Luxury Seems To Be Riding The Economic Wave

In today's economic recession many businesses

, especially service industry businesses, have had to make cutbacks or even close. With struggling hotels abounding, people are surprised to see many luxury hotels continuing to make financial gains. With mid-range hotels closing, how are so many luxury hotels surviving, and in some cases, even expanding?

The explanation for the downsizing and foreclosures that many hotels are experiencing seems intuitive. The economic recession has caused people to cut back on spending. Around the globe, this has caused travelling for leisure, as well as travelling for business to drop. Businesses in particular are trying to maximize alternatives to travelling, utilizing video conferencing services for meetings instead of holding face-to-face functions. Average businesses, the businesses that have been the most affected by the recession, are more likely to send employees to mid-range hotels than luxury hotels. The cut back in business travel accounts for some of the disparity in the success, or lack of success, between mid-range and luxury hotels.

Despite the overall decline in leisure travel, many luxury hotels have continued to do good business. Part of the explanation for this is the demographic who utilizes luxury hotels. Many people who feel forced to cut back on their spending, and decide to do away with any leisure travel are families. These families are likely to be middle or upper-middle class families, who need to reorganize spending, and continue to save for college funds or pay back loans. This demographic has probably been far more likely, in the past, to stay in a mid-range property than a luxury one, and now they will not travel as much, taking business from the mid-range sector. In many instances, regular guests of 5 star properties do not experience the effects of the economic recession in the same way. While they may have to make some spending adjustments, most very wealthy people can still easily afford travel expenses. Since the appeal of travel has not declined, high-end travellers are more likely to continue travelling.

The types of trips that people take during the recession are also part of the reason these properties have survived when many mid-range ones have not. While travellers probably try to reduce the amount of times they go on average trips, for a business event, or to avoid a long drive, they are not necessarily cutting out all travel. Instead of taking several trips throughout a year, more and more travellers are taking only a few trips. A person who seldom takes trips may decide to indulge when they do travel. Or, for some, the times that they do choose to travel may be for a very special occasion, such as a honeymoon or anniversary, and this might influence their decision to stay in a luxury hotel.

Many find it surprising that even in the midst of difficult economic times, when so many businesses are struggling to survive, luxury hotels continue to survive and even thrive. Examining the class of travellers who have used, and continue to use, luxury hotels, and the reasons and occasions people are travelling, will help to explain the interesting success that luxury hotels have maintained. With their clientele and appeal, luxury hotels may continue to do well in the future, surviving and expanding despite a suffering global economy

by: Timothy Capper

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