Number of luxury hotels in U.S. set to grow

The Nobu Hotel Chicago is slated to open this summer in Chicago. It will be situated in the meatpacking district, an industrial area that is undergoing a rapid transformation. Photo credit: Nobu Hotels

The number of luxury hotels in the United States is set to rise, according to a new report titled “Destination Market Insights U.S.” from GlobalData. The U.S. will have 1,067 luxury hotels by the end of 2019. This figure is expected to increase to 1,123 by 2022, at a compound annual growth rate of 1.7 percent.

That growth will be driven by increasing numbers of Chinese tourists, according to the report. Chinese tourists are a high-spending source market and their visitation numbers to the U.S. have been growing in recent years. A CAGR of 8.7 percent was recorded in Chinese visitation to the U.S. between 2014 and 2018, and luxury hotel companies such as Four Seasons Hotels and Resorts state that China is their second-largest source market, according to the GlobalData report. The report also shows that revenue from Chinese travelers has increased steadily for Four Seasons, with double-digit growth in revenue in recent years.

Additionally, the average spend per inbound tourist in the U.S. is expected to trend upward, according to GlobalData. From 2016 to 2018, average expenditure has risen at a CAGR of 3.2 percent from $2,534 to $2,700. Luxury hotels are being constructed in up-and-coming areas that may not necessarily be located in tourist hotspots, according to the report. For example, a Nobu hotel and a Hoxton property both will open in Chicago this year in the meatpacking district, an industrial area that is undergoing a rapid transformation.

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“Hotels opening in up-and-coming areas away from city centers will help to reduce the effects of overtourism and are more socially sustainable. The meatpacking district is known for independent eateries and shops, so money spent there will stay in the local economy and won’t be leaked out of the area via multinational corporations,” said Ralph Hollister, associate analyst for travel and tourism at GlobalData.

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What’s more, an increasing number of downtown areas in major cities within the U.S. are being gentrified to increase capacity, appeal to higher-spending market segments, attract further investment in to the city and improve the overall brand image of the destination. An example of successful gentrification would be Industrial Way in Buellton, Calif., researchers noted. Industrial Way used to be a collection of warehouses and light manufacturing buildings. In recent years, developers have added restaurants, breweries and distilleries to the area, and it now is a popular destination for wine tasting.

Hollister said that the trend of luxury hotels opening in once industrial or downtown areas within large cities will continue.

“Luxury consumers are moving away from standardization as the millennial market grows in size," he said. "Old industrial and downtown areas within cities often provide a vibrant mix of architecture, culture and are often noncommercial. This gives these areas an alternative image, which attracts younger market segments.”

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