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-   -   Do real luxury hotels earn money? (https://www.flyertalk.com/forum/luxury-hotels-travel/1086801-do-real-luxury-hotels-earn-money.html)

TrophyCollector May 18, 10 10:07 pm

Do real luxury hotels earn money?
 
If we take the narrow FT definition of luxury (like Amanhotels, FS, Dorchester, PEN):

Do real luxury hotels earn real annual returns?

Or is it mostly for appreciation of real estate value?

Or rather a prestige benefit for Ultra-HNWI hotel owners?

I hear that the best money is earned in the 4 star category.

And undoubtedly a lot of the flagships struggle.

number_6 May 19, 10 4:25 am

Many high-end hotels do lose money, but obviously the ones that stay in business have a revenue stream that makes it work. Often it is from other than the hotel itself. Hardly surprising: most of the 10 best restaurants in the world lose money (despite charging hundreds for a meal). There are so many other revenue sources available that sometimes book tours are worth more :)

TrophyCollector May 19, 10 5:03 am


Originally Posted by number_6 (Post 13983820)
most of the 10 best restaurants in the world lose money (despite charging hundreds for a meal).

Good example ^

I'd be keen to know if there are some documented real luxury cash cows out there.

Non-NonRev May 19, 10 5:19 am

My guess would be that a property that is clearly acknowledged as the best in a given area is going to attract (almost by default) a good deal of non-lodging revenue from things like corporate parties, weddings, and the like. The cachet that "being the best" provides can serve to allow these hotels to drive profitable food & beverage income.

TrophyCollector May 19, 10 5:31 am


Originally Posted by Non-NonRev (Post 13983966)
My guess would be that a property that is clearly acknowledged as the best in a given area is going to attract (almost by default) a good deal of non-lodging revenue from things like corporate parties, weddings, and the like. The cachet that "being the best" provides can serve to allow these hotels to drive profitable food & beverage income.

The Ciragan Palace in Istanbul for example is proof for what you say. A real "status symbol" in a huge metropolis, attracting most prestigous parties and weddings.

I chose my Trophy name relating to hotels that are a status symbol to visit (in my case) - or own (important motivation for billionaire owners of Dorchester Group, Frégate, African lodges, many FS, etc.).

Especially Amanresorts with hard access, few rooms and virtually no outside-F&B must have constant difficulties. We should thank the owners for providing such an excellent price-benefit-ratio, even at prices way above 1.000 US$.

Kettering Northants QC May 19, 10 8:44 am

I recall reading somewhere that for Mandarin Oriental their most profitable hotel was 4* Excelsior in Hong Kong and that's why they keep it, despite it being the odd one in their portfolio

tfjim May 19, 10 10:25 am

Kage quoted some financials here http://www.flyertalk.com/forum/13542264-post47.html.

TrophyCollector May 19, 10 11:23 am


Originally Posted by Kettering Northants QC (Post 13985006)
I recall reading somewhere that for Mandarin Oriental their most profitable hotel was 4* Excelsior in Hong Kong and that's why they keep it, despite it being the odd one in their portfolio

That sounds consistent with what I hear about real luxury hotels - and how tough it is to earn money with them. As compared to the 4* segment.

Kagehitokiri May 19, 10 4:37 pm

one can pull up financials for any public company...

Originally Posted by tfjim (Post 13985681)
Kage quoted some financials here http://www.flyertalk.com/forum/13542264-post47.html.

im amazed at how many things have 5% > 10% margin, even in luxury industries.

OE "tourist trains and cruises" > http://www.flyertalk.com/forum/13852961-post24.html
aman did better >http://www.flyertalk.com/forum/13610023-post102.html

other >
http://www.flyertalk.com/forum/13627784-post24.html
http://www.flyertalk.com/forum/13979995-post184.html

TrophyCollector May 19, 10 9:28 pm


Originally Posted by Kagehitokiri (Post 13988133)
you can pull up financials for any public company...

im amazed at how many things have 5% > 10% margin, even in luxury industries.

other stuff >
http://www.flyertalk.com/forum/luxur...l#post13852961
http://www.flyertalk.com/forum/luxur...l#post13627784
http://www.flyertalk.com/forum/luxur...l#post13979995

aman was better >
http://www.flyertalk.com/forum/13610023-post102.html

Thanks Kage, the AMAN article in Forbes is particularly good.

Raffles May 20, 10 2:46 am

The truth is, I think, if you want to make some money in hotels you should stick up a pre-fabricated Holiday Inn Express in a second-tier location ....

edcli May 20, 10 7:38 am


Originally Posted by Raffles (Post 13990576)
The truth is, I think, if you want to make some money in hotels you should stick up a pre-fabricated Holiday Inn Express in a second-tier location ....

My father always says "easier to make money on the buy than the sell". I think it rings true.

Kagehitokiri May 20, 10 8:00 am

room service
http://www.flyertalk.com/forum/4474058-post19.html
http://www.flyertalk.com/forum/13006779-post53.html

Shangri-La May 20, 10 3:45 pm


Originally Posted by number_6 (Post 13983820)
Many high-end hotels do lose money, but obviously the ones that stay in business have a revenue stream that makes it work. Often it is from other than the hotel itself. Hardly surprising: most of the 10 best restaurants in the world lose money (despite charging hundreds for a meal). There are so many other revenue sources available that sometimes book tours are worth more :)

El Bulli is a money-loser, correct?

Shangri-La May 20, 10 3:51 pm


Originally Posted by Kettering Northants QC (Post 13985006)
I recall reading somewhere that for Mandarin Oriental their most profitable hotel was 4* Excelsior in Hong Kong and that's why they keep it, despite it being the odd one in their portfolio

Does the MO own the property or just manage it?


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