In an increasingly competitive landscape, differentiation has become one of the biggest challenges for luxury hotels and branded residences, with traditional markers of high-end hospitality no longer no longer adequate when seeking to create a true luxury product.
Beyond amenities
And with the luxury segment is forecast to grow at 6 percent per year through 2025, according to analysis by McKinsey and non-luxury properties increasingly closing the gap on some of the physical details that indicate luxury, progress in this area has become crucial.
“Everyone offers the nice amenities, big swimming pools and the spa but what do you actually have that sets you apart? That’s an area that needs a bit of work. It's fine to have the amenities and the facilities but actually the level of service that you that you get as a resident owner or as a hotel guest or how many staff are allocated per guest for example, could be where you hang your hat” says Louis Keighley, head of development advisory at Savills as he stresses that differentiation stems not just from facilities but from the level of service provided.
And other experts agree that the answer to differentiation could lie in a focus on service, distinct experiential elements, segmentation and hyper localisation, underscoring a broader industry shift towards experience-led differentiation and curating a highly tailored guest experience.
The local touch
For brands like Ennismore, success is built around integrating hotels into their surrounding communities. Davina Zydower-Cisier, SVP development Europe at Ennismore, emphasises the importance of creating a product not just for the visitors but also for the locals.
“We're not just building hotels for hotel guests but also for locals. One key way to do that is through F&B - we are creating F&B for locals with the goal of people using our hotel almost like a canteen where they come and dine several times a week. And then that will also attract hotel guests,” she says.
And ensuring each property is uniquely tailored to its environment extends beyond dining, with Zydower-Cisier expounding the importance of full market studies in order to figure out what’s missing in the market and would be very relevant for locals, with this approach aligning with the rise of cultural authenticity as a key driver in luxury hospitality, with many brands and luxury hotel groups such as Six Senses and Aman successfully leveraging this strategy by opting to incorporate local artisans and traditions into their properties as well as offering locally inspired experiences.
“It’s about figuring out what the locals are looking for. For us, it's the local research on the market and making sure that you adapt whatever the brand is. You have to be very holistic in how you approach keeping your brand identity while making sure you localise it for a different market. You can’t be cookie cutter across different markets and there needs to be a lot of work on understanding how that's going to translate,” she adds.
What’s your niche?
Juan Garnica, executive director - hotels at Savills agrees that a holistic approach is paramount when seeking to offer a competitive product as he highlights an increase in the quantity of niche offerings.
“What you’re looking for is a complete, holistic experience that combines luxury, space, time and access to things that can’t really in other resorts. And that's very hard when you are competing in the luxury or ultra luxury segments. So what we’re seeing now are a lot of niche products – more sports oriented, gastronomy oriented, wellness-oriented etc.”
But while wellness has emerged as a dominant trend in hospitality and continues to gain significant traction, the space is becoming increasingly saturated and therefore hotels and branded residences needs to look towards the next phase of growth.
Keighley advises that the shift and the next area of growth - especially for branded resi where there’s already a lot of well-being focus, ski resorts and non-hotel brands– could be gaming and sports.
He explains that a move into gaming could be driven by an increase in interest in branded residences and luxury in a younger generation who are very keen on gaming products such as Playstation. In relation to sports, he notes branded resi opportunity in the number of international football teams playing in destinations such as the Algarve, highlighting that by aligning with global sports brands like Adidas or Nike, hotels and branded residences could tap into new demographics.
The integration of gaming and digital experiences into hospitality has already begun, with luxury brands experimenting with metaverse-inspired services and AI-driven entertainment offerings.
Rethink your approach
Beyond differentiation, a shift in mindset is required—one that views hotels and branded residences as dynamic, evolving spaces, with Zydower-Cisier noting that investors are increasingly understanding the importance of maximising the entire property,
“It’s about the added value and using all the square meters of the property to the max, rethinking and reprogramming empty areas and really activating those spaces such as the reception, rooftop etc in order to generate revenue,” she says.
This isn’t a novel idea has increasingly been adopted by many luxury hotels; for example both Six Senses Ibiza and 1 Hotel Brooklyn Bridge maximise square footage by either flexing the lobby to double as a casual work area and using the rooftop to host wellness events or cinema nights.
Keighley adds that it’s more than differentiation, it’s also about segmentation, drawing attention to a huge change in the demographic of hotel guests and highlighting the importance of adapting to the needs of the new type of clientele without alienating the old.
“Going back 20 years, hotel guests used to be older, retired people with a lot of cash but now you're looking at a way younger crowd who have a completely different interaction with the brand. The hotel brands have had to massively adapt and you need to be able to cater to each of these segments,” he says.
Zydower-Cisier says programming is vital. “For us, the most important word is programming – how do you programme your hotel? It could be anything from the F&B to the wellness, to the entertainment. How you programme every element of your hotel and how those elements interact is what’s critical.”
Looking forward, it seems the future of differentiation in luxury hotels and branded residences hinges on constant innovation to remain competitive whether it be through a hyper focus on service or a niche, real integration of local culture or future forward thinking.