Heading into 2020, the outlook for New York City’s hotel industry wasn’t pretty. Increasing supply, labor costs and property taxes, continued incursions from Airbnb and a sobering forecast of city visitor growth slowing to 2% had most consultants projecting a 0.8% rate hike for NYC’s hoteliers.
“They were telling us flat was the new up,” says Heiko Kuenstle, general manager of The Lowell, a 5-star landmark on the Upper East Side. Obviously that message was meant for somebody else.
By early March, he and his team had leveraged an enviably loyal customer base, a US$25 million renovation and a 2019 ranking as the number one hotel in New York by readers of both Travel + Leisure Condé Nast Traveler into a 12% jump in combined occupancy and rate. Then COVID-19 hit.
Kuenstle’s strategies for managing through a pandemic, as well as his playbook for addressing the longer-term issues constraining the New York market, could be a blueprint for how the luxury sector will evolve over the next few years.
Contributed by Mary Scoviak
Job one: Make hotels more bulletproof. “Managers in the luxury sector need to move from a transactional approach to one of relationship-building,” says the 51-year-old, German-born Kuenstle, whose CV includes stints at Michelin-starred restaurants and 5-star hotels in Europe, along with Plaza Athénée and The Pierre, a Taj Hotel, in New York. The Lowell retained room service when coronavirus-related regulations shuttered its F&B outlets and instituted a “forgiving” cancellation policy, as well.
“Sure, there was a short-term hit. But it was worth it to maintain our customer relationships over the long haul,” Kuenstle says. “When this pandemic is over and fear about the virus subsides, New York City will rebound quickly. However, how hotel managers dealt with their guests’ issues during the worst of the crisis will be very much top-of-mind when people decide where to book.”
As long-time colleague and friend Hans Bruland, vice president and general manager of The Hay-Adams in Washington, D.C., says, “Heiko thinks far off the beaten path. He has a unique gaze and know-how.” So, while COVID-19 was a lesson in crisis management for some operators, Kuenstle was assessing what permanent shifts this nightmare would create in customer priorities.
Clearly, all aspects of personal safety would be a key business driver. Kuenstle sees that speeding up the recovery curve for small 5-stars with intimately scaled, easily monitored spaces such as the 74-key Lowell. It’s also likely to favor high-end hotels out of the central business district like this Leading Hotels of the World member nestled into a posh residential neighborhood near Fifth Avenue and Central Park. Don’t be surprised if subtle assurances about unflinching housekeeping standards and hygiene filter into some luxury properties’ near-term marketing messages as well and in homepage pop-ups like The Lowell’s detailing health and safety practices.
By extension, the concern for safety and security will ripple into guest demand for more high touch than high tech. “Luxury hotels will become more centered on human interaction and nurturing personal relationships,” he says.
Kuenstle spends about half his time in the front of the house to make sure guests feel welcome and heard. But he doesn’t take the approach that the guest is always right.
“You can’t follow every whim because budgets won’t support that,” he says. Take technology: “We have to look carefully at whether an item of new technology is really important to the guest, whether it has longevity, whether it creates a smoother experience.” Installing a smart TV might be a priority, but a smart room may not, he says.
In a post-COVID-19 economy, zeroing in on what matters will impact the look and service style of rate leaders such The Lowell.
“When we were discussing improvements for the rooms and suites, we realized that, at the end of the day, guests weren’t looking for a dramatic change. Nor were we willing to give up the soul of the hotel to a demographic that wanted a drastically different aesthetic,” says Kuenstle. His forecast is for more investment in fundamentals — top-of-the-line mattresses and bedding, lightning-fast Internet and furniture with high-quality upholstery and finishes. The rooms and suites still have the hotel’s signature fresh flowers alongside an in-room dining menu for pets.
Like many of his counterparts, Kuenstle is trying to capture younger travelers and a broader target market. Mastering social media is a given.
“We also saw the opportunity for a hotel with a great non-alcoholic bar program — something most properties lack,” he says. “Right now, people who don’t drink feel like outsiders. With a talented bartender and so many interesting ingredients, non-drinkers can have cool options for new tastes and, more importantly, feel they belong.”
Kuenstle also shares the view that 5-star hoteliers will have to be greener. Respect for the planet is a selling point as much for the 60% of business that comes from the U.S. as for the 40% from international destinations. “People are more socially conscious, so we need to communicate that we and the companies we do business with have a social conscience as well,” he says.
Kuenstle is always looking for new ideas. His fellow GMs in Leading Hotels are among his sources. He also watches luxury boutique operator JK Place; Luke Bailes, the owner of Singita “who’s leading the charge in conservation, sustainability and ecotourism in the safari community,” and the Tollman family (the forces behind The Travel Corp. and Red Carnation Hotels) “for their devotion to giving back.”
Being able to filter such diverse ideas within the context of The Lowell has kept this icon agile under Kuenstle’s leadership — both in his initial tenure as general manager from 2001 to 2005 (he left to learn bigger-box operations as GM of the hallowed Pierre) and upon his 2016 return to lead the renovation. Bruland credits Kuenstle’s ability to blend traditional values, tailor-made services and consistency with “a natural curiosity and a goal of raising the bar a little each day” as the basis for a quietly disruptive management approach that many say reshaped the service culture at the top of the NYC market.
Despite appearances, Kuenstle insists that personal balance is essential. “I have to step away to prevent burnout and step out so that I can come back at a problem with a clear mind,” he says. That usually involves a trip to a home in Vermont where he goes to garden in summer, ski in winter and allow his two cats and three dogs to run free — something they can’t do in his New York townhouse.
What keeps him awake? “Airbnb is taking a toll on occupancy, but the hotel associations and the unions are working to level the playing field. Labor costs are a big concern. We’ll need to find ways to maintain rate even if labor and other expenses increase,” he says. “We’re also fighting down xenophobia. Our industry is about breaking down barriers and boundaries, so anything that prevents that isn’t good.”
Can visitor numbers outpace additional supply? “I don’t have the answer to that,” he adds, “but I do believe that hoteliers on a solid financial footing with a very specific niche or point of view will be successful. If a hotel is nondescript or it’s selling itself purely on price, I’d be concerned.”
His immediate priority is increase buzz. “People refer to (The Lowell) as New York’s best-kept secret,” he says. “In my view, it was too well-kept. It was always talked about by people in the know. Now, we want to get everyone talking.”