the Four Seasons, the (Ritz-Carlton)—made their initial push into the luxury business.”

Eric Danziger, CEO of Trump Hotels, said the hotel industry has some work to do to reach millennial employees, who now comprise roughly one third of the workforce.

“Our industry pays worse than most competitive industries trying to get the best talent,” Danziger said. “Our industry does not provide all the support and training to the very people who are the face of all of our brands and who really are the connections to our customers.”

He said the focus should be on improving engagement efforts for existing employees, better recruitment efforts for potential employees, and widening the net of where to find employees.

“It’s not just colleges,” he said. “It’s people who have some kind of passion for service, which might come not only from colleges but elsewhere all around our neighborhoods.”

Danziger said one way to reach more people is being more flexible as employers.

“Is there anything wrong with flexible work hours? Is there anything wrong with more part-time people?” he asked. “It goes along with accommodating individuals’ needs as long as they’re accommodating the needs of the company. There’s nothing wrong with that.”

Ownership perspective
Mike Barnello, president and CEO of LaSalle Hotel Properties, said the issues that play into how well a luxury property is run also affect how investible a property might be.

“When we invest in something more high-end, it comes down to who is running the property,” he said. “It ties into the people, and it ties into what we’re offering.”

But Barnello said investment decisions are still driven by the strength of individual markets as opposed to being attracted to a particular chain scale.

“If it’s a strong market, we’d do a whole cross-section across segments,” Barnello said. “Because we’re not a brand, because our name is not on the hotel, we don’t start out with ‘let’s go find a property at our level.’ It’s more ‘let’s find a property we think is undervalued and we can add value to … through repositioning, renovation, changing management, handing management over to the brand to best fit that hotel.’”

He said a recent uptick in consumer confidence should inspire confidence for luxury hoteliers.

“If people feel better, they travel more and spend more money at these guys’ hotels,” Barnello said