The top of the chain scale makes up a comparatively small portion of the total hospitality portfolio, but it's a portion many hoteliers want to control, and in which they are eager to invest.
Luxury Growth
According to Lodging Econometrics, the U.S. had 85 new-construction branded luxury hotels in the active pipeline with 17,838 guestrooms as of mid-January. The new-construction unbranded luxury pipeline had 77 projects with 17,595 guestrooms. (Bruce Ford, senior vice president, director, global business development at Lodging Econometrics, noted that many unbranded hotels could pick up a flag as the opening draws nearer—or even after opening.) Fifteen hotels with 9,170 guestrooms are converting to luxury brands or from one luxury brand to another. For example, the Bellagio Resort & Casino will join Marriott’s Luxury Collection as a result of Marriott International’s partnership with MGM Resorts.
Luxury hotels make up 5 percent of the total hotel pipeline, according to Ford. And as many new luxury developments take two years or more to open, Ford added, he expects to see more properties opening in 2027 and 2028 than next year.
Branded Appeal
Since 2017, 14 new luxury brands have either launched domestically or come to the U.S. for the first time, Ford said. As an example, Hyatt’s 2018 acquisition of Two Roads Hospitality added five brands to the company’s portfolio. As of December 2023, 70 percent of Hyatt’s rooms were categorized as luxury and upper-upscale. Hyatt has added nearly 90,000 rooms in those categories since the end of 2017, representing 45 percent of the company’s total portfolio. This growth has doubled the number of luxury rooms, and by the end of 2025, Hyatt plans to add more than 35 hotels worldwide to its luxury brands.
Marriott, meanwhile, signed a record 58 new deals for luxury hotels in 2023 and added 29 new luxury hotels to its portfolio during the year. IHG acquired the Six Senses brand in early 2019 and has since built the flag’s pipeline up to 43 properties, nearly tripling its current presence. The brand’s first U.S. hotel is slated to open in California in 2026.
During the company’s fourth-quarter and full-year earnings call in early February, Hilton President & CEO Christopher Nassetta said the company has 100 open luxury hotels with an estimated 60 to 70 in the pipeline worldwide. The company recently partnered with Small Luxury Hotels of the World to allow booking for participating SLH hotels on Hilton’s website. SLH currently has 560 hotels in its portfolio, and Nassetta predicted that portfolio would grow “at a much faster pace” by being on Hilton’s system.
“Luxury is a key focus for us,” said Dino Micheal, senior vice president & global category head for luxury brands at Hilton. “When it comes to growth and development, we want to do that purposefully. It's not about being the biggest or the fastest. It's about having product in the right location.” Those locations, he added, must appeal not only to luxury travelers but also the 180 million members of the company’s loyalty program. “It's about having the right destination [and] the right products,” he said. “A lot of time gets spent thinking about those dynamics.”
The SLH partnership, Michael said, aims to broaden Hilton’s target audience. “It complements our luxury portfolio of three brands, particularly in resort destinations, where we've grown significantly.” On the flip side, he added, SLH properties will benefit from Hilton’s scale and loyalty program. “It does put us into markets where we haven't been, or maybe [where there is] a high barrier to entry. … It just adds another dynamic to our brand infrastructure.”
Todd Wynne-Parry, managing director at Horwath HTL, emphasized the growing value of wellness in hospitality, particularly for brands. “It's still very disparate and very slow, but it's finally getting some traction,” he said. “The big companies are buying into it: Hyatt bought Miraval and IHG bought Six Senses. So they're clearly seeing the trend and trying to get out in front of it and develop those brands.”
Target Markets
“Luxury hotel room-night demand does not exist everywhere,” Ford noted. “It exists in a select set of cities and a select set of resort destinations.” Rate elasticity for luxury branded hotels changed “a little bit” during the pandemic, he added. “As a result, we're seeing some more locations that we wouldn't have traditionally considered luxury locations to get luxury branded product.” A few decades ago, Ford estimates that there were perhaps 20 markets for luxury branded hotels. “Today, that probably goes as far as maybe 40 to 45 markets,” he said. “When I first came into the business, there were very, very few luxury hotels in Atlanta. … Now, just about every luxury brand has to be in Atlanta, and some with multiple locations.”
Ford sees Nashville as an emerging market for luxury hotels. Real estate developer Turnberry opened the JW Marriott Nashville in 2018 and is set to break ground on the adjacent 177-room St. Regis Nashville next year. “New Orleans continues to get more luxury development, and we're seeing some cities that might have had two or three [luxury hotels] now have six. So you're getting another layer of luxury brands in some cities." Beyond the top development hubs, Ford sees a number of “second-tier markets”—in the 25 to 40 range—becoming more viable for luxury development than ever before.
Internationally, Michael sees North Africa and the Greek islands as strong markets for luxury development. “What's going on the Middle East is really interesting,” he added. “I think the dynamic is changing.” In Latin America, Michael sees growing demand for Costa Rica, where the company already has a Waldorf Astoria residences.
“Location is the first thing that people are going to ask for,” Wynne-Parry said of luxury hotel stays. As such, he said, developers must target not only popular markets but the most popular locations within those markets, such as New York City’s Central Park South or adjacent to a national park.
This is the first part in a series on luxury hotel development and operations. The second part is here: Luxury hotels are upping the ante