Luxury hotels risk losing 'soul' in rush to wow guests with personalization
PRAGUE, Czech Republic — How do luxury hotels and hoteliers “humanize” themselves yet at the same time “bedazzle” guests who don't flinch at high nightly room rates?
Bedazzlement might come at a cost to a luxury hotel's ability to deliver humanization or personalization, according to a panel at the Inspire: Luxury Hospitality Conference.
Sonia Santana Cerpa, CEO of Montreux, Switzerland-based advisory S Strategic Services, said placemaking and design are the first steps to providing something extra that can wow high-end guests who cannot be wowed by luxury add-ons and personalized gifts.
“They still want standards and personalization, but if you’re paying $3,000 a night, then that is a given. What they want is the human touch and an emotional bond. [Humans are] not rational. Ninety percent of our consumer decisions are based on emotions, so for a hotel, it all comes down to the people, and people who care,” she said.
Stellar employees could make the difference of separating one luxury hotel from another, said Abdul Baaghil, the Lisbon-based co-founder and principal of Harvest Cotton Tale Hospitality Group. Baaghil is also a former general manager of the Fairmont Nile City, Cairo, among other hotels.
“Everyone must make the destination better, its character, its humanization and its soul. We need to find aspiring storytellers, musicians, chefs, who can tell their stories. Soul and product need to marry as one. Luxury is intention and presence, not about the marble,” Baaghil said.
Santana Cerpa said there some guests may stop going to their favorite luxury hotels because of staff turnover, leaving no one who remembers their specific stay preferences.
But not enough hoteliers understand what guests want from personalization, Baaghil said.
“General manager sometimes are too busy crunching numbers,” he said.
Panelists cited examples of “luxury” gone wrong, such as neglecting to ensure guest bathrobes are the right sizes or providing things that might be thought of as adding value but don't, according to the guest's perspective.
“Every brand looks the same, and you cannot tell the difference between luxury and lifestyle. If you live in a luxury-branded residence, the blur is more,” Baaghil said.
And in some cases, hoteliers in the luxury segment can overthink the experiences and amenities guests are looking for, said Sofia Rodrigues, founder and CEO of The-Guest Club and based in Brig, Switzerland. Her company is a membership club for high-end guests and travelers that store and distribute their tastes, preferences and requirements.
“iPads!” she exclaimed. “I am [at your hotel] for two days, and you want me to learn this new, complicated system?”
Sometimes a city or destination goes through changes that undercut a luxury hotel's vision and appeal. Anna Domingo, founder of New York City-based consultancy Padzzle, said Prague — although largely a marvel — suffers from an overabundance of Thai massage parlors, cannabis shops and restaurants selling food that has nothing to do with Prague or the Czech Republic.
“I’m from Barcelona, and parts of the old city have been destroyed. I, we, have a responsibility to correct this,” she said.
Building emotion and legacy through a luxury hotel must be in cooperation with guests, a journey that starts with a hotel’s conceptual master planning, Domingo said.
“That is where it starts. How to purpose and add value to a heritage building, as an example. … ‘If you build it, they will come,’ I believe is not the right concept right now,” she said. “As the saying goes, numbers do not lie, and liars do not use numbers. [The hotel industry does] not want community pushback; [it wants] community ideas, ideas you would never have thought about on your own.”
Data dilemma for luxury hotels
IT and AI have major roles to play in the humanization of hotel stays and the bedazzlement of guests, Rodrigues said. However, luxury hotel guests seek out the segment for wellness and rest, which might lead some customers to withhold the amount of data the share.
“IT can enhance and humanize the personal touches. … What data does the guest want to give to the hotel? This is what should be listened to,” she said.
Not all panelists agreed on the importance of data.
“Data is not the solution to provide ethos and soul. A huge amount of instinct has to be involved,” Baaghil said.
Where data falls is when it is siloed data within a hotel or brand, Rodrigues said.
“That is the enemy of the push to humanization, as are excessive or incorrect information,” she said, adding that abiding by Europe's General Data Protection Regulation can also muddy the waters of how useful guest data can be.
Baaghil said IT needs to be balanced against “soul.” He added he is worried many luxury hotels have lost that soul.
“Data is important, but the right data,” he said, adding soul and legacy can be difficult to notions to transfer from their originators to those who take over from them.
“Data is the facilitator. It will never replace the human,” Domingo added.
Third-party hotel operators are taking advantage of a hospitality industry increasingly looking for their services, but with these new opportunities comes their own set of challenges.
In a recent podcast interview with CoStar News Hotels, Paul Sacco, chief growth and development officer at PM Hotel Group, said there’s been a proliferation of third-party operators in the industry, but there’s also been a lot of consolidation among companies.
PM Hotel Group itself merged with Sightline Hospitality in late 2024.
Some of PM Hotel Group's competitors in the hotel management space have grown to such a degree that they’re a different business, he said.
“They’re not necessarily able to be as nimble as we are in some areas, and that really resonates with owners today,” he said.
Hotel owners are going through an interesting time in the cycle, he said. They’re generally looking for an operating partner who has an accessible C-suite because that helps resolve problems and also creates a level of transparency. They also want discipline around costs, the ability to drive top line as well as flow-through and profitability.
“Owners appreciate that on existing properties someone who is really going to tell them what the situation is but also someone who is insightful and forward-thinking enough to create solutions as well,” he said. “So, it’s pointing out the realities but also coming up with great guidance and implementation of solutions to those issues.”
The U.S. hotel transaction market is in transition with a massive reset in pricing, Sacco said. The fundamentals suggest potentially strong growth but there’s still a question mark with a lot of the current geopolitical concerns, among other factors, that have people playing a bit more cautiously.
There may be more hotel transactions coming in 2026 and the following years, but in the meantime, operators looking to hold on to their management agreements as a deal goes through should do what they can to be the best steward of that property, he said. They can’t control the buyer’s circumstances, but they can control their own.
“What you can do is just do the absolute best that you can at understanding the existing owner’s needs and the existing asset needs, and then also understanding what their sale goal is,” he said.
The global hospitality industry has undergone significant changes in the last five years, experiencing both major disruptions and a dynamic recovery. While the initial phase of the pandemic presented unprecedented operational challenges, the subsequent economic rebound has introduced new hurdles, especially concerning property-improvement plans, or PIPs.
Hotel owners face growing challenges in managing the rising costs of mandatory renovation programs. Crucial for maintaining franchise affiliation and brand standards, PIP expenses have significantly increased due to supply chain issues, persistent inflationary pressures and labor shortages.
This confluence of factors has increased the availability of hotels with substantial capital expenditure and PIP requirements as many owners grapple with sticker shock, potential refinancing hurdles or special servicing challenges. But for savvy investors who recognize a PIP as a value-added investment rather than a liability, these assets offer an advantageous entry point to acquire properties at a discount, unlock significant embedded value through strategic PIP execution, stabilize operations and increase revenue per available room yields.
This strategy may be contributing to the shrinking bid-ask spread, as sellers contemplate two options: Executing the PIP themselves, or selling the asset to a buyer willing to complete renovations and monetize future benefits.
Identify opportunistic hotel deals
Accurately budgeting PIP renovation costs is crucial for investors to make informed acquisition decisions. Successful hotel acquisitions hinge on several core elements: location, market viability, brand strength or franchise opportunities, functional suitability and past performance. Additionally, PIP-driven acquisitions need a well-defined strategy for how the redeveloped property will compete in its local market, focusing on top-line revenue generation and achieving operational efficiencies. Value creation is not an inherent outcome, but rather the result of a deliberate and well-executed plan.
Prioritize guest-centric enhancements
Not all brand-mandated improvements contribute equally to revenue generation. When approaching a PIP for a newly acquired asset, the overarching strategy should prioritize maximizing ROI, focusing on impactful renovations that will most significantly enhance the guest experience, transform the guests’ perception of the hotel and thus drive revenue performance.
Brands share this objective and may be willing to amend less impactful requirements to facilitate high-impact PIP components. Key areas for strategic investment include:
- Public spaces: The arrival sequence, encompassing the lobby and other communal areas, influences the guest's initial impression of the hotel. Strategic investments in these zones set the tone for the entire guest experience.
- Guestrooms: The guestroom remains the primary focal point of the hotel experience. Updates to furnishings, bedding, bathrooms, door locks and in-room technology directly enhance guest satisfaction and average daily rate. Incorporating elements such as plank flooring, tub-to-shower conversions and closet systems can contribute to faster room turnover, serving the dual purpose of decreasing labor costs while enhancing the guest experience.
- Amenities: Judicious amenity investment can serve as a potent differentiator. Evolving guest preferences have influenced brand mandates for expanded fitness centers, collaborative lobby workspaces enhanced breakfast options and manager receptions, outdoor lounge areas and robust technology packages. Guests tend to be willing to pay more for amenities that align with their expectations for a specific chain scale. However, it is crucial to avoid over-improvement, which may not yield a net positive return.
Strategic PIP negotiation
PIPs are negotiable! A change in ownership presents a crucial opportunity for the buyer to negotiate the scope and timeline of the renovation. The new owner can leverage the size of their current portfolio, established brand relationships and comprehensive market analysis to gain an advantage.
Brands are often more open to flexibility when a committed owner presents a strategic plan for achieving profitability. For example:
- Focus on high-ADR-impact improvements.
- Use a qualified PIP contractor to identify “value engineering” opportunities that can reduce costs by refurbishing serviceable items.
- Advocate for phasing the project to align with cash-flow cycles and low-demand periods. Strategically scheduling rooms to be taken out of service for PIP implementation will minimize operational disruption and lessen revenue impact.
Beyond the PIP: Maximize revenue
Completing the PIP is just the first step. To fully maximize value, owners must implement operational strategies that boost top-line revenue and minimize expenses. The goal is to optimize NOI.
- Market the renovations: A refreshed property is a marketable asset. To inform guests and drive demand, showcase the renovations through updated website photography, social media campaigns, OTAs, brand marketing channels and targeted sales blitzes.
- Update pricing strategy: The completed renovation justifies a revised pricing strategy. A thorough post-renovation marketing analysis can guide owners in determining optimal room rates. Leveraging revenue management strategies, brand sales teams, local relationships and internal sales efforts can help ensure that the property recoups its PIP investments. Owners should quantify the necessary ADR increase to achieve the desired ROI and compare it against the competitive set to ensure the market can support the increase.
- Use guest feedback: Guest feedback regarding their experience and perception of the price/value relationship — whether from online reviews or internal surveys — provides invaluable quantitative and qualitative data. This feedback loop should inform and, if necessary, adjust the marketing plan to align with guest expectations.
The long-term value proposition
Although the immediate financial outlay associated with PIP implementation can seem formidable, the long-term benefits typically supersede the initial investment. A modern and brand-compliant hotel is more attractive to potential investors and guests, thereby strengthening its competitive standing in the market.
In hotel ownership, creating value is a dynamic and consistent process. Maximizing value rests on three pillars: consistent asset maintenance, timely and strategic completion of PIPs, and consistently sound operational strategies.
Though external variables such as economic cycles, interest rate fluctuations, and new supply additions inevitably influence market dynamics, rigorously managing controllable elements demonstrably enhances ROI. Ultimately, a blend of strategic foresight and opportune timing is essential for optimizing hotel disposition, culminating in a successful investment trajectory.
*The authors thank John Dehner, CBRE Vice President of Hotel Valuation & Advisory, for his assistance with this article’s research.
Eric Belfrage is a Senior Vice President for CBRE’s Columbus office and serves as a member of the Investment Properties and CBRE Hotels teams.
Laurel Keller is a First Vice President in CBRE’s Columbus office, where she is a member of the Investment Properties and CBRE | Hotels groups.
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