Luxury hospitality has experienced a period of prosperity given the rising growth in the world’s affluent population and that segment’s desire for exclusive experiences. This trend, coupled with a limited supply in premium locations, is driving investor interest in luxury hotels. Personalized luxury experiences, new wellness offerings, sustainable practices, unique culinary ventures, and a culture of excellence are commanding daily rates of US $3,000 or more. This Viewpoint explores these trends and the levers for success.
Several factors are driving the growth of the luxury market, including an increase in the number of millionaires worldwide, the strong restart of China’s luxury market, and evolving consumer preferences toward luxury goods and exclusive experiences. According to UBS, there will be more than 85 million millionaires in 2027 (see Figure 1), a rise of 26 million from today and 71 million from the beginning of the century. In 2022, 42% of this segment was concentrated in North America and 27% in Europe, but China expects to reach 13 million millionaires in 2027, a 112% growth for the 2022–2207 period.
According to a recent Knight Frank wealth report ultra-high-net-worth individuals (UHNWIs, with wealth above $30 million), rose globally by 4.2% to 626,619, with North America (7.2%) and the Middle East (6.2%) being the main drivers (see Figure 2). This wealth creation was supported by global economic growth and the upside of key investment sectors: the equities markets surged on the back of enthusiasm surrounding AI (S&P Global 100 delivered a 25.4% annual increase in 2023), residential capital values grew 3.1% across the world’s leading markets in 2023, and gold (up 15%) and Bitcoin (up 155%) delivered positive results. The number of UHNWIs is expected to rise by 28% in the next five years (to 2028), with Asia (38%) and the Middle East (28%) experiencing the highest growth.
This increase is driving the growth of the luxury sector worldwide. For example, average prices in the secondhand market for top watch models from the three largest luxury brands (Rolex, Patek Philippe, and Audemars Piguet) rose at an annual rate of 20% between 2018 and 2023. The luxury yacht sector is forecasted to reach $13.2 billion in 2028 (a 19% increase for the 2020–2023 period), while the luxury watches market is expected to reach $54 billion in 2028 (an 11% annual increase for the 2020–2023 period) — see Figure 3. In the luxury car market, iconic brands have experienced significant growth. In 2023, Lamborghini sold more cars than ever, breaking the 10,000 units barrier — the first time in the brand's 60-year history that it has broken into five figures.
Not surprisingly, the luxury hotel sector is also on the rise. According to specialist real estate information company CoStar, the number of available global luxury rooms could reach 1.9 million in 2030, up from 1.6 million in 2023 (see Figure 4). Despite growth in available supply, hotel chains are struggling to meet demand, which stems from an increase in both affluent travelers and the aspirational segment of the middle class who desire to more frequently travel through unique experiences for birthdays, destination weddings, honeymoons, and so forth. Business travel is pushing demand for luxury rooms as well: mid-level and senior managers are splurging on plush retreats as a way to reinforce corporate culture and reward employees.
In the past few years, luxury tourist destinations like the Maldives began diversifying beyond honeymooners to families and groups. This broader demographic will support higher occupancy and room rates in the coming years while increasing the average length of stay (which in the Maldives was 6.3 days in 2019 and 7.6 days in 2023).
Luxury hotel expansion is driven in part by specialized operators; Six Senses, for example, shows annual growth of more than 14% since 2005 (see Figure 5); other brands like Aman Hotels with almost 1,400 rooms in 2024 and an annual growth of 5% for the same period also stand out. Smaller firms experienced more moderate growth; Virgin Limited Edition and Soneva had annual growth of 2% and 5%, respectively.
This growth is attracting new investors such as property developers and buy-out barons, attracted by the sector’s profitability. According to specialized real estate firm JLL, the annual rate of return on such properties exceeded 6% in 2022, the highest in a decade.
For example, Aman Group received more than $1 billion from investors, including Saudi Arabia’s Public Investment Fund (PIF), which, in December 2023, also paid $1.8 billion for a 49% stake in Rocco Forte, a British boutique firm that owns Brown’s Hotel in London, UK, and Hotel de Russie in Rome, Italy.
Luxury hotels are increasing their range of exclusive services, reinforcing their culinary offerings, and expanding their wellness and well-being experiences. They also offer privacy and exclusivity, with a limited number of rooms (some hotels have less than 20) and remote locations, including private islands.
These factors, combined with bespoke service, high levels of comfort and convenience, and sustainable and ecologically responsible facilities, allow luxury hotels to achieve average room rates of about $3,000 or more per night (see Figure 6).
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