What European Luxury Hotels Can Learn From Their Midscale Cousins

The European hotel market is a different beast to its U.S. counterpart – the big split being the number of branded versus unbranded properties.

This is both good and bad for industry trend watchers. The lack of conformity means plenty of product differentiation but the number of countries makes it tougher to spot broader changes in the market.

Travel industry analysts earn big bucks to be on top of trends before they become trends. That’s why, when we wanted to get some insight on innovation in European hospitality, we turned to experts with their ears to the continent’s ground.

Siniša Topalović is managing partner at tourism consultancy Horwath HTL and is based in Serbia; Wouter Geerts, is a travel industry consultant for Euromonitor International based in London; and Alexis Gardy is a partner at Roland Berger, a global strategic consulting firm headquartered in Germany.

Skift: Discuss why hospitality innovation proceeds from a different place in Europe. 

Siniša Topalović: In Europe, a large percentage of hotels are not part of chains. That’s partly because places like Germany, Austria, Italy and France have traditional hospitality cultures, where there are many family-owned hotels. Within this context, there’s an opportunity to develop and deliver things differently. Also, chains didn’t take off here, due to the differing tastes of the citizens of different countries. This is unlike the U.S. hospitality industry, which initially took a very cookie-cutter approach to hotel development (hence, the focus on chains).

That’s why there is more focus in Europe on niche products focused on very specific markets, designed to follow the customer journey at every touchpoint. For example, there’s Kinder Hotels, which specializes in premium family vacations and Loisium Wine and Spa Resorts, which provide unique experiences in beautiful landscapes. Both concepts originated in Austria.

Alexis Gardy: There is a lot going on in Europe, but it’s a highly-scattered environment, so it’s difficult to assess innovation across the market. That said, The Netherlands is a place that has a lot of innovation. The Dutch are highly educated, highly international, and have a strong ability to understand different customer needs (particularly due to the volume of visitors from other countries in Europe).

Skift: Do you see a difference between innovation in the luxury and mid-market sectors? 

Wouter Geerts: Most of the innovation in Europe is coming from the mid-market segment. The mid-market needs to be a little more innovative, as it is stuck between a luxury segment that is performing well and budget hotels that are improving the quality of their offerings. This forces them to be more innovative – more likely to try new technology, for example.

These mid-priced hotels are a bit quicker in reacting to the fact that it’s not just the framework of a building that provides quality. It’s people, seamless experiences, authenticity, which, because of the sharing economy, has become a lot more important.

Luxury always seems to be behind when it comes to innovation. They believe their guests have a certain expectation of standards. And for some reason, there’s this attachment to the idea of what “I pay equals how much I get in material value.” But luxury hotels need to get away from thinking in terms of material things and moving more toward the experiential.

Gardy: The issue is the ability to monetize the innovation. What the hoteliers are facing is: can you get a return on the cost of innovation, either through room rate, customer loyalty, or increased occupancy. In franchise models, on-site investment is paid by franchisees. In the mid-market, there’s the ability to replicate a similar value proposition from one site to another. If there are 300 units of the same mid-range brand, it’s easier to launch pilots (upon which) the brand can make an appealing business case to owners. Then, it’s easier to get the rest of the network on board. But for luxury, each hotel is a more specific, dedicated offering.

Skift: Talk a bit about how luxury hotels can cater to their guests through personalizing experiences. 

Geerts: The understanding of what luxury is has totally changed. We live in a very individualistic world, but people are seeking ways to be part of something. The sharing economy has contributed to that.

Luxury should be exclusive, yet inclusive. Traditionally, especially with loyalty programs for example, a lot is tied to money – the more money you spend, the more access you get. But people who are not as brand loyal will still want to have certain experiences. How can we offer something special, but still allow anyone to have it, that is not based on money spent. You aren’t going to get loyalty to one brand unless you reinvent programs to offer special events and experiences before guests have spent a ton of money.

Gardy: For me, there is a consistent part of luxury which is related to the product itself—and that will stay as it’s always been—location, the quality of rooms. What has changed is more on the service side. with the Increasing need for personalization and providing a unique customer experience to each individual guest. And it’s getting faster – there’s the ability to understand clients one minute before they enter the lobby.

Skift: What can luxury hotels learn from the new niche midscale products popping up around Europe?

Topalović: In terms of developing niche products brands, companies have to start working with very focused products. Focus on specific experiences first, then build from that. In other words, don’t start with a design concept like we are going to have a cool lobby….start with the experience and build from there.

25hours Hotels, Jaz in the City, CitizenM, Mama Shelter – where these hotels are different are the unconventional methods they use to lose the barriers between guests and employees. They have a welcoming atmosphere of home and belonging shared by guest and staff alike. They have a well-curated process of standard operating procedures. But they are more about friendly way to encourage human communication.