Upscale hotels show no sign of a downturn

— -- At a time when bank accounts and stock portfolios are draining, the high-end hotel business might be expected to be losing its fizz.

Not yet. While occupancy is down slightly as room count rises, rates and room revenues are up. And new luxury lodgings continue to pop up like bubbles in a glass of Champagne.

Lower-cost quarters at upscale hotels are being booked less frequently, say hoteliers, in part because of reduced business-travel budgets. But suites and rooms with a view are selling, as the industry woos younger guests in addition to the older well-heeled set with Architectural Digest-worthy design, high-tech bells and whistles, haute and happening lounges and the VIP insider experiences guests increasingly expect.

"The demand for luxury hotels is not as affected" by the economy as other hotel categories, says Jan Freitag, a vice president of Smith Travel Research, which tracks hotel performance. In March, U.S. luxury hotel occupancy averaged 72.2%, the best in any hotel category; average daily rate was $323.80 (up 5.6% from March 2007) and revenue per available room rose 1.5% over last March — more than any other hotel segment.

"People who stay in luxury hotels are either insulated from the general economy trend because they're independently wealthy, or they are traveling on business at a (high) level," Freitag says. Or they've saved for a splurge and insist on the best.

Customers "want to pay up and buy the best room," Paul McManus, president and CEO of The Leading Hotels of the World, told an April media roundtable in Washington, D.C. His global consortium of about 450 hotels, which had its best year ever in 2007, is booking lots of the "new wealthy," including Russians, Chinese, millionaires from India and self-made U.S. moguls.

Other ritzy hotel groups are doing well, too: The prestigious Relais & Chateaux group of worldwide lodgings just reported higher occupancy and room revenue this year.

"Time is luxury for a lot of customers, and that's why they'll pay more," says Jim FitzGibbon, president of worldwide operations for Four Seasons Hotels and Resorts, an industry leader. But now, "you have to create an experience for the customer and not just put them through a (cookie-cutter) system."

Guests want to take classes, get insider tours of museums and more, says McManus, echoing other hotel executives. "They want to go home and say, 'I learned to cook pasta' " in Italy.

Personalized experience

Baby boomers are big spenders, but chichi hotels also are trying to lure travelers in their 30s and even late 20s who are prolific travelers. Some are as able as their elders to indulge but don't want to do it in stuffy, formal surroundings. Even grande-dame brands such as Four Seasons and Ritz-Carlton are giving hotels a less formal and more individual feel.