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World's Best Hotels Trying to Fuel a Rebound

Establishments in Institutional Investor’s World’s Best Hotels 2011 ranking are using renovations and renewed dedication to service to fuel a rebound.

  • Kristin Baird Rattini

It’s a common occurrence: A guest leaves a piece of luggage behind in his room. Housekeeping finds it and places it in lost and found. What happened next, however, at the China World Hotel in Beijing was hardly standard procedure.

“When the guest arrived in Hong Kong, he called to say he’d left his bag and needed the papers inside the suitcase for an important meeting,” recalls John Rice, general manager of the ­Shangri-La property. “This was a regular guest of ours. So our concierge booked an air ticket, flew to Hong Kong and hand-­delivered the bag to the home of the guest.”

After the financial crisis first erupted, in 2007, it was easy to argue that the luxury hotel market lost its way. Occupancy rates fell sharply. Monthly cancellation rates at top U.S. properties hit an unprecedented 20 percent. The luxury segment became a prime target in the political backlash against executive compensation.

Lately, however, the market has found its footing again. In the U.S. occupancy rates for 2011 will end up at close to 70 percent, well above 2010’s rate of 66.2 percent and just shy of the peak of 71.8 percent reached back in 2006, according to STR Global, a Hendersonville, Tennessee, hospitality data research company. Premier hotels are leaving nothing to chance, though. They are going the extra mile — or 1,224 miles, in China World Hotel’s case — to provide the extraordinary service that has earned them customer loyalty as well as coveted spots on Institutional Investor’s annual ranking of the World’s Best Hotels.

The top spot on this year’s list belongs to Rosewood Mansion on Turtle Creek. The 31-year-old boutique hotel is a Dallas institution. Texans pack the house on weekends, and its fiercely loyal base of repeat clients accounts for 35 percent of overall business. A three-year, $30 million overhaul, completed in 2010, updated the lobby from its 1980s origins and modernized the 143 rooms. “The renovation has been a huge success,” says managing director Duncan Graham. “People who’d been here 250 times worried it wouldn’t be the mansion anymore. But it was done in degrees — we never closed — and I think the design is ­timeless.”

When the economic crisis first hit, some groups became sensitive about “staying at a place with ‘mansion’ in the name,” Graham says. But since 2008 occupancy rates at Rosewood Mansion have been on the rise. Midweek business travelers have returned. The hotel has landed some significant new accounts, including a large out-of-state bank whose employees generate 50 to 60 room nights a month. Yet the battle over patronage remains fierce. ­Graham estimates that the supply of hotel rooms in his competitive set has increased 125 percent since 2006 — with no accompanying increase in demand. “We are at pre-2007 occupancy levels, but softer in rates,” he says.

Average daily rates: They’re the Achilles’ heel of the recovery for the upscale sector. “In the U.S. market rates will probably end this year at $258,” says Bjorn Hanson, dean of the Preston Robert Tisch Center for Hospitality, Tourism and Sports Management at New York University. That represents a decline of nearly $30 from the peak rate of $286 set in 2008. “Never before has there been that large, nor that sustained, of a decline,” ­Hanson notes.

Many luxury chains insist that rate integrity is an absolute. “You would never see a ‘For Sale’ sign on a Rolls-Royce dealership,” says Heinrich Morio, general manager of the Burj Al Arab in Dubai, No. 5 on II’s roster. “Likewise, the Burj Al Arab is not a product that can have a ‘For Sale’ sign.”

Yet in these times when hotels are fighting harder than ever for business and online travel agencies have made pricing even more transparent, guests are expecting more for their money— and getting it. A free extra night? That once-­elusive incentive has become more commonplace among premium hotels — even at the Burj Al Arab, where room rates average $2,000 a night. Breakfast? It’s now included in the Burj Al Arab’s base rate. Free transportation? The Mount Nelson Hotel in Cape Town, South Africa, which ranks 47th on the list, provides a complimentary “green limo,” an electric car that transfers guests to three nearby tourist spots. Free Wi-Fi? ­Claridge’s was one of the first hotels in London to offer it.

“Value add-on is really in demand, particularly among leisure clients,” says Thomas Kochs, general manager of Claridge’s, this year’s third-place hotel. Leisure travelers account for 55 percent of ­Claridge’s mix; they have returned with fatter pocketbooks than corporate guests. “Leisure clients are spending more, staying longer and treating themselves to suites a little more often,” he says.

Kochs has made goodwill visits to the U.S. this year to confer with his top bookers — members of networks like ­Virtuoso, Signature and ­American Express ­Centurion — and to promote the 113-year-old property as a destination for modern and traditional travelers alike. That means providing butlers who are as adept at troubleshooting iPads (which are provided in the hotel’s limousines) as they are at manning the 5:00 p.m. rounds of the sweets trolley. It means cutting-edge fare from Gordon Ramsay as well as the best afternoon tea in London, according to the prestigious Tea Guild. “Our heritage, history and the royalty that stays with us definitely help make Claridge’s attractive,” Kochs says. “But we are actively working at keeping our name and our brand relevant to the needs travelers have today and ­tomorrow.”

Although exquisite service remains part and parcel of the luxury image, the segment is starting to fine-tune its marketing message. “Pampering is now complemented by something that conveys productivity,” NYU’s Hanson says. “The message is: ‘If you stay at our hotel, we will have the service you need and will make your time more productive.’”

That’s certainly the mantra at the China World, No. 42, where corporate guests have reduced both the frequency and duration of their stays. “They want the best value and best quality in the shortest length of time,” says general manager Rice. Since those guests are eating in-house more during their short stays, the hotel now changes its recommendation menu every two weeks to offer more variety. An 8,000-square-foot executive lounge, due to open mid-2012, will connect directly to the business center and the newly refreshed conference facilities. The hotel also added a dedicated concierge to serve as a single point of contact for organizers of meetings and conventions. “Physical product will always be there, new hotel or old hotel,” Rice says. “But guest experience and ser­vice will always differentiate one property from another.”

The Mount Nelson Hotel has assigned a staff member to assist production crews for films, advertisements and photo shoots, which account for 25 percent of the hotel’s clientele. (Cape Town is considered the Hollywood of Africa, thanks to its tax incentives and skilled English-­speaking talent.) “They’re long-stay guests, so I like to take care of them,” says general manager Xavier Lablaude. “I give them small discounts at the bar, special rates for laundry and 10 percent off on food and ­beverage.”

What happens, though, when there’s too much of a good thing? STR Global has cautioned that oversupply could spoil the recovery in the high-end market as new properties continue to open their doors around the globe — and around the corner from some of the hotels on this year’s list.

“Competition is our top preoccupation,” says Vincenzo Finizzola, general manager of the Four Seasons Hotel Milan (No. 61). The luxury 95-room Armani Hotel opened in November just a five-minute walk away. The Four Seasons courteously tweeted its “very best wishes to our new neighbors,” even as the 18-year-old property is freshening up for the fight. A 7,000-square-foot spa will open in 2012, just as renovations begin on all 118 rooms.

Once the sole luxury property in lower ­Manhattan, the Ritz-­Carlton New York, ­Battery Park — which ranks 64th — now has several competitors for the business that’s expected to come with the opening of 1 World Trade ­Center, the 1,776-foot skyscraper currently rising on the site of the old Twin Towers. However, continuous delays have pushed the tower’s opening back to April 2014 — adding insult to the injuries suffered by downtown business hotels as a result of the financial turmoil on Wall Street.

As a $10 million renovation revamped the hotel’s 298 rooms in 2009, the Ritz-­Carlton New York, Battery Park’s management team overhauled its food and beverage and sales approach as well. The high-­priced steakhouse? Gone. 2 West is now a more moderately priced American bistro. “It’s giving customers a lot more options,” says general manager Greg Mendoza. Financial and corporate groups disappearing from the reservation books? Call in the lawyers. The sales team has booked several legal groups and associations for functions at the Battery Park property. In July the hotel even marketed a package for trial lawyers, which included everything from a free shoeshine to a noncompete clause excluding opposing counsel from booking at the hotel. Those wholesalers that were unnecessary in the past? Ring them up. “They are bringing us business from Germany, Brazil and Mexico,” Mendoza says. “It’s a new segment, and it’s working.”

Claridge’s also has its sights set on the Brazilian market, as does the Fullerton Hotel in Singapore (No. 75), owing to direct flights now connecting São Paulo to Singapore three times a week. “Singapore has enjoyed buoyant visitor arrivals the past year” because of those direct flights, says Giovanni ­Viterale, general manager of the ­Fullerton ­Heritage hotel group.

To highlight its prominent position in Singapore’s history (the hotel occupies the grand former General Post Office building), in July 2010 the ­Fullerton opened an 800-square-foot gallery with photographs, maps, stamps and other artifacts that date back to 1932. The hotel also teamed with the Singapore Philatelic Museum to create the Fullerton Heritage Trail map. “It guides visitors on a walking trail to discover firsthand the rich history and diverse culture of the neighboring civic district within which both our hotels are located,” ­Viterale says.

Although the Fullerton has been guiding foreign visitors to its door, several other properties on this year’s list have turned their gaze homeward. The Four Seasons Hotel ­Mexico City (No. 35) has aggressively targeted its domestic market through Internet ads pegged to Spanish-­language searches and websites. The push has boosted the Mexican share of the hotel’s clientele to 28 percent from 23 percent previously. “We are also strongly targeting social catering, especially weddings,” says general manager Ricardo ­Acevedo. “In Mexico City it’s common to see weddings in the high-end market with 800 to 1,000 guests. It’s a lucrative ­business.”

After the earthquake, tsunami and nuclear crisis crippled Japan in March, the Peninsula Tokyo, which captures second place on II’s list, launched a highly successful “Peninsula Dream Stay ­Package” strictly for Japanese residents at an unprecedented 55 percent off rack rates. “During this time only Japanese were visiting hotels,” says general manager Malcolm Thompson. “It was important to target the local market.”

By year-end corporate business had rebounded, but leisure guests — the ones whose three- to five-night stays in suites add significantly to revenues — were as yet sorely missed. “We are still working on informing and convincing the international community that Tokyo is safe,” ­Thompson says. “We would like the international leisure traveler to return to us.”

What was once lost can be found again; just ask that grateful China World Hotel guest. The extraordinary levels of service that earn the Peninsula Tokyo and its fellow honorees the accolades of savvy travelers will serve them well as they, and the luxury market as a whole, continue to regain strength and look for growth opportunities in the year ahead. • •