[COLUMN] The new equation for luxury hotels: offer fewer rooms but more experiences, and earn more

The big story for luxury hotels in 2025 is a normalization of volumes without any loss of pricing power. The global hotel industry continues to outperform the Luxury segment, which is the only one to maintain an increase in RevPAR (Revenue Per Available Room) while other segments are declining. Affluent customers remain loyal and are willing to pay for rarity and quality.

Under the hood, demand is changing in nature rather than intensity. HNWI travelers, Millennials, and Gen Z say they prioritize personal transformation (well-being, active nature, themed retreats) and multigenerational stays. The “must” is no longer ostentation, but the memory of a moment, such as insider culinary expertise, local craftsmanship, a sleep and recovery retreat, or an arts and crafts workshop. The Virtuoso and Amex Travel barometers confirm this and show a rejuvenation of the mix, with a quest for experiences.

Where value is created: prime capitals and premium nature

Looking at the world map, the message from investors is clear: London, New York, and Tokyo are capturing the appetite, with an urban rebound supported by the return of long-haul flights. London has returned to pre-COVID occupancy levels and remains a priority destination. It is a deep market, dense with events.

In New York, there is a new, structurally constrained supply (special permits for all new hotels) and part of the demand that has shifted to hotels after the crackdown on short-term rentals. This double effect is providing sustained support for high-end prices, in addition to international tourism.

In Asia, Tokyo and Osaka are riding the wave of the inbound boom. Capital cities are attracting high-spending intra-Asian and long-haul customers, with an increase in wellness/cultural components as an integral part of the product. The consequence for luxury is higher price floors and pressure on occupancy, primarily linked to the growth in supply rather than a shift in demand.

At the other end of the spectrum, the “premium nature” resort seems to be here to stay. East Africa is seeing a boom in ultra-luxury safaris. Marriott has opened the JW Marriott Masai Mara Lodge and is preparing to launch a Ritz-Carlton Masai Mara Safari Camp, both of which are very high-priced products that are real reasons to travel.

The Middle East is playing a different tune, that of giga-destinations. The Red Sea is gradually opening its hotels, such as the St. Regis Red Sea and the Nujuma – Ritz-Carlton Reserve, with the ambition of using 100% renewable energy. NEOM is rolling out ultra-high-end concepts, such as Epicon and Leyja, combining iconic architecture and pockets of nature.

The three growth areas that are reshaping the offering

High-end wellness is the main driver. The global wellness economy is worth around $6.3 to $6.8 trillion and is targeting $9 trillion by 2028, according to the Global Wellness Institute, with growth of 7.3% per year, faster than GDP. For the hotel industry, this means monetizable “reasons to go,” such as longevity retreats, sleep and recovery, new-generation thermal spas, and nutrition and exercise.

In addition, branded residences (operated or hotel-affiliated) are moving from a niche market to a global asset class. Branded residences sell for an average of 30% above market value, and the pipeline is swelling with approximately 690 projects delivered by mid-2023 and 600 in development for delivery by 2030.

Nature-premium and “rare venues” are other factors that will reshape the offering. Safaris, protected archipelagos, mineral valleys, and regenerative agricultural estates are the new “white spaces” of luxury. They require impact engineering (conservation, carbon, local employment) and an experience design capable of justifying very high prices.

Luxury hotels are no longer competing for square footage, but rather for attention, expertise, and meaning. Where the offering is truly unique and the local footprint is positive and proven, pricing power remains. The next phase of growth will come from ecosystems of well-being, residences, clubs, and culture, rather than isolated assets, locked-up capital, rare natural features, and a narrative where hospitality is worth more than the nightly rate.