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The global luxury hotel market size was USD 93.43 billion in 2020. The global impact of COVID-19 has been unprecedented and staggering, with luxury hotels witnessing a negative demand shock across all regions amid the pandemic. Based on our analysis, this market exhibited a huge decline of -60.82% in 2020. The market is projected to grow from USD 119.55 billion in 2021 to USD 238.49 billion in 2028 at a CAGR of 10.4% in the 2021-2028 period. The sudden rise in CAGR is attributable to this market’s demand and growth returning to pre-pandemic levels once the pandemic is over.
Lavish stay during family vacation time or offering over-the-top facilities for upper management executives during business tours have primarily supported the luxury hospitality industry. Hotels are striving to showcase the highest quality of services and features, from interior designing and food offerings to extended types of services, such as spas, gym, swimming pool, and laundry, among others, to attract guests.
The emergence of online accommodation booking services has further accelerated market proliferation. For instance, on 10 February 2021, Marriott International released another version of its mobile app, Marriott Bonvoy, with new features such as better booking options, enhanced personalized experiences, and customizations in earning and redeeming points. Therefore, the increased demand for premium services with improved booking facilities is anticipated to consolidate the market.
Hospitality Market to Experience Severe Downturn with the Emergence of COVID-19
The rapid spread of the coronavirus infection led to strict lockdown rules in the majority of the countries worldwide at the start of 2020. Physical distancing norms and stay-at-home orders resulted in the closing down of hotels, restaurants, and spas. Several conferences, events, social gatherings, and scheduled trips had to be canceled or postponed in order to contain virus transmission. These factors, in turn, negatively impacted the hospitality industry. For instance, as stated in the report ‘STATE OF THE HOTEL INDUSTRY 2021’ published in January 2021 by the American Hotel & Lodging Association, the average annual hotel occupancy in the U.S. decreased to 44% in 2020 from 66% in 2019 due to the pandemic.
The emergence of the pandemic, however, has led to the accelerated adoption of touchless services. The article titled ‘New Challenges and Technical Solutions for the Hospitality Industry in the Context of Pandemic’, published in January 2021 by Hotel News Resource, states that activities such as contactless payments, activating room keys or locks by smartphone, kiosk-assisted self-service check-ins, and digital messaging services for hotel staff would be highly demanded after COVID-19. Therefore, luxury chain operators have had the opportunity to offer such technologically advanced services and thereby increase the room occupancy rate.
Besides, as per the Expedia Annual Vacation Deprivation study, released on 3 February 2021, 42% of survey respondents had to cancel one or more trips due to COVID-19 in 2020. However, as per the same survey, 36% of survey respondents stated that they are planning to take regular vacations in 2021. Therefore, the gradual easing of lockdown rules would boost the market growth in the forecast period.
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Growing Adoption of Green Practices is the New Trend in Luxury Business
The ‘Five Star Alliance’ has listed several luxury eco-friendly hotels across the globe. The listed hotels include Banyan Tree Bintan (Indonesia), Four Seasons Vancouver (Canada), Hyatt at Olive 8 (the U.S.), Shangri-La Hotel Bangkok (Thailand), and The Oberoi Vanyavilas (India), among others. These hotels are listed based on a number of factors, including the use of locally available materials, recruitment of local labor force, and adoption of sustainable business practices. Therefore, hotel owners are focusing on offering services that do not harm the environment due to the shifting consumer preference towards nature-based living. For instance, in August 2019, Marriott International announced the removal of single-use bottles of bath gels and shampoos & conditioners from all of its properties present globally. By eliminating the use of such tiny bottles, the hotel company aims to reduce the current plastic usage in the amenities department by about 30%.
Blooming Travel and Tourism Industry to Expand Market Size
The tourism industry has witnessed continuous growth over the years, with an increased number of domestic as well as international tours. For instance, as per the report, ‘International Tourism Highlights 2019 Edition’ of the World Tourism Organization (UNWTO), international tourist arrivals increased from 680 in 2000 to about 1,401 in 2018. As per the same report, among various reasons for travel, the share of traveling for leisure, recreation, and vacation had grown from 50% in 2000 to 56% in 2018.
Besides, the increasing availability of lodging packages with deluxe rooms and high-end services have attracted a wide number of guests for extended stays, thereby boosting revenue generation. The increasing adoption of advanced technologies in offering various facilities, such as free Wi-Fi or smart bathrooms, in 5-star hotel rooms would further attract guests. Therefore, a growing trend of leisure and luxury travel has bolstered the demand for lavish hospitality places.
Increasing Number of High Net Worth Individuals to Support Growth
Luxury services are primarily availed by wealthy consumers, and therefore, the ever-growing wealthy populations across the globe are likely to promote market expansion. For instance, as per the Capgemini World Wealth Report 2020, High-Net-Worth Individual (HNWI) population has increased from 10.04 million in 2009 to 19.6 million in 2019 globally, wherein global HNWI wealth increased by 8.6% in 2019, recording a higher growth rate as compared to 2018.
Further, business luxury hotels are on the rise owing to constant bookings from business executives at luxury airport hotels or luxury city hotels that are centrally located. For example, 2L De Blend in Utrecht, Netherlands, received The World Luxury Hotel Awards under the LUXURY BUSINESS HOTEL category two times consecutively in 2019 as well as in 2020. 2L De Blend, located about 1 km from the Utrecht Zuilen railway station, is an aparthotel opened in October 2018, wherein the guest can stay from 1 night to up to 6 months in the hotel.
Emergence of Accommodation Sharing Facilities at Lower Prices to Limit Demand
High tariffs in star-rated hotels, coupled with the emergence of low-cost shared accommodation platforms such as Airbnb in low-income countries, are likely to hamper the market growth. Additionally, the growing presence of budget and mid-scale hotels in a number of countries worldwide would further limit market expansion.
Premium Services Offered at Comparatively Lower Cost to Aid Upscale Segment to Dominate
The market is segmented into luxury, upper-upscale, and upscale, based on room types. The growing trend of affordable luxury services is likely to increase the footfall in upscale hotels, making it a dominant segment in the global market. The number and quality of services offered to guests differ as per the room type. As per the guest satisfaction survey of J D Power released in July 2020, the following rankings were given for hotel brands based on guest satisfaction level in their respective types – Luxury: The Luxury Collection, Upper-upscale: Wyndham Grand Hotels, and Upscale: Hyatt Houses.
Players offering hotel services under the luxury and upper-upscale segments are adopting several strategies, such as partnerships and acquisitions, which are aimed towards consolidating their market share. For instance, in February 2019, Best Western International, Inc. acquired WorldHotels, a global hotel brand offering hotel collections under the upper-upscale and luxury segments. Therefore, upper-upscale and luxury segments are likely to grow at a CAGR higher than the upscale segment.
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Chain Segment to Hold Highest Share Backed by Greater Number of Branded Chain Hotels
By category, the market is bifurcated into a chain and independent. The widely distributed presence of hotels in the chain category globally makes the chain hotel segment hold a major share in the market. Hotels in the chain segment are focusing on expanding their reach to various parts of the globe, strengthening their presence in lucrative regions. For instance, in April 2018, Accor Hotels signed an agreement with Mantis Group, a South Africa-based hospitality and travel company. Accor acquired a 50% stake in Mantis Group under the agreement that would increase Accor’s foothold in Africa.
However, organizations such as Small Luxury Hotels of the World (SLH) are focusing on promoting smaller, independently-owned hotels, which is likely to fuel the independent hotel segment's growth.
North America Luxury Hotel Market Size, 2020 (USD Billion)
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The North America market size stood at USD 30.66 billion in 2020. Increasing spending on extravagant lodging in the U.S. and Canada contributes to greater revenue generation, making North America a dominant region in the luxury hotel market share. For instance, as per the U.S. TRAVEL AND TOURISM OVERVIEW (2019) of the U.S. Travel Association, domestic travelers in the U.S. spent about USD 972 billion in 2019, wherein spending on lodgings, such as hotels/motels/B&B and vacation homes, among others, was USD 242 billion for domestic as well as international travelers. As per the same source, leisure travelers, including domestic and international, spent about USD 792 billion in 2019, which increased by 4.1% compared to 2018. Therefore, the regional market is driven by the increasing preference for leisure travel coupled with the higher spending power of the region's population.
Europe is expected to hold a considerable market share due to the presence of some of the most visited tourist destinations in the world. For instance, as per International Tourism Highlights 2019 Edition of the UNWTO, Europe accounted for 50% of international tourist arrivals in 2018 globally. The report also reveals that the top 10 destinations listed based on international tourist arrivals in 2018 include five major countries of Europe. The list includes France in first place with 89 million tourist arrivals, followed by Spain (83 million), Italy (62 million), Germany (39 million), and the U.K. (36 million). Therefore, the rising penetration of technically sound high-scale hotel chains to accommodate an increasing number of tourists in the region is likely to increase the room occupancy rate of European luxury hotels.
The growing upper-middle-class and middle-class populations in the Asia Pacific region and the improving standard of living have significantly contributed towards augmenting the market's growth. International hotel chains are therefore investing heavily in the region to expand their presence. For instance, in May 2019, Hyatt Corporation announced its plans to launch 21 new luxury type of hotels in Asia Pacific to strengthen its presence in the region. The new launch would include 7 Park Hyatt properties, 6 hotels of Grand Hyatt, 6 of Andaz brands, and 2 of Alila branded resorts. Besides, an increasing foothold of domestic players, including The Oberoi, Shangri-La International Hotel Management, and Banyan Tree, among others, would further support market growth.
The market in the Middle East and Africa is primarily driven by countries associated with GCC, owing to the presence of several millionaires and billionaires in these countries. The WEALTH-X BILLIONAIRE CENSUS 2019 report listed the top 15 countries with billionaires that constitute 75% of the global billionaire population in 2018. In the list, Saudi Arabia was ranked at the 9th position with 57 billionaires and the UAE ranked 11th with 55 billionaires. Therefore, being major oil-exporting countries, GCC countries have a strong presence of wealthy populations, which is likely to propel the regional market.
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Rising governmental initiatives in South American countries to promote the tourism sector would positively impact the region’s market. For instance, as per Brazil’s Tourism policies and programs published by Organization for Economic Co-operation and Development (OECD), Brazil exempted visa requirements for residents of 4 countries from June 2019, including Australia, Japan, the U.S., and Canada. Visa waivers available to such developed countries would attract a greater number of tourists, boosting the need for comfortable and high-quality accommodation facilities in the country, fueling this market growth.
Introduction of New Premium Facilities by Key Players to Electrify Competition
The introduction of enhanced services by key players at their newly introduced deluxe facilities is likely to attract more guests, increasing competition between players to acquire new clientele and retain regular visitors. Additionally, strategies such as mergers and acquisitions adopted by key players are intended to increase their brand portfolios and thereby enlarge their market share. For instance, in February 2019, InterContinental Hotels Group (IHG) announced the acquisition of Six Senses Hotels Resorts Spas, one of the leaders in this market. This acquisition is likely to strengthen IHG’s portfolio of luxury brands.
An Infographic Representation of Luxury Hotel Market
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The luxury hotel market research report provides a detailed analysis of the market and focuses on key aspects, such as competitive landscape, room types, and categories. Besides this, it offers insights into the current luxury hotel market trends, drivers and restraints, and highlights key industry developments. In addition to the aforementioned factors, the report encompasses several factors contributing to the market's growth in recent years.
Value (USD Billion)
By Room Type
Fortune Business Insights says that the global market size was USD 93.43 billion in 2020 and is projected to reach USD 238.49 billion by 2028.
In 2020, the North America market size stood at USD 30.66 billion.
Registering a CAGR of 10.4%, the market is estimated to exhibit a steady growth rate during the forecast period (2021-2028).
Based on category, the chain segment is expected to lead the market.
A rising number of leisure as well as business tours is a significant factor driving the growth of the market.
Marriot, Accor, Hilton, and Hyatt are a few of the major players in the global market.
North America held the highest market share in 2020.
The advent of contactless technology, the adoption of online bookings, and the emergence of green hotels are creating growth opportunities in the market.
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