Owners of luxury hotels are now concerned about negative guest perception and political pressures on groups and corporations to avoid the stigma of being publicly chastised for choosing a luxury hotel or resort.

In today’s challenging economy, owners of luxury hotels are considering how best to weather the downturn. Once fortunate to represent a segment of the industry that seemed immune to economic fluctuations, owners are now concerned about negative guest perception and political pressures on groups and corporations to avoid the stigma of being publicly chastised for choosing a luxury hotel or resort.

Indeed, even the words “luxury,” “resort” and “spa,” once seen as code for a memorable experience, now telegraph extravagance, waste and politically incorrect decision making.

So, how are owners to cope with weak occupancy and demands for lower rates? Discounting to maintain occupancy has its own set of pitfalls. Many owners and luxury brands are concerned that raising rates to pre-recession numbers will be all but impossible as the economy improves. Meanwhile, the wear and tear on the hotel’s FF&E is accelerated when the guest profile changes in response to lower rates.

Many luxury brands disguise rate cutting with deals including free amenities, resort credits or extra nights, hoping that by maintaining rate, guests will ignore the reduction in freebies that will accompany an upturn and continue to pay.

But how does this affect the value proposition established by offering added incentives? Inevitably, guests come to see these benefits as part of the value and resent such reduction.

Those with deep pockets or nerves of steel stand firm on rates and take the hit in occupancy while focusing on doing more with less. For example, Mark Harmon, president of Auberge Resorts, says it is critical to determine your customers’ value proposition and focus on delivering it very well. He maintains you make customers for life if you deliver beyond expectations, particularly in difficult times, even gaining market share without reducing rate.

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