Originating from the 17th century, luxury was found in extraordinary commodities such as rare pearls, crystals, perfumes and even spices from the Caribbean. More recently in the industrialised world, with the problem of mass production solved, luxury became a brand. Today, luxury brands are one of the most profitable and fastest growing brand segments, yet there is no precise description of what makes up a luxury brand. Although research in the luxury retail industry has grown in popularity, there is little conducted into luxury brand hotels and the variations between them. So what makes a hotel luxurious in the year 2020? Does the price of a luxury hotel decide the level of exclusivity and luxury of the room?
The concept of luxury is associated with two characteristics – price and exclusivity. Society perceives that if price increases levels of luxury and exclusivity also increases. Some, however argue that luxury industries are cataloguing their products and services around a high price in order to capitalise on greater revenue and profits. Such an industry is the luxury hotel industry, which is notorious for promoting high prices. In order to understand what makes a hotel luxurious we need to explore the relationship between the constructs of luxury, price and exclusivity within hotels.
It is believed that price is the factor that represents the beginning of luxury. It is the characteristic consumers look for when defining luxury. Exclusivity, which is in a binding relationship with rarity, is also justified by price. In other words as luxury increases, so does price and exclusivity and vice versa. The question that remains is at what point does price cross the boundary by making a hotel more luxurious or more exclusive?
According to Melissen, van der Rest, Josephi and Blomme (2015), there is no general or standardised definition of a luxury hotel that currently exists. This means that the categorisation of luxury is open to individual preference and interpretation. One way to justify the price charged by a luxury hotel is to look at the range of determinants, which assist a luxury hotel in setting its room prices, including the number of rooms, the age of the hotel, market conditions, location and the staff-to-guest ratio. The article Price, exclusivity and luxury: Exploring London’s luxury hotels, poses the questions about how “valuable” these variables truly are and whether more complex matters are being associated with pricing structures. One such variable associated with justifying prices charged by a luxury hotel is seen to come down to the quantity of the tangibles within the hotel and, specifically, within a hotel room.
Prices set by a luxury hotel are pivotal in maintaining the hotel’s status, with a price which is deemed too low possibly resulting in a deterioration of the hotel’s positioning as well as a loss to its exclusivity. This means that companies will be seen to use high-pricing strategies, and even the term “luxury” itself, to increase marketing initiatives as well as attract elite members of society. It could be suggested that the charging of a high price for a hotel room in this case could be seen to make a room more marketable for a particular type of customer, or to emphasise position within the market. Luxury hotels are built on pillars representing quality in the tangible products as well as in the services which are on offer to guests far surpassing those of an ordinary hotel. It is this perception of quality being more than the norm that is the pillar of pricing strategies within a luxury hotel. In other words higher prices suggest an increase in consumer expectations.
The city of London in particular is a pinnacle representative of the worldwide industry’s expanding development. Modern luxury hotels are designed and constructed to represent contemporary innovation, while the more traditional luxury hotels have seen major refurbishments to meet with changing consumer trends. The London luxury hotel industry has and continues to grow, prices for rooms per night still remain high, with large variations between hotels noted by analysts.
The study Price, exclusivity and luxury: Exploring London’s luxury hotels by C. Lashley explores three hotels in the city of London, with specific attention being dedicated to each of the three hotels’ top suites. All hotels and rooms were defined as luxurious, and service levels were similar, yet each of the three hotels charged £5 000, £15 000 and £22 000 per night for their top suite.
The drawn comparison between the tangible and intangible products/services which a guest receives upon purchasing either of the three differently priced rooms shows that they are similar to each other, despite the considerable price differences. This therefore suggests that a room which is more expensive is not necessarily more luxurious based upon physical purchasable features. This signifies that the relationship between price and luxury is not seen to correlate parallel to the relationship of price and exclusivity. The article concludes that the rate price is constructed far exceeds the rate at which luxury expands. Price in this context does not necessarily indicate the levels of luxury a guest is likely to consume on purchasing.
The three hotel suites used in this investigation suggested a negative correlation between the relationship of price and luxury, and a positive relationship between price and exclusivity. These findings suggest that a hotel room that is more expensive does not necessarily mean it is correspondingly more luxurious.
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