Take a stroll around the Sunset Marquis Hotel and Villas and it’s clearly not the kind of place to expect a discount. After all, a guest can order a massage at a poolside cabana before recording a song in the on-premise studio.
Indeed, you can’t buy a discounted room at the West Hollywood luxury hotel on Expedia.com or Orbitz.com – but you can bid on one through Luxury Link Travel Group, a company that auctions off packages of luxury rooms along with such perks as VIP passes to area nightclubs.
The Playa Vista company, which operates website LuxuryLink.com, took off during the depths of the recession when upscale hotels such as Sunset Marquis signed on to unload unsold rooms.
Now, even as luxury hotels are showing signs of recovery, Luxury Link continues to sign deals with chains looking to reach affluent consumers still bargain-hunting for deals.
“The affluent traveler is still traveling, but just wants to do it smarter,” said Diane McDavitt, co-founder of Luxury Link. “And the typical luxury hotel is always looking for a cost-effective way to reach the affluent traveler.”
This month, Luxury Link, which lists rooms from about 1,150 hotels worldwide, began listing packages offered by the Dorchester Collection of Hotels, which includes London’s famous Dorchester Hotel, and, closer to home, the Hotel Bel-Air.
Competitors targeting affluent travelers include Kiwi Collection, a luxury hotel booking site operated in Vancouver, Canada, and Tablet Inc., a New York company that runs TabletHotels.com.
Chris Cope, director of marketing at the Sunset Marquis, said he is approached at least once a week by a website that wants to list his hotel’s rooms in exchange for a share of booking fees.
He has been turning some of them down, but Luxury Link has been able to carve out a niche with hotels by touting a customer base with an average household income of $175,000.
“I use sites that help market our hotel to an audience that might not otherwise find us,” Cope said. “Luxury Link is a good demographic for us.”
Luxury Link was founded in 1997 by McDavitt, a former sales and marketing executive with Rosewood Hotels & Resorts, who was looking to create a luxury-hotel search engine for travel agents.
The business-to-business service attracted some traffic, but McDavitt found getting repeat visitors a challenge. So she switched to a consumer site, and after observing the success of eBay, began auctioning off vacation packages. The site still lists about 1,000 vacation packages per day, including to exotic locales such as Bali and Zimbabwe.
The company was able to expand into auctioning vacant rooms by signing up hotel clients for a relatively small undisclosed fee and taking 20 percent of the auction revenue. For those hotels that resist paying the fee up front, the company will take all auction revenue until the fee is paid.
A number of L.A.-area hotels have chosen to list on the site to market themselves to Luxury Link’s affluent demographic, supplement their bookings, and drive foot traffic to their spas and restaurants. Clients include Rancho Palos Verdes’ Terranea Resort, developed and operated by West L.A.-based Lowe Enterprises, and Oceana Santa Monica, a Santa Monica hotel owned by West L.A.’s JRK Hotel Group.
For example, an auction last week for three nights at the Oceana Santa Monica offered a “Buy Now” price of $1,089, including add-ons such as a three-course meal at the hotel restaurant: a 38 percent discount compared with the retail price of $1,756.
Some of the hotels joined during the depths of the recession when vacancy rates spiked, including the Sunset Marquis, which began listing in 2008 right after unveiling a $35 million expansion that includes 40 luxury villas costing as much as $1,500 per night.
“My main focus is, ‘While I have you, I’m going to drive some business into the spa and restaurant,’” said Cope of the Sunset Marquis, which is owned by hotelier George Rosenthal.
The Luxury Link business model also encourages hotels to include add-ons such as spa treatments to the packages with the idea that guests will spend more once free perks are used up.
The model has worked well enough that Luxury Link was able to expand with two ventures in 2009. One is Vacationist.com, a flash-sales site that lists rooms that can be had at a moment’s notice – LuxuryLink.com packages normally are booked months in advance – and the other is a family-oriented auction site, FamilyGetaways.com.
The company also partnered with TravelandLeisure.com. The travel site owned by American Express Co. provides reviews of listed hotels and drives traffic to Vacationist through web links, and shares revenue with Luxury Link.
Other revenue is derived from selling advertising space on its websites to hotels and brands such as Tiffany’s.
Luxury Link Chief Executive Drew Marich said the company is profitable and has seen annual revenue rise 25 percent to almost $20 million since adding the sites. A dozen employees have been hired in the past year and the company now employs 55.
Huntley Hotel in Santa Monica is a new client drawn by the flash-sales site. Andrew Pangelinan, the Huntley’s director of sales, said the company was eager to be listed on Vacationist because of its relationship with TravelandLeisure.
“This was more of a marketing partnership,” Pangelinan said.
Although not every luxury hotel had the misfortune of expanding for the 2008 season like the Sunset Marquis, most saw vacancies increase substantially during the trough of the recession, providing luxury-listing sites an opportunity.
Pangelinan said the Huntley was about half-full during stretches of 2008, while today its occupancy rate is more than 70 percent, even during off-peak periods.
Still, even with improving occupancy rates, L.A.’s luxury hotels on average leave about one-quarter of rooms vacant. In September, rooms priced at more than $300 a night in Los Angeles County were filled about 73 percent of nights, compared with 65 percent in September of last year.
That’s evidence that the local luxury hotel market is recovering, said Bruce Baltin, senior vice president at hospitality research firm Colliers PKF Consulting and Hospitality Research in downtown Los Angeles. However, Baltin believes luxury-listing sites will still have a place.
“There will be more inventory when the market is soft, but there will still be deals (when the market is stronger),” he said.
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