Kate Mooney, founder and principal of OCCA, explores how strategic value engineering can make luxury hotels commercially viable without compromising guest experience or design intent.
Luxury hospitality is facing a credibility test. Spend any time at hotel investment conferences and a familiar sentiment emerges: luxury hotels are becoming harder to justify. They are expensive to build, complex to deliver and, in the current climate, far from a guaranteed route to returns. For some investors and developers, the conclusion appears increasingly simple – avoid luxury altogether.
That caution helps explain the continued growth of branded residences. In many mixed-use schemes, residences are not simply an extension of the brand proposition; they are a funding mechanism. Pre-development sales help unlock capital, de-risk delivery and make the wider project stack up financially. The model is commercially compelling.
But the rise of branded residences should not be mistaken for evidence that luxury hotels no longer work. It signals that the economics of luxury have become less forgiving of poor decisions.
That distinction matters. Because luxury hospitality has not become unviable. What has become unviable is an undisciplined approach to delivering it.
This is where value engineering should come into its own. Done properly, it is one of the most effective tools in hotel development: a disciplined process that aligns design ambition with commercial reality, ensures capital is spent where it genuinely matters and protects return on investment without eroding the guest experience.
In practice, however, value engineering is too often where projects begin to unravel.
Across the industry, it has become a late-stage exercise in subtraction rather than an early strategic discipline. Finishes are downgraded, details simplified and scope reduced on a spreadsheet, often without any meaningful understanding of what those decisions will do to guest perception, brand distinctiveness, operational flow or long-term asset performance. The outcome is predictable: diluted concepts, underwhelming spaces and costs that quietly return later through maintenance, refurbishment or lost rate potential.Â
After more than two decades working across hotel interiors, procurement and branding, I do not believe value engineering fails because budgets are too tight, although this is also common. It fails more because we are asking it to do the wrong job, at the wrong time and in the wrong way.
By the time value engineering is typically introduced, most of the decisions that create genuine value in a hotel have already been made. The guest journey has been shaped. The tone of the brand has been set. Spatial planning is locked in. Key materials, operational assumptions and design gestures are already part of a broader narrative. Once a project reaches that point, cost reduction becomes blunt and often destructive. It can remove expense, certainly, but it rarely removes it intelligently.
And in luxury hospitality, intelligence is everything. Guests experience luxury through ease, clarity, comfort and emotional resonance. They remember the confidence of arrival, the atmosphere of public spaces, the tactility of materials, the intuitive functionality of a room and the sense that every detail has been considered. None of this depends on indiscriminate spend. It depends on disciplined choices.
That is the real purpose of value engineering: to decide where investment delivers the greatest return.
Sometimes that means protecting the elements guests will feel immediately and remember longest. Sometimes it means investing in durability rather than visual theatre. Sometimes it means resisting bespoke gestures that add cost without adding value. And sometimes it means recognising that what appears to be a saving on a spreadsheet can create far greater operational or reputational cost later.
Furniture, fixtures and equipment are a good example. Lower-grade FF&E may help reduce capital expenditure at early stages, but it often shortens replacement cycles, increases maintenance demands and weakens the quality cues guests associate with premium hospitality. The same is true of operating supplies and equipment (OS&E), which remains one of the industry’s most frequent blind spots. Because it is often procured too late, under pressure and in isolation, opportunities to balance brand expression, durability and cost efficiency are regularly missed.
The problem is rarely one poor decision. It is fragmentation. Hotel development still too often treats design, procurement, branding and operations as adjacent functions rather than interdependent ones. Designers may be asked to remove cost without access to live procurement intelligence. Procurement teams may be asked to source savings without a clear understanding of design intent or brand priorities. Operators may inherit compromised environments they had little role in shaping but are expected to run efficiently for years.
This siloed approach creates false economies. A decision that appears efficient in isolation can introduce operational friction, reduce staff efficiency, weaken brand clarity or accelerate the need for reinvestment. In other words, it can protect the budget while quietly damaging the business case.
If the industry wants luxury hotels that are both distinctive and commercially robust, value engineering must move forward – not backward – in the process. It should begin at concept stage, not after design sign-off and once the mock room has been built. It should shape the brief, inform the brand story, guide procurement strategy and influence how teams define value from the outset. That means looking beyond upfront cost and measuring decisions against full lifecycle performance.
It also means accepting that value is not universal. What represents value in a luxury resort is different from what drives value in a lifestyle-led city hotel or an extended-stay product. Yet too many projects are still filtered through generic benchmarks that ignore the nuances of brand, market and guest expectation.
The best luxury hotels are the clearest in their intent. They understand what the brand stands for, where guests will perceive quality most acutely and how to deliver that experience without waste, inconsistency or commercial naivety.
That is why the conversation around luxury hospitality needs reframing. The question the industry should be asking is whether projects are being designed, specified and procured intelligently enough to make luxury perform.
In a tougher market, investors are right to scrutinise every assumption. But stepping back from luxury altogether may be the wrong response. A better response is to demand more rigour in how luxury is created.
The industry therefore needs better value engineering – earlier, more collaborative and far more strategic. Because value is what every interior designer, procurement specialist and branding expert wants to create from the very beginning, intentionally and intelligently.
