Global
luxury hospitality once represented a small proportion of the hotel industry as
a whole. However, recent travel trends and the growth of wealth have led to an
explosion of luxury hotels. As a result, both private and institutional
investors are taking increasing notice of this particular asset.
A recent JLL report examines this niche sector in depth and analyses its key trends. The Evolution of Luxury Global Hospitality concludes that these tendencies will create new opportunities for investment.
Rise in HNWIs contributes to more luxury hospitality
According to JLL, the luxury hotel sector has experienced an increase of over one million rooms in the last four decades. Part of the cause behind this growth lies in the uptick in spending on luxury travel.
Although the world’s high-net-worth individuals account for just 0.3% of the population, their travel spending makes up 30% of the market. Within global luxury hospitality, their share rises to nearly 70%. This proportion is expected to reach its highest levels in 2024.
New travel trends
Luxury hotels have also benefitted from post-pandemic holiday trends. According to the JLL report, 40% of affluent individuals prioritise travel since the arrival of Covid, compared to 30% of the general population.
In addition, affluent travellers seek exclusivity and privacy on their holidays, leading to a rise in experience-based vacations.
Increase in supply of luxury rooms
Recent demand has powered much of the arrival of new high-end accommodation across the world. JLL calculates that the luxury market share will reach 7.6% in 2033, the equivalent of 1.7 million rooms.
APAC leads the worldwide share, accounting for 41.2% of the market, with China at the helm. The Americas lie in second place, with 7.4% of the global luxury hospitality supply.
Benefits for luxury hotels
The surge in demand for high-end accommodation has led to soaring ADR for this niche sector. JLL reports that ADRs in 2022 exceeded those for 2019 in most countries. Furthermore, luxury ADR reached US$469 in Europe last year, its highest rate ever.
Single-asset luxury hotel liquidity accelerates
The JLL report finds that single-asset luxury hotel liquidity “accelerated” between 2019 and 2022. Specifically, it soared to over US$10 billion in 2021 and 2022 for the first time since 2015, “driven by strong performance in the Americas”.
Although luxury accommodation in cities continued to dominate market share, resort hotels increased their presence. According to JLL, “investors continue to gravitate towards resorts due to their strong fundamental performance”.
Further investment on the cards
On the back of bullish performance from luxury hotels, JLL predicts yet more investment in the short and medium term. The consultancy company forecasts that “foreign investors should begin to selectively deploy capital” in the next 12 to 18 months. It also expects growth in “platform acquisitions” and more investment in branded residences.
Furthermore, the luxury travel sector should continue to evolve in tune with new holiday trends. JLL believes traditional hotel brands will “look to own the entire traveller experience”. As a result, they will become “an immersive part of life thereby creating new opportunities for investment”.
The rise in digital nomad visas in many countries, including Brazil, is one example. This trend has led to luxury resorts evolving into short-term homes for remote workers looking to combine their job with a vacation.
(Source: JLL)
