1) Luxury At Its Low Point

Just as after 9/11, luxury hotel occupancies and rates tumbled faster than the rest of the industry and many questioned the very viability - and even future - of that segment. Joe Brancatelli, editor of Joe Sent Me, the website considered the voice of the business traveler, told us, " Every rule is off the board now as far as where people stay. While many business travelers are staying in lower categories other are asking, 'If I can get a Hyatt for $49 a night, why not.' He added, "The industry is not getting the message that we won't want to pay for frills that we don't want. We don't need five-ounce bars of Bulgari soap."

According to Brancatelli, one of the top luxury chains had closed "all its fancy restaurants." He noted that, " When the Mandarin Oriental opened in New York at an $850 rate, nobody sneezed; now if a hotel asks that rate, people laugh."

"My plea," Brancatelli concluded, "is for real luxury at a real price. It's just like the price of a business class airline seat - if you take away the markups for all those extras that many travelers don't even want, it could be much more affordable."

While luxury hotels certainly eliminated frills, most simply tried to adapt. For instance, at St.Regis, Starwood's most upscale brand, there is still butler service, but rather than butlers being physically present at all times, according to senior vice president Paul Sacco, "guests are given electronic devices so they can text the butler when they need something."

2) The Response: Pushing Value - Reaching Out To the "Merely Affluent"

Luxury purveyors could not afford to sit back and wait until the economy recovered. Creativity and adaptation became the orders of the day. Value become the byword - and discounting the unspoken "D" word. When it became standard for hotels to offer third or fourth night free, managers launched promotions aimed at distinguishing their products - and even repositioned themselves to attract those who might not have been able to afford luxury in the past.

Thomas Geshay, senior vice president - Davidson Hotel Company, told a panel at The Lodging Conference in Phoenix last fall that he had recently booked the Trump Chicago at the official rate of $340. However, that ‘official rate’ included credits for a spa treatment, food and beverage - in effect driving that rate down to $80 which he called "a sort of price integrity." But more likely, hotels began distinguishing themselves through creativity - with promotions like takeout meals at Four Seasons, beds on the beach in Bali (see box for Who Did What That Worked.)

At Luxury Travel 360, we saw more and more research and news confirming the fact that the affluent were moving toward luxury - less glitzy, more affordable - and taking advantage of historically low rates for hotels at the top of their markets. In addition, the wealthy have become, "negocianados" (to quote Melissa Biggs Bradley at Indagare, a web enterprise aimed at the sophisticated traveler.) She defines that segment as "connoisseurs of wine, cigars and cars who have always paid full price... but who now might be haggling over the price of an expensive item and bragging about getting great deals."

In one interview, Jim Petrus, COO for Trump International Hotels, told us, "With the recasting of rates, the market has a much wider base to it. These people will absolutely stay with us. We also know that if you give people reasons to believe in your brand they will stay with you once loyalty is created."

Kirk Kinsell, who heads up the mega brand in Europe, told us, Luxury is defined by the guest. Somebody might now splurge and stay at the InterContinental in London but the luxury for them might the concierge telling them where to find the best deal on fish and chips"

At The Lodging Conference in Phoenix, Tom Storey, president of the Fairmont Hotels, said, "Our leisure transient business is actually up 8% in 2009, many of them customers new to us. Over time that customer will pay more for the experience. We are seeing not only a trading down from Ritz-Carlton and Four Seasons, but many people want a luxury experience so we get clientele trading up and down."

3) Will 2010 Be A 10 For Luxury?

Luxury certainly emerges from 2009 in better shape - though many think it will never be the same. Recently, Arne Sorenson, president of Marriott, which operates Ritz-Carlton, predicted that luxury hotels "will grow faster than the rest of our business." Marriott, which recently created a new upscale brand, the Autograph Collection, recently said, " the fact is, the wealthiest demographics are growing very fast, like in China and Russia. They will become increasingly important."

Many have begun to see opportunities in the purchase of distressed luxury hotels - in trouble not because of their operating results but because of heavy debt. A London based group formed The Avingstone Fund specifically to purchase luxury hotels; it quickly raised more than $500 million to do so. This group was not alone. For one, Barry Sternlicht recently closed a $2 billion fund to buy distressed hotel assets.

The year is certainly ending on an up note for luxury. Smith Travel Research, the industry statisticians, recently reported that the luxury segment's occupancy jumped 10.6 percent year over year to 45.2 percent, reporting the largest increase among all hotel segments for the week ending 28 November 2009. Overall, the industry's occupancy 1.7% in the same week

Perhaps summing things up best was Art Buser, president of Sunstone Hotel Investors, a large ownership group, who told The Lodging Conference, "Luxury is dead and from the ashes something else will rise. The aspirational guest is now the perspirational guest, sweating it out."