A new breed of ultra-luxe hotels is on the Australian horizon but is the existing star-rating system ready for such developments?
JLL Hotels & Hospitality Group’s Julian Whiston examines whether a new system is required to cater for a new era in the Australian hotel industry.
The Australian hotel industry is undergoing its most dramatic expansion in its history, with over 60 hotels in the development pipeline, including a number that are touting themselves as ‘six-star’.
There isn’t an official six-star rating, but the developers believe their hotels are ‘beyond five-star’ and deserve a new category to reflect their luxury.James Packer says his Crown Resorts’ hotel at the Barangaroo casino precinct will be “the best in the world”, which might suggest an even-higher rating, as the famed Burj Al Arab Jumeirah in Dubai already claims to be ‘seven-star’ and a Chinese hotel – the Pangu Seven Star Hotel, Beijing – asserted their (self-proclaimed) status in the hotel’s title.
In addition to Crown’s six-star proposition, Ritz Carlton is talking of a six-star hotel for Melbourne, and there are six-star expectations for hotels in Perth’s Elizabeth Quay and Brisbane’s Queens Wharf urban projects. Even Northern Territory Chief Minister Adam Giles believes Darwin is ready for a six-star hotel in Darwin, despite some upscale hotels currently struggling to attract rates of $100 a night.
This is not the first time that Australia’s hotel industry talked about ‘beyond five-star’.
In the early 1990s, the arrival of the Park Hyatt and The Observatory hotels in Sydney saw calls for a new star to be added to the ratings, but economic recession and a massive decline in corporate travel quickly ended such discussions as frugality became king among travellers.The Park Hyatt, however, went on to complete a massive renovation in 2012, with the hotel commanding rates of over $1,000 for a standard room, more than double the rate of most five-star hotels in Sydney.
The question is, therefore, what do star ratings really mean, and do they have any impact on the rate that hotel owners and managers can charge, given that some five-star hotels struggle to gain $200 rates in under-performing cities?
Creating an image has always been an essential aspect of hotel marketing. In the early days of the Australian accommodation industry, hotels and motels lived and died by the star-rating provided by the motoring associations.
The ratings were based solely on facilities and didn’t take into account ambience, service and style.
Hotel managers would endlessly argue the issue with the ratings assessors, but the NRMA or RACV accommodation guides – like the AAA and Forbes hotel guides overseas – were treated like bibles and remained highly influential till the 1990s.
The arrival of chain hotels with their own brand standards, along with the internet and review sites like TripAdvisor transformed the whole star-ratings systems with own consumer-led ratings often making official ratings redundant. However, the reliability of such arbitrary review systems has left many hoteliers calling for the return of an official system to provide a fairer and more representative guide for travellers and the industry.
The motoring associations did pass on the ratings mantle to an off-shoot called Star Ratings, which had the disadvantage of many booking sites allowing hotels to ‘self-rate’ rather than pay for an official star rating.
Self-rating, though, doesn’t work for many of the upmarket tour programs, particularly international programs, which still require independent star-rating assessments, and the difference between four-star and five-star can mean a great deal to the bottom line of many independent hotels.
It has helped that star ratings have adapted their assessment criteria to reflect changes in travellers’ demands. No longer are such ‘random’ aspects such as underfloor heating in the bathroom critical for five-star status, and guest reviews are now taken into consideration.
For independent non-branded hotels, a credible, official rating can be an important investment, especially if the property wants to compete in the top-end of the market. It can also motivate owners to ensure that a high commitment to maintenance and refurbishment is maintained.
The claim of six and seven stars can be seen as a marketing ploy or as an investment decision to attract funds for developments in high-cost cities such as Sydney. But there can be a downside to over-egging the omelette.
Top-end hotels quickly go out of fashion during economic downturns, with companies wanting to demonstrate fiscal responsibility, as the GFC proved. Five-star hotels also rely on the corporate and conference markets, which have been particularly affected by the mining downturn in cities such as Brisbane, Perth and Darwin. Pitching a hotel development to suit the marketplace is always a better long-term investment decision.
The hotel industry has adapted to changing tastes with the launch of ‘lifestyle brands’ where ambience and environment are considered more important by guests than the size of the room or specific facilities. It has allowed former three-star motels, such as Bannisters at Mollymook and Halcyon House at Cabarita, to turn into $500+ a night boutique hotels, transcending their humble origins.
The Australian hotel industry has evolved a vast amount in the past four decades from the days when ‘Hilton’ was a reference point for upscale hotels. Today, there are dozens of brands claiming five-star status, and a new category may be warranted to differentiate the new breed of luxury hotels – if not six-star, then at least five-star ‘plus’.
It must be remembered that until relatively recently, the highest rated hotel in many overseas countries was four-star. French administrators eventually accepted a five-star hotel classification after a collection of ‘palace’ hotels insisted that they needed to differentiate themselves from the other more functional business-style upscale hotels.
The industry itself has tried to resolve the star-ratings issue by talking about ‘budget’, ‘economy’, ‘midscale’, and ‘upscale’, and even ‘upper upscale’, though the travelling public and booking sites have always reverted to stars, diamonds or some other measure to indicate the quality levels of hotels.
Australia is on the verge of its most exciting era in hotel development, and while it is unlikely that the issues regarding star systems and six-star status will be resolved in the short-term, the fact that the industry is raising its standards so significantly means that the debate can only be a healthy one for the industry’s future.
