Luxury hospitality begins with a signature property, but a well-situated, beautifully designed hotel is only a start. Stellar service, driven by devoted hotel staff, is what makes a great property come alive. As one general manager (GM) of a luxury hotel told us in an interview, “Our facility is our stage, and guests are paying for a performance.”

Distinctive, superior service is more important now than ever. The luxury segment is projected to grow at 6 percent per year through 2025—faster than any other chain-scale hotel class—and competition for customers is intensifying, as luxury hotels proliferate and alternative options (such as stylish rental villas equipped with chefs and staff) enter the marketplace. Nonluxury properties have also closed the gap on some of the physical details that indicate luxury, such as sumptuous mattress tops and rainfall showerheads.

Meanwhile, across the entire service landscape, the meaning of luxury is shifting. Affluent customers increasingly value unique experiences—not just the tangible product—and vibrant atmospheres over opulent formality. Data on consumer spending substantiates the notion that interest in recreational experiences is generally rising while interest in nonessential goods is generally subsiding (exhibit).

Today, the most powerful differentiator in the service sector is a culture of excellence—powered by staff that can anticipate customers’ needs, exceed expectations, create cherished memories, and make it all feel seamless. Luxury properties may potentially see more return from investing in this type of culture than from coating the hotel with marble and gold plating the bath fixtures.

To learn how the GMs of the world’s best hotels create healthy, supportive, and winning service cultures, McKinsey interviewed a dozen current and former GMs who have worked at iconic hotels across five continents (including properties from luxury and ultra-luxury brands such as Aman, Four Seasons, InterContinental, Jumeirah, Mandarin Oriental, Raffles, Shangri La, and Six Senses, as well as independent luxury properties). Their strategies were developed with luxury hospitality in mind, but the lessons they impart can be applied across many other service contexts and price points: McKinsey research shows that the primary reason consumers cite when asked how they’ll choose a travel brand in the future is not value, quality, or convenience but “positive past experiences with the brand.”

Create a culture of excellence

Great service flows from a culture that values quality and dedication. Establishing this culture begins with exemplary leadership. “Culture is not a sign on a wall or a saying in a textbook,” said one luxury hotel GM. “It has to be driven by a leader, 24/7, on good days and bad.”

Assume the role of chief culture officer

To build a winning culture, leaders should instill foundational principles on day one. “I attend every new-hire orientation and share my expectations,” said one GM. “I make it clear that I expect us to greet guests by name, anticipate their needs, constantly seek to learn more about who they are and why they’re here, and never let them leave an interaction feeling unhappy.”

Leading by example can help a healthy staff culture thrive. “You can’t just be buried in paperwork in your office,” said one hotel GM we spoke with. “You need to be there yourself and show your staff what five-star hospitality is all about.” For hotel GMs, this can mean getting out and about on regular facility walks, or making sure to locate the GM’s office close to the lobby so that getting directly involved in service becomes more natural. It’s important for staff to see leaders modeling excellence on a day-to-day basis.

Staff are also more likely to view a leader as a chief culture officer—and someone worth emulating—when the leader listens to employee concerns and demonstrates that they’ve been heard. “If you listen to your staff and you act on their feedback,” said one hotel GM, “your staff turnover will go down considerably.” Luxury-service leaders should foster an inclusive environment, solicit input from staff on the floor, and schedule regular one-on-ones with key employees.

Building shared values can become easier when departments are brought together by shared activities. “You need happy staff to have happy guests,” said one hotel GM. “I try to find opportunities to make the workplace fun. For example, each month a different department decorates the colleague cafeteria and picks the menu.”

Hire for personalities, not resumes

“Having the right china is of no value if the person handing it to the guest doesn’t smile or engage,” said one hotel GM. Outgoing, friendly personalities are an absolute must for staff in roles with high visibility. “I’m fanatical about doormen,” said one hotel GM, “because they are the first people guests interact with when they arrive and the last people they interact with as they depart.” When hiring based on personality, it’s important to remember that skills can always be taught. “You can teach someone how to set a table,” said one GM, “but you can’t teach a positive disposition.”

Natural personality tendencies can be observed during the hiring process. For instance, one hotel GM makes sure to do a hotel walk-around with all job applicants. Before strolling around the property with a prospective staffer, this GM strategically places a pen on the ground in a prominent spot—essentially littering. Only an applicant who has the instinct to pick up the pen can get hired. Bonus points are awarded for interviewees who greet guests along the way.

Invest in celebrating and rewarding employees

Best-in-class service is about treating customers with generosity and care. Leaders in the service sector can model this behavior by treating employees similarly.

Ceremonies can be conducted, replete with a bit of pomp, to officially welcome new hires aboard after their probationary periods are completed. Some hotel GMs we spoke with said they also invite new staff to spend a complimentary night in the hotel with a loved one, dine at a hotel restaurant, and enjoy room service in the morning. Marking the occasion with special perks like these can help instill pride and strengthen commitment.

Many hotel GMs described “points” systems they’ve established to recognize employees who excel. Staff might receive points when customers mention them specifically in positive reviews on websites. Staff might also earn points after receiving positive quarterly reviews from supervisors. These points can then be redeemed for the same kinds of services that customers would receive, such as (in the case of a luxury hotel) an overnight stay or a meal at the restaurant. Alternatively, points might equate to a cash bonus. Group or department incentives, such as movie tickets awarded in exchange for hitting targets, can help improve both performance and cohesion.

Enable a distinctive customer experience

Giving staff the proper tools and then trusting them to deploy those tools correctly goes a long way toward cultivating a top-tier service environment. Regularly updating the customer experience can help it stay fresh. Making the effort to deliver experiences that go above and beyond can be a powerful investment in the lifetime value of a customer.

McKinsey research has shown that the top factor influencing customer loyalty in the lodging sector is “an experience worth paying more for.” And every hotel GM we spoke with agreed that ultimately, it is experience, not product, that differentiates the luxury segment.

Empower staff to gain knowledge of customer preferences

Customers feel pampered when staff addresses needs before those needs are expressed. This kind of anticipation only happens when the staff deeply understands who they’re serving. Customer relationship management systems and processes can help track repeat customers’ preferences and then distribute this information to staff in a timely and efficient manner. The result is personalized service: “Your favorite table is ready, Mrs. Jones.”

To provide even more personalized customer experience, some luxury hotel GMs we spoke with direct their staff to conduct additional research to become familiar with guests’ preferences prior to arrival. “Nowadays, between social media and search engines,” said one GM, “there are so many opportunities to learn about your guests, their backgrounds, and what they like.” It’s important that deploying this research never feels intrusive to customers, who will of course value their privacy. But, when executed with care, knowledge flowing from this research can be used to generate tiny delights (such as highly personalized welcome cards) or to anticipate major needs (such as gluten-free food options for a customer with celiac disease). In general, staff should always be looking for “tiny details” and use those clues to provide individually tailored service.

Younger consumers, especially, crave personalization and have come to expect it. McKinsey research shows that personalized service is valued 2.5 times more by Gen Zers than by baby boomers—suggesting that personalization will become increasingly important in the future.

Trust staff with budget, especially when rectifying missteps

Staff should be empowered to surprise and delight customers without always having to obtain prior approval. This could mean something as small as offering a free drink or as significant as offering free tickets to a show. The key is to give staff freedom to use their judgment and to spend as necessary—within reason—instead of forcing them into a one-size-fits-all approach (for example, giving every hotel guest the same complimentary fruit plate). “In the luxury space especially, you’re better off with guidelines than policies,” said one hotel GM. “You want to give the staff guidance without locking them into a straitjacket.” Granting staff this freedom also makes the process more rewarding for them.

Staff should also feel enabled to execute recoveries swiftly and fully after a misstep or misunderstanding. “If a service recovery must be executed, regardless of who is at fault, it needs to be executed immediately,” said one GM. “It’s very important not to give guests time to stew. And we don’t just ‘fix’ the situation but try to go a step beyond.” For example, at one luxury hotel, a customer ordered chocolate chip pancakes at breakfast but received plain pancakes instead. The server realized and remedied the mistake, apologized profusely, and brought a plate of macaroons designed in the colors of the customer’s favorite sports team (which the customer had mentioned earlier in the meal).

Regularly reinvent the customer experience to avoid stagnancy

Recurring reinventions of customer experience can happen over the course of a few days. “Midweek, we attract business travelers who mostly want peace and quiet,” said one hotel GM. “On weekends, we set a more festive tone for leisure travelers with DJs, social events, and more casual staff uniforms.” Pop-up stalls, such as a surprise gelato cart in a lobby, can provide quick new experiences without a big footprint.

Broader reinventions can take place over the course of a year. “Each quarter, I ask every department to submit three reinvention ideas,” said one hotel GM. These can take the form of, for example, facilities improvements, special holiday events, or tie-ins with local businesses. “Not only does it help brainstorm, but it also builds staff ownership.”

Go to extra lengths to create unique memories

Going above and beyond can create moments a customer will remember forever. A few examples from the hotel world:

• When a guest lost her wedding ring while swimming, the GM hired a metal detector service to look for it. They found it, and the GM surprised the guest by returning the ring to her at dinner.
• An executive staying at a hotel was scheduled to close an important deal the next morning, but he’d forgotten to pack his dress shoes. The concierge happened to wear the same size and graciously offered his shoes to the guest. The guest closed the deal.
• A little girl with an illness was staying with her family at a luxury desert ranch hotel. The girl dreamed of riding a unicorn, so the hotel put one of its horses in a unicorn costume (complete with horn) and made the girl’s dreams come true. The family now comes back every year.

Manage performance without skimping on quality

While striving to create spellbinding service environments, it’s important to keep track of performance outcomes. Monitoring financial metrics carefully can be balanced with the recognition that investing in customers’ lifetime value outweighs making shortsighted budget cuts.

Identifying financial levers that don’t erode the luxury experience or undercut a brand’s unique value proposition can sometimes provide a solution. One hotel GM was able to trim operational expenditures by 10 percent through actions such as consolidating which floors were in use, reducing the hotel’s linen volume, and working with the hotel owner to invest in sensor lighting, LED lighting, and water-saving showerheads.

It’s always crucial to see the bigger picture. The focus should be on boosting revenue and building customer relationships, not just on costs. “Where the service industry sometimes fails,” said one hotel GM, “is when it creates cookie-cutter leaders who make shortsighted cost-benefit trade-offs.”

What can service industry leaders learn from the best hotels in the world?

Anyone looking to build a great customer experience—for a restaurant, retail store, airline, or any other context in which service matters—can take some lessons from top-tier luxury hotels:

• True luxury is less about lofty price points and fancy finishes and more about exquisite service that is executed with thought and care.
• A culture of excellence among staff is what creates a luxury experience (and can create great customer experience in more affordable contexts, as well).
• It’s critical that people leading service staffs imagine themselves as chief culture officers, fostering cultures of excellence by instilling shared values, celebrating great performance, being highly visible, and leading by example.
• The best leaders model the behavior they want to see from employees. They treat staff with care and generosity so that staff will treat customers with care and generosity. They listen intently to staff so staff will listen intently to customers.
• People make all the difference in service industries. Hire employees with naturally wonderful personalities, invest in them, and empower them with the tools and freedom to be excellent.
• Don’t be afraid to go above and beyond. It’s possible to be mindful of ROI—understanding where to spend and where to look for savings—while still finding ways to offer personalized service that surprises and delights customers.

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A culture of excellence is the differentiating factor in the service industry. Leadership that can create a healthy, supportive atmosphere for staff—instilling a devotion to great service while providing staff with the tools, skills, and freedom to make customers feel special—excel at building a best-in-class customer experience.