With no less than 26 five star hotels of which 16 hotels are affiliated to international luxury chains, Vienna’s once association with exclusivity, luxury and sophistication has long dawn. In reality, the luxury hotel market has two players of world class standards, the iconic Hotel Sacher and the Park Hyatt Vienna.
The ‘abundance’ of ‘five star/ luxury’ hotels only adds to the confusion of foreign travellers who can easily book a room from 100 euros. The list of extremely dated and tired properties (most of them not renovated in more than 10 years) sadly includes hotels in heritage buildings in landmark locations: The Imperial (owned by UAE’s Al Habtoor), Bristol (owned by one of the family embers which co-owns the Sacher Hotel), Grand Hotel Wien (Al Jaber of Saudi Arabia), Palais Coburg (all suite hotel).
Below the top luxury level of Sacher / Park Hyatt is a lower five star segment (not luxury!) that includes Kempinski and The Ritz-Carlton Vienna (one of the three five star hotels which feature an indoor swimming pool), the third layering including Andaz Vienna or the privately owned ‘design hotel’ Sans Souci. However, both Kempinski and Ritz-Carlton present their own challenges, for one being its location and the relatively basic interior design for the latter. Nevertheless, the two properties have earned a reputation for providing solid service even if, at time, at quite low rates.
Hotels which rely mostly on Congress / MICE guests which are also in very modest conditions (tired & dated), of maximum 4 stars, include InterContinental (70s industrial style building), DO&CO (very tired ‘modern’ building owned by the JV company that runs the huge catering business for both Austrian Airlines and Turkish Airlines), SO/Vienna (downgraded a few years ago from Sofitel, one of Accor’s luxury brands) and Melia (which the management confirmed to us in writing we are not even welcome for a visit / site inspection because they are ‘not luxury’).
The only new hotel opened in the past 2 years is Hyatt’s Andaz which is traditionally positioned as lifestyle in all markets it is present. In Vienna is its positioned ‘luxury’ and there is even a cluster of staff for both Andaz and Park Hyatt, which, in the case of PR / Marketing is questionable, wondering how the same professional can ‘wear two hats at the same time’, with completely different guest target profiles.
The explanation behind the context of the luxury market of Vienna lies in its limited potential. All these un-renovated hotels run high operational costs and because they are unable to reach higher rates, owners are obviously reluctant to invest in upgrading them because a renovation would not immediately translate in higher rates.
However, instead of acquiescing to the situation, there are plenty of innovative approaches these hotels can take – such as an exceptional dining offering to attract both hotel guests and locals, transform venues to host themed events, provide attractive complimentary perks – through a marketing partnership with a car company, they could offer complimentary airport transfers for suite guests or a proximity service, a complimentary ride for guests seeking a quick shopping session or an overview of the city’s landmarks. Achieving desirability, which is essential for a true luxury offering, is yet much more complex and should be considered on a case by case manner.
From the moment any traveller lands at Vienna International Airport the disproportion between scheduled airlines and low cost airlines is huge. Low cost airlines rule all routes within 3 hours from Vienna, travellers being able to fly return with as low as EUR 50.
This has led to Austrian Airlines announcing major cuts in order to survive the competition. It already boasts extremely low rates and now it is excepted to shed jobs and cut routes. The presence of Qatar Airways, EVA Air and Emirates does not translate into a wealthy segment from their countries of origins or those in transit.
Speaking to several ‘luxury hotels’ most have confirmed that the Middle Easter GCC wealthy consumers have practically vanished. The Middle Eastern airlines are at least half running on Austrian travellers who can secure exceptional rates to Asian holiday destinations. The same impression is shared by the major luxury watches and jewellery retailers most of them facing pressure from very high rents, mass retail ‘hunting’ their locations. Two of the mono-brand luxury watches stores told me they have not seen a ‘real’ client in months.
At major luxury fashion brand stores such as Louis Vuitton, Dior, Prada, Chanel or Hermes, the minimal stocks on display are evident for the limited potential of the market. Hermes stores at airports in Frankfurt or even at Vienna Airport have a much more diversified stock that the downtown store in Vienna. The buying is also centred around accessories, with few apparel pieces.
The luxury mono-brand stores which have opened in small locations (less than 80-100 sqm) are probably the only ones which are able to achieve a feasible business plan – Saint Laurent, Tod’s, Bottega Veneta, Bally, Paul & Shark, Loro Piana. Vienna’s leading luxury fashion multi-brand store Amicis enjoys a safer position, as from one season to another they are able to scale down on weaker selling brands.
Similarly to other metropolis destinations such as Vienna, major fast fashion and mass market brands command top locations not only with the highest rents but also the highest footfall. Mass market Zara and Humanic have managed to secure locations right adjacent to the iconic Sacher Hotel and the Opera. Starbucks is moving closer to the Sacher too, at the time of our visit being in the relocation process.
Luxury brands which are already present with mono-brand stores benefit from an array of marketing initiatives in order to boost sales and therefore be more pro-active, thus making sure luxury hotel guests are aware of their presence – discount coupons, certain value vouchers against a minimal shopping, trunk shows at hotels etc.
Another vivid major issue is that most of the stores feature an older retail design concept which cannot go unnoticed by the trained eye of international luxury consumers (similarly to how hotels are dated / tired). Some even go as far to suspect whether such ‘dated’ looking stores might actually sell outlet stock (older collections)
Future confirmed luxury hotel projects such as Rosewood Hotels and Four Seasons Hotels should very carefully ponder the timing of their market entry and should scale their business plans to consider all market conditions, including both opportunities and challenges. For Almanac, a brand with limited awareness and only one other hotel operating, success will not be as obvious as it may seem.
Oliver Petcu in Vienna
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