What's the future of hotel lounges? Recent cuts and closures make us wonder

IHG recently moved to reduce lounge access for travelers receiving complimentary upgrades to suites and club-level rooms at its high-end brands making many travelers wonder, "What's the point of being in a club-level room if you can't even access the club?"

Under the new policy, even if a member of IHG's recently renamed IHG One Rewards program can be upgraded to a suite or club-level room, they won't be eligible for the perks that accompany those rooms for full-paying guests — including lounge access.

It is quite a loyalty program head-scratcher. But it's also the latest development in an ongoing push from the broader hotel industry to cut down on lounges at many properties in the first place, experts say.

Club lounges reserved for a brand's most elite loyalty members and those paying premium prices still abound at hotels around the world. But this doesn't mean every hotel has one.

Why? Simply put: That space can make a hotel owner more money if it is used for something else.

"Good asset managers are always looking for ways to squeeze more profit and more money out of a box, if you will, and that holds true for all commercial real estate asset classes," said Daniel Lesser, CEO of LW Hospitality Advisors. "People invest in these [properties] to get returns. Every hotel investor I've ever encountered — and, candidly, also every operator — thinks they can always do better than the previous regime."

A labor and cost conundrum 

Elite lounges may have been one way to earn the loyalty of high-paying customers in the past, but there are other ways a loyalty network can lock in customers.

Room upgrades (even if they don't come with club lounge access), bonus points, later check-out times and even complimentary elite status with travel partners — Marriott, for example, offers its Titanium Elite members free United MileagePlus Premier Silver status — are all part of the loyalty package these days.

In turn, some of that space previously reserved for lounges can become a bigger revenue generator if put to a different use.

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"Having lounges is ... partly a hotel-specific decision," Greg Miller, a vice president of lodging and experiential leisure equity research at Truist Securities, said via email. "For some hotels, removing a lounge makes sense as one can make more money by converting [the space] to meeting space or additional guest rooms, especially as some lounges historically were in premier locations on high floors."

Miller noted this was a trend that was underway before the pandemic. But the pandemic added a new element to the process, as most hotel owners suspended operations of lounges and other food and beverage outlets during the early months of the health crisis. Reopening these spaces isn't always easy, as a labor shortage continues to grip the industry.

Even with a healthier-than-expected jobs report Friday (the U.S. leisure and hospitality sector added 96,000 jobs), the overall hospitality sector is still down 1.2 million workers from pre-pandemic levels — and there was a labor crunch at hotels even before the pandemic hit.

"While lounges are an ancillary benefit for hotel loyalty members with status, they don't directly generate revenue and are seen as cost centers, especially on the labor front," said Patrick Scholes, a managing director of lodging and leisure equity research at Truist Securities. "In today's labor environment, adding labor costs that don't immediately generate revenues is a tough proposition for a hotel manager or owner."

Not entirely gone

It isn't easy to decipher how many hotel lounges are still open in the world. IHG, Hyatt, Hilton and Accor did not respond to TPG's request for comment in time for publication.

But those interviewed for this story note there is still a very much a need for these lounges in the hotel sector, particularly at hotels that generally see a high level of business from loyalty program members.

"I'd be surprised if you start seeing attempts to permanently cut back access to lounges for elite travelers," Lesser said. "The one brand family that doesn't do it is going to have a competitive advantage, and then everybody will pile back in and reinstate them."

At Marriott's eponymous brand, the majority of M Clubs have reopened "at varying levels of opening hours based on local market needs" like hotel occupancy and the volume of Marriott Bonvoy elite members looking to use the space, a company spokesperson told TPG. The exact number of reopened M Lounges was not available.

At the San Francisco Airport Marriott Waterfront, the M Club is currently open for breakfast from 6 a.m. until 9 a.m. and light snacks are offered until the club closes at 5 p.m. Meanwhile, at the Marriott Marquis Houston, a desk agent told TPG that the M Club is open for breakfast every day of the week but closes after breakfast service and reopens for cocktail service from 5:30 p.m. to 8 p.m. Monday through Thursday only.

But while many hotels have kept their lounges closed due to staffing issues, other brands are transforming the club experience.

As part of Sheraton's global transformation, lounges are being moved to lobby floors to give guests a "greater visual connection to the community spirit of the lobby and the street beyond," the Marriott spokesperson said.

Those changes to the Sheraton Club are making the spaces feel more like a hip WeWork than a stuffy old lounge, as TPG reporter Benji Stawski found while reporting on the facelift of the Sheraton Denver earlier this year. After that stay, Benji spoke with Amanda Nichols, senior director and global brand leader of Sheraton Hotels, who explained that Sheraton believes its lounges need to evolve to be less about complimentary food and drink and more about the physical space.

"Sheratons have a lot of elite guests and elites will always expect to have an exclusive space," she told Benji, who got to see the lounge in person even though it was closed during his early 2022 visit. That lounge has reopened daily from 6 a.m. to 10 p.m. with breakfast and hors d'oeuvres, but a front desk agent told TPG there's no alcohol in the club lounge.

On the other hand, the Ritz-Carlton New York, Central Park is set to reopen its Club Lounge with a bang — and a big emphasis on food — on Sept. 1. The lounge went through an extensive renovation in 2019 that guests hardly experienced thanks to it shuttering early in the pandemic.

While many lounges have been cutting back, this luxe 3,000-square-foot lounge is doubling down on its offerings by serving daily rotating breakfast, lunch and dinner with a "new, exclusive wellness-inspired menu," according to a statement from Marriott.

Perks also include daily culinary presentations and, on Fridays, a Champagne cart and caviar tastings — a stark contrast to Nichols' contention that the lounge is more about the space than the amenities within it.

But will this Ritz lounge set the standard for other top-tier luxury brands, or will it be the exception to the new set of rules lounges have been abiding by due to the fallout from the pandemic and ongoing labor issues in the hospitality world?

Like everything else during this strange, strange time, only time will tell.

Featured image courtesy of Marriott.