Before the economy flatlined in 2008, bling was the thing in metro Atlanta.
Developers, hoteliers and marketers, enjoying ready access to financing, focused on a new direction to grow their businesses: up. The buzzword was "luxury," and everything worth having had to be upscale.
Last week’s Chapter 11 filing by the Sea Island Co. was an unhappy echo of the high-end implosion in Atlanta, marketing and retail leaders said.
Land where pricey condos were supposed to be built near the Fox Theater and the High Museum is pockmarked by fields of weeds.
Spa Sydell filed for bankruptcy late last year while buildings housing the Rosewood hotel in Buckhead and the W downtown went up for sale.
Glam lodging brands like Mandarin Oriental never materialized, and those that did have adjusted prices to meet the new normal; i.e., prices much lower than initially considered.
Developer Ben Carter’s Streets of Buckhead, which was to bring off-the charts luxury to the city, has been stalled for lack of financing; Carter said in June that he was expecting to secure $200 million to put construction crews back to work on the project.
Leaders in Buckhead took out a full page ad in the Wall Street Journal late last year touting the community’s business, retail and residential opportunities, an acknowledgment of high vacancies because of overbuilding.
Atlanta's binge on luxury over the past five years was a response to the city's changing demographics, the marketing experts said. Empty nesters and the young affluent moved in, bringing with them money and demands for a more well-heeled lifestyle. Leaders also saw opportunities to attract more international investment by creating the opulence foreign visitors were used to.
Ken Bernhardt, a marketing professor at Georgia State University, said excess is no longer fashionable.
“People still desire high quality, but they don’t want to appear insensitive to the economic situation,” he said. “They don’t want to appear to be showing off. The new prestige is bragging about what you've saved, not what you spent."
That reality has forced purveyors of luxury goods and services to retool how they market. In addition to cutting some prices, the emphasis is on quality and value and less on glitz.
Su Longman, a frequent shopper at such toney retailers as Neiman Marcus, Versace and Jeffrey Atlanta at Phipps Plaza, has seen the difference. She said the stores, recognizing the troubled economy, have upped the ante on service by learning the tastes of frequent customers like her and always having suggestions of purchases. Gifts with purchases, which were offered from time to time as an incentive to come back, are now the norm.
"The most important thing to me is the service," said Longman. "I don't care how beautiful something is, if the level of service is not there, I'm not buying it."
Perception is also important. To lure group meetings for business travelers, the Ritz-Carlton at Reynolds Plantation near Lake Oconee created a program pairing the groups with organizations like the Boys and Girls Club, said Gino Marasco, the lodger’s director of sales and marketing.
The goal, he said, is to address the perception of conventions at high-end properties as golf vacations for the rich. That was highlighted by AIG in 2008 when the insurance giant was heavily criticized for throwing a lavish resort meeting at the same time it was being bailed out by taxpayers.
"It has eased up," Marasco said of what was later dubbed the "AIG effect," "but there is still some of that perception out there. It's going to be there for a while."
Other signs of the sector's changing focus: analysts for J.P. Morgan applauded handbag retailer Coach in notes recently for its improved performance as a result of lowering prices last year by 10 percent. The analysts said sales had suffered as average retail prices drifted "north of $300."
Marsha Middleton, who advises several upscale metro Atlanta properties for M-Squared Public Relations, said one of her clients, MF Buckhead – a sushi restaurant – began offering smaller portions to attract those for whom the dinner menu might be out of reach but still wanted to dine there. Another client, Four Seasons Atlanta, introduced $1 sliders between 5 p.m. and 7 p.m. daily.
“People still want the experience,” she said. “But it has to be packaged in the right way.”
Some in the luxury market may never recover the prices of just a few years ago. The Internet, for example, will make it increasingly harder for hotels to charge $800 a night, said Pan Danziger, who operates Pennsylvania-based Unity Marketing, which researches the luxury segment. Consumers are about bargains and won't pay top dollar just because they can.
"No one is going to pay that any more," she said. "We are not that dumb."
Mark Woodworth, president of PKF Hospitality Research, said Atlanta may be challenged on the luxury front for some time to come. For the luxury space to recover fully, demand would have to outstrip supply; right now that's not happening, especially with hotels.
Developers, who were hard hit by the downturn, may not bounce back in time for the next big boom, Woodworth said.
About the Author
