Editor’s Note: Connecting the Dots is a series of monthly conversations with Michael Dominguez, President and CEO of Associated Luxury Hotels International. The series examines issues in the global economy in 2024 that will “connect the dots” to be helpful not only in business but in life as well. This installment is moderated by Ashly Balding, Executive Vice President & Chief Sales Officer at ALHI.
Ashly Balding: You've been talking about bifurcated consumer in an industry for a bit. Can you explain this a little bit more.
Michael Dominguez: What's really nice is that currently every CEO of every major hotel organization is now talking about a bifurcated consumer. I'm not saying that we were ahead of them. What I'm saying is it's now bubbling up into their side of the business. I was talking about it bifurcated consumer in the overall economy and it’s now bleeding into the hotel business. It simply means we have the people that buy economy at mid-scale, and you have people that buy upper upscale and luxury, and there is a big differential. What is down and what is dragging the markets down for us as an industry is the economy in mid-scale. Luxury and upscale is still doing well, so what's really important for us -- I always remind the meeting professionals, guess where all the meeting space is? Luxury upper upscale. The reason we do all of this is to help to help our planner community be able to talk to a stakeholder. A stakeholder is going to see a headline reading of average rate is growth is below 3%, and they're going to get a bid on a piece of business that they're trying to get in and they're going to have a rate growth of 6% to 7%, and that they're going to have a stakeholder at some point say, ‘I don't get this.’ What we’re trying to do is educate them to say, well, we have more economy in midscale in our industry. That's what's sucking down the average because it's overweight and it's an important one for us to be able to tell them. But if you look at luxury upper upscale, it's still growing in that 5% to 8% range, which isn’t unusual and unfortunately, you're not going to be able to put your meeting in the economy mid-scale. Those are the areas that are suffering, so that's the bifurcation. The best way I've worded it is, you look at the parent of Louis Vuitton and everything that rolls into it. Louis Vuitton is doing well as a company and the Dollar Store has filed for bankruptcy. It's a bifurcating consumer. Too much, again, with the narrative that we were talking about earlier, with what we see on the news, we make a general statement when it's very different and you have to be able to break it into pieces.
Balding: Love that. Thank you for connecting the dots. Your perspective is always valuable.
Dominguez: Thank you for the conversation. I appreciate it. Thank you all.