Cyclical shifts in demand when it comes to luxury hotel or resort bookings are part of the industry, they always have been. Travel is intimately connected to politics, economic events and natural phenomenon, which sadly can also include new health risks at times. If the only thing we know is that black swan events and other types of disruptions can severely affect the occupancy for our properties and the overall booking pipeline of our brand, then the smartest thing we can do as luxury hoteliers and marketers is to learn from previous events and adapt our strategy accordingly, right? Is that what has happened in the larger luxury hospitality industry since the pandemic has ended? Have the behavior patterns of investors and marketers really changed for the better? Are we any wiser as a whole?
Market disruptions and changes are cyclical
Let’s look at couple factors which might affect your booking campaigns no matter how creative or well planned they are, no matter what stage your brand is at or what the market looks like where you are in general at any give time:
Seasonality
Seasonal fluctuations are inevitable as they are tied to natural weather patterns and climate changes. For example, luxury ski resorts experience high demand during winter months, while beach resorts see increased bookings during the summer.
Ecological Disasters and Pandemics
Natural disasters like hurricanes, wildfires, or floods can damage properties and infrastructure, rendering popular destinations temporarily unviable. Similarly, pandemics such as COVID-19 can impose widespread travel restrictions and safety concerns, causing a sharp (if temporary) decline in bookings.
Economic conditions
During periods of economic growth, consumer spending typically increases, leading to higher demand for luxury travel experiences. Conversely, during economic downturns, people may be more cautious with their discretionary spending to not project a bad image, leading to reduced demand for luxury travel. While this rule goes out the window when we approach higher wealth segment echelons, as we know that these consumers always travel no matter what due to business and social obligations, it still applies to the lower levels of wealth to a certain degree.
Changing travel trends
The preferences of travelers constantly evolve, influenced by factors such as demographic shifts, technological advancements, and cultural trends. These changes can lead to cyclical shifts in demand as the popularity of specific travel experiences, destinations, or types of accommodations rise and fall over time. Demographical change like the shift from boomers and gen X towards millennials and gen z is just accelerating the pace at which these trends come and go.
Holidays and events
Major events, such as sporting events, conferences, or festivals, can lead to a surge in demand for luxury accommodations in the vicinity. Similarly, national and religious holidays can also influence travel patterns, causing cyclical shifts in demand. Events like the Olympics, the FIFA world cup or presidential elections only come around every couple years but can have a big impact on your planning.
Political climate
Unstable political situations, conflicts, or travel restrictions can lead to a drop in demand for luxury travel experiences in affected areas. The recent war in Ukraine being a prime example.
Competition
The introduction of new properties or changes in your regional or national competitive landscape can lead to fluctuations in demand as guests explore different luxury experiences and options. We wrote in the past how relying on OTAs too much only amplifies this type of market disruption.
The world has changed
The COVID-19 pandemic has profoundly impacted the luxury hospitality industry, leading to a myriad of changes as businesses adapted to new challenges and shifting consumer expectations. One of the most significant changes has been the increased focus on health and safety measures. Luxury hotels and resorts have had to prioritize implementing stringent sanitation protocols, social distancing measures, and contactless services to ensure guest safety and build trust. Another notable shift has been the rise of local and domestic travel, as international travel restrictions and safety concerns prompted wealthy guests to explore destinations closer to home. This has led luxury hospitality providers to tailor their offerings to cater to local and domestic travelers, highlighting unique experiences and regional attractions to entice guests. Additionally, the pandemic has accelerated the need for flexible booking policies.
Uncertainty around travel plans and ever-changing restrictions have made flexibility a key factor in booking decisions. Luxury hotels have responded by offering more lenient cancellation policies, adaptable reservation dates, and other booking-related assurances to attract guests and encourage bookings. The luxury hospitality industry has also seen a surge in demand for private and exclusive experiences, as wealthy guests prioritize privacy, safety, and personalization in the post-pandemic world. This has led to an increase in popularity for private villas, boutique hotels, and bespoke services that cater to individual needs and preferences.
Digital Direct Bookings
The pandemic has also significantly affected the digital booking behavior of wealthy hotel guests. Firstly, there has been a marked increase in the use of digital channels for research and booking, as guests seek comprehensive information on safety measures, travel updates, and destination-specific restrictions. This has prompted luxury hotels to enhance their online presence, offering detailed, up-to-date information on their websites and social media platforms. Moreover, wealthy guests are increasingly relying on digital tools for communication and customer service.
With the rise of contactless services, guests now expect seamless digital experiences throughout their stay, including online check-ins, virtual concierge services, and digital payments. Luxury hotels have had to adopt innovative technologies and invest in digital infrastructure to meet these expectations. And we all now not every brand has caught up yet. Lastly, the pandemic has amplified the importance of personalized and targeted marketing, as guests seek relevant, timely, and customized communication. Luxury hotels have to leverage data-driven marketing and digital tools nowadays like email campaigns, social media advertising, and re-marketing efforts to reach their audience effectively and promote offerings tailored to guests’ evolving preferences.
How should luxury hospitality brands adapt react to the next market disruption?
Staying visible
During temporary market disruptions, staying visible is crucial for luxury hospitality brands to maintain consumer engagement and brand loyalty. Visibility during challenging times demonstrates resilience and adaptability, providing reassurance to potential guests that the brand remains committed to delivering exceptional experiences.
By maintaining a consistent presence through strategic marketing efforts, including social media, email campaigns, and content marketing, luxury hospitality brands can keep their offerings top of mind, ensuring they are well-positioned for a swift recovery when market conditions stabilize and demand returns. The brands that followed this premise have seen a faster and more healthy recovery and were able to absorb losses quicker and more effective than brands who let their momentum die out completely over the course of the pandemic.
Creating loyalty
Brand loyalty in the luxury hospitality industry can be fostered through targeted, consistent and personalized digital advertising. By leveraging data-driven insights, brands can create compelling ad campaigns that resonate with their target audience, showcasing the unique offerings and experiences that set them apart. Tailored messaging, appealing visuals, and timely promotions can strengthen the emotional connection between guests and the brand, leading to a memorable and lasting impression. Consistent engagement through digital channels, including social media, search engine marketing, and display advertising, ensures the brand remains top of mind, ultimately cultivating loyalty and driving repeat bookings, especially when market disruptions subside and normal travel conditions return.
Retaining talent
During the pandemic, massive layoffs and furloughs have significantly impacted the luxury hospitality industry, making it harder to maintain service quality. This upheaval has contributed to the talent shortage the industry is currently facing, as many skilled professionals have sought opportunities in more stable sectors or experienced difficulties in returning to their previous roles. Consequently, retaining and attracting great talent has become even more crucial for brands to uphold their reputation for impeccable service and to successfully navigate the challenges of today’s competitive market.
Offering fair or above market compensation, work life balance supporting benefits and hybrid or remote working models (were possible) are crucial when it comes to attracting new generations of talent into the industry and keeping the luxury company culture many brands have curated as part of their business model alive in the coming years. Without this very service and excellence oriented culture it will be borderline impossible to maintain impeccable service standards, which should be logical even for the most frugal investors and hoteliers.
Investing in quality partners
Investing in quality partners, such as a specialized luxury hospitality marketing agency like Jadewolf, can play a pivotal role in helping brands navigate market disruptions and maintain long-term relevance. During periods of market disruption, a specialized marketing agency can swiftly adapt promotional efforts to align with shifting consumer preferences and expectations. By leveraging data-driven insights and innovative marketing techniques, we can create compelling content, campaigns, and experiences that resonate with affluent target audiences worldwide, even in uncertain times.
We can also help brands identify opportunities for growth and diversification, such as expanding into new markets, catering to emerging customer segments, or exploring alternative revenue streams. This strategic guidance enables our clients to stay ahead of industry trends and capitalize on emerging opportunities, ensuring their long-term success and profitability. Managing brand reputation during challenging periods is another crucial benefit of working with a skilled partner. We can develop crisis communication plans, monitor online sentiment, and engage with customers through various digital channels to address concerns, provide reassurance, and maintain brand trust.
What is the status quo?
Despite the disruptions caused by the pandemic, it appears that some hotel investors and luxury marketers in the hospitality industry continue to adhere to traditional practices, potentially overlooking the lessons that the pandemic has taught. This reluctance to embrace change and adapt to evolving market conditions may hinder their ability to navigate future crises effectively, leaving them susceptible to the same challenges faced during the pandemic. As the industry continues to evolve, it is crucial for these stakeholders to reconsider their approaches and prioritize innovation and adaptability to remain competitive in the long run.
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