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Do real luxury hotels earn money?

Do real luxury hotels earn money?

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Old May 18, 10, 10:07 pm
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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.

Last edited by TrophyCollector; May 19, 10 at 5:04 am
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Old May 19, 10, 4:25 am
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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
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Old May 19, 10, 5:03 am
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Originally Posted by number_6 View Post
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.
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Old May 19, 10, 5:19 am
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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.
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Old May 19, 10, 5:31 am
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Originally Posted by Non-NonRev View Post
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$.
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Old May 19, 10, 8:44 am
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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
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Old May 19, 10, 10:25 am
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Kage quoted some financials here http://www.flyertalk.com/forum/13542264-post47.html.
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Old May 19, 10, 11:23 am
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Originally Posted by Kettering Northants QC View Post
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.
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Old May 19, 10, 4:37 pm
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one can pull up financials for any public company...
Originally Posted by tfjim View Post
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

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Old May 19, 10, 9:28 pm
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Originally Posted by Kagehitokiri View Post
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.
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Old May 20, 10, 2:46 am
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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 ....
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Old May 20, 10, 7:38 am
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Originally Posted by Raffles View Post
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.
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Old May 20, 10, 8:00 am
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room service
http://www.flyertalk.com/forum/4474058-post19.html
http://www.flyertalk.com/forum/13006779-post53.html

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Old May 20, 10, 3:45 pm
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Originally Posted by number_6 View Post
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?
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Old May 20, 10, 3:51 pm
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Originally Posted by Kettering Northants QC View Post
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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