Performance elevated but growth is slowing

Global Revenue per Available Room (RevPAR) increased by 10.2% relative to 2019 levels through the first eight months of 2023. Almost all regions are now fully recovered to pre-pandemic rates with Europe leading the way, followed by the Middle East and the Americas. Asia Pacific has yet to fully return to historic levels, although performance has rebounded since the reopening of China earlier this year. Urban market performance is expected to accelerate as group, corporate and international travel reemerge; conversely, resort activity will likely contract, leading to some stabilization in broader global performance over the coming months.

EMEA continues to see strong inbound travel and stands as the top-performing region worldwide. While demand has begun to normalize across some resort-heavy markets, urban performance has skyrocketed with many cities generating historically high RevPAR. Resort markets have also seen demand soften in the Americas as RevPAR growth decelerated for the first time in nearly three years, although urban travel continues to pick up pace. Intraregional tourism within Asia Pacific has surged following China’s reopening in January 2023, which has resulted in RevPAR reaching a 94% recovery relative to 2019. Now that outbound Chinese travel has no remaining restrictions, we anticipate that the region’s performance will accelerate further.

Future trends: Increasing global wealth to drive luxury travel and brand innovation

Outlook for 2024: While global RevPAR continues to remain elevated - up 10.2% relative to 2019 through the first eight months of the year - many markets have begun to see performance normalize as consumer savings contract and discretionary spending declines. Resort-heavy markets are likely to see growth stabilizing through 2024, whereas urban market performance will accelerate as group, corporate and international travel surges. Transaction volumes are expected to increase meaningfully over the next 12 months, driven by significant impending loan maturities, deferred capex and private equity fund-life expirations. Luxury hotels and select-service assets should attract the most investor interest, underpinned by strong operating performance and lower cheque sizes respectively.

Long-term: Traditional hotel brands will expand into new areas including private membership clubs, branded residences and yachts, with the goal of owning the entire traveler experience. Despite widespread economic volatility, global wealth continues to grow and HNWIs are consistently demonstrating a willingness to spend more on travel. This should create opportunities for luxury hotel brand expansion, both within the traditional hotel environment and into other lodging-adjacent categories. We expect an influx of investment, particularly from cash-rich Middle Eastern buyers, into luxury brand platforms.