The Luxury Slump

The Luxury Slump

The Luxury Slump

Moneybox
Commentary about business and finance.
Oct. 2 2001 9:00 PM

The Luxury Slump

"Enjoy life," the president urged the other day, as he encouraged Americans not to fear traveling (he made specific mention of Disney World). Message: Spend money. I was interested in this because on the evening I heard the sound bite on CNN Headline News, I had just wrapped up a brief period filled with activities that are widely regarded as good for life-enjoyment, and that consequently involve ridiculous amounts of money.

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I should mention right away, though, that I wasn't actually spending my own money; I was basically on a life-enjoyment assignment for another magazine that included visiting a resort spa. So while I won't get into specifics about the experience or the place, you can safely assume that this spa is in the United States. And you can assume that its mission is to pamper guests elaborately with rich food, good wine, a posh golf course, luxurious facial and massage treatments, and a highly opulent and exclusive setting. Thus, for reasons that had nothing to do with my actual assignment, it was interesting to be in a place where "enjoy life" is the one and only guiding idea.

Whenever I could, I informally canvassed the employees about the mood of recent weeks. On Sept. 11, the place practically emptied, with hundreds of guests canceling everything and driving away immediately. The next few days bought more cancellations—many more—including crucial corporate bookings. One man estimated that capacity has climbed back to around 35 percent, but that's about half what it would normally be this time of year.

Not surprising. On Friday the Wall Street Journal ran a front-page story on the drastic effects the attacks have had on the hotel business generally, and especially on luxury hotels. As that piece noted, there are a lot more luxury hotels now than there were just 10 or 15 years ago, and many more high-end projects were recently in the works: The number of "upper upscale" hotels has increased by 36 percent over the past decade, according to Smith Travel Research. There were eight Ritz-Carltons in 1989, and there are 41 today. Now, instead of aggressive plans to continue this trend, there is talk of massive layoffs and perhaps even tax breaks or similar help from the government.

Fear is one of the things keeping potential hotel, resort, and theme park customers from enjoying life. Another, as the Journal put it, is that hoteliers are "unsure how to market themselves when emotions are running high. Some find it unseemly to promote resorts with golf and spa packages while thousands of Americans grieve for lost loved ones." (At the place I was visiting, one employee told me the resort did a phone blitz to guests who had made reservations convincing them that the trip is just what they needed; another said the marketing department is focused on getting nearby business groups that have canceled off-sites in faraway locales to reschedule closer to home.)

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The other reason that bookings at such places are off, of course, is that it feels fairly unseemly to "enjoy" such packages while thousands grieve. The assignment that brought me to this particular resort pre-dated Sept. 11, but that really doesn't matter.

Often in the past, when looking at, for instance, old American propaganda posters urging citizens to sacrifice during World War II—"waste helps the Nazis," that sort of thing—I've wondered how such sentiments would play now. How willing are we to sacrifice? What I never considered is that an opposite scenario could occur: that the sacrifice we'd be asked to make is to get out there and enjoy life even if we don't want to, whether that's because a trip to Disney World seems scary, or because it just feels wrong. I can imagine a new round of agit-prop posters showing Americans getting massages or golfing—"self-denial helps the terrorists," maybe.

Whether that sentiment is true or not, what's maybe even more surprising is how hard it seems to follow through with it. That's especially odd because one of the central traits of the modern consumer would seem to be an ability to enjoy one's own life as much as possible without being paralyzed by visions of other people's misery. After all, thousands of people are pretty much always grieving or suffering. What's different is how acutely aware of this we all happen to be at the moment.

Anyway, despite that promotional blurb from the president himself, Disney saw one analyst cut his earnings estimate for the company by almost 30 percent. This is also no surprise. I understand why the president wants us to enjoy life, but I also understand why some people are a bit reluctant to do so. I have to admit that while I had moments of uncomfortable guilt on my little vacation, I also had many moments of unencumbered enjoyment. When you're being pampered, life seems fine. Inevitably we'll not only take the president's advice but also re-acquire the taste for luxury that made the "upper upscale" segment boom. That is the good news, I suppose.