Where Luxury Is Going Next

8.9.2018

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That is the question that Chris Cahill, CEO Luxury Brands AccorHotels, answers in the new Skift report "Where Luxury is Going Next".

Luxury travel is growing by leaps and bounds. As more people around the world enter into the aspirational middle class demographic, and as the number of high-net-worth individuals  continues to grow, there is increasing demand for new tourism products, in terms of destinations, flights, and hotel rooms. SkiftX recently spoke with CEO of AccorHotels Luxury Brands Chris Cahill to get his thoughts on where luxury is going next.

SkiftX: The luxury travel sector is experiencing exponential growth around the world. Why is that?

Chris Cahill: If you look at it from a macroeconomic level, during the past 35 years, global tourism has been experiencing compound annual growth rates of 4 or 4.5 percent. Globalization and technology are shrinking the world. At the same time, travel is becoming less of a discretionary spend than a fundamental right. People are much more focused on incorporating travel into their leisure time.

Demographics are also feeding into the growth. People are living longer and they’re staying healthier. The baby boomers have more time and money. On top of that, there’s the emerging middle class in developing economies –– in China, Asia in general, and the Middle East and Africa. Put it all together, and there’s a great deal of upward push in the affluent population.

SkiftX: How has luxury changed since you’ve been in the business?

Cahill: The fundamental change is largely around the physicality of the offering. Some years ago, it was about the quality of the furnishing, along with the focus on formal service. Nowadays, beautiful lobbies, fine linens, and marble bathrooms –– while still in demand and highly appreciated –– are merely the basis of luxury. They’re commodities.

Today, the feeling of entering a magnificent space where one is greeted by name is a thoughtful intimacy that makes guests feel they are being treated with care and surrounded by luxury. Our guests tell us that luxury is an emotional experience. As a result, luxury is being broadened to aspects such as facilitating experiences. Thus, it’s moved from a physical definition to having a more personalized, softer side.

The luxury customer has also become much less strictly defined. Twenty years ago, most luxury travelers shared a similar demographic and financial profile. Today, the market for luxury is much broader, with many aspirational travelers willing to spend beyond their means to attain luxury goods and services.

SkiftX: Who defines luxury today? Several of your colleagues have noted that, whereas in the past, the hotel itself defined luxury, today, the consumer sets the definition. Do you agree with this assessment? 

Cahill: Some brands in the jewelry or fashion spaces still define luxury in hard ways. But from a hotel perspective, it comes from the customer. Guests want to be more comfortable in their luxury experience, and so they are defining the experience, concerning everything from design to the food and beverage offering.

SkiftX: Speaking of food and beverage, it seems another shift has been to make the hotel restaurant more of a gathering spot for locals rather than a convenient accessory for guests.

Cahill: I would say that today, a large part of the hotel product is geared to the local market. Restaurants, bars, the spa, and the health club all are driven by revenue from the local customer. In a sense, it’s much easier to figure out what the local customer wants. If you get the public spaces right for locals, the hotel guests will follow, as it further localizes their experience.

SkiftX: Since the title of this report is Where Luxury is Going Next, what are your thoughts about the actual destinations that are going upmarket?

Cahill: There are so many areas around the world that are right for growth. In terms of what I am seeing, Laos is starting to develop, while Vietnam has seen explosive growth in luxury in recent years. In Africa, Tunisia has great prospects.

Evening Europe, there is growth. Cities in Eastern Europe are becoming better known as people want to go beyond the main destinations. Part of it is exposure. Once people learn about destinations, they are more likely to visit. Some areas are being opened up and becoming more familiar due to river cruising. But it’s also a matter of governments recognizing tourism as an economic opportunity. That’s a significant shift from 20 years ago. Countries started realizing the export capacity of tourism, whereas before, they didn’t really think about it as a product.

ShiftX: What’s next for the luxury traveler?

Cahill: The luxury consumer will continue to evolve and it will be interesting to watch, as everyone is looking for what’s the “new” new. It’s likely about self-fulfillment that goes beyond the experiences, what travelers can take away from a destination. Our job is to facilitate those desires, with individual recognition and delivery of experience as the ultimate goals. 

Source : 2018 Skift Report, "Where Luxury is Going Next"

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