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The current COVID -19 pandemic is likely to have a lasting impact on the size, number, and market position of luxury and upscale hotel brands in the U.S. The impact of the pandemic will lead to a consolidation of brands resulting in fewer brands after their rapid growth in recent years. The smaller brands are likely to address redundancy in their operations and make permanent new staffing schedules brought on by furloughed employees. Despite restructurings and increased efficiencies, we believe several smaller brands will fall prey to larger hotel chains that operate across different market segments, such as luxury, upper upscale, midscale, and economy.

The franchising of brands to third-party hotel owners by the major chains has become a successful business model that enables hotel chains to expand without incurring high capital costs. The current crisis is likely to accelerate the process whereby hotel brands shed their real estate ownership and concentrate on an “asset-light” strategy.

The recent performance of the major luxury hotel brands in 2019 is illustrated in the accompanying graph. The luxury brands are characterized by hotels that achieved average daily rates (ADR’s) of between $200 and $520 and operated with average occupancies of 55% – 90% in 2019. According to STR, Luxury chain hotels achieved an average occupancy of 73.9%, an ADR of $343.44 and a RevPAR of $253.69 in 2019.

The Market Position of Several Luxury Hotel Brands in the US 2019

Note: The size of the bubble reflects room nights sold in 2019.

The graph above clearly displays the spread of price points (ADR’s) for each of the brands and chains with multiple brands in the luxury sector. Different factors such as the age of guests, the purpose of travel, and budget for accommodation and related expenses are used by hotel operators to differentiate their brands, thereby capturing a wider range of guests.

Despite the current upheaval in the lodging industry, we expect the majority of luxury and upscale brands to survive and prosper, but we do expect several lower-tier luxury and top-tier upscale brands to be acquired and merged with other brands in the next few years. Only time will tell if this redirection pays off especially for the country’s luxury and upscale hotel brands.

Please feel free to call us if we can help you with your brand positioning and market segmentation and customer acquisition strategies or if you need to identify and negotiate with a hotel brand, franchise, or operator that will maximize the performance of your hotel. Our outcome-focused solutions span research, strategy, creative, engagement and execution. Please call us at: +1 973 723 0423 We can assist you!