Here's a cool Journal article (sub) about the arms race for luxury in the hotel industry. It's moving features that were once considered luxury downmarket, because the guys at the top keep outdoing each other and raising the bar.
"...There's a big problem facing five-star aspirants: A spate of new-hotel construction has raised the bar for what is now considered luxurious. Even midpriced hotels now sometimes offer frills once considered the sole province of swanky properties. "I'm sure there was a time when a bathrobe and slippers were five-star amenities," says Sandy Duhe, who oversees travel-guide marketing for Exxon Mobil Corp., the Irving, Texas, oil giant that owns Mobil Travel Guide. "Now they're three star."
There are two points to consider here strategically.
First, this is good for consumers in the short-term, because they get better amenities at cheaper prices. But in the long-term it might be bad for them. This kind of industry dynamic might stifle innovation, because arms races can destroy industries by leading to massive price (or quantity, in this case) competition.
Second, strategy is fundamentally about difference
: doing something differently and doing it better. These guys are all competing head on - and leaving themselves wide open to discontinuity (like Ian Schrager was threatening for a while). This industry needs to think hard about that.