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Boutique hotels enjoy the spotlight in luxury travel

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In Short:

Luxury hotels are in high demand with more big spenders and wealthy individuals looking for exclusive experiences. This is leading to a boom in luxury accommodations worldwide. Investors are also seeing high returns in this asset class. However, the construction of new luxury hotels is slow due to various factors, creating scarcity and allowing hoteliers to raise rates without losing patrons.

World’s Priciest Suite Comes with a Hefty Price Tag

In Doncaster, a town in northern England, $100,000 can buy you a four-bedroom house. But in Dubai, that amount will only get you a four-bedroom penthouse—for a night! The Royal Mansion, located on the 18th and 19th floors of the Atlantis The Royal hotel, holds the title for the world’s priciest suite. This lavish accommodation boasts 1,100 square metres (12,000 square feet) of marble floors, a terrace with an infinity pool, a steam room, Hermès shampoo, $500 bathrobes, a fully-stocked mini bar, and of course, a personal butler.

Luxury Properties on the Rise Worldwide

The Royal Mansion is truly one-of-a-kind, but around the world, similar high-end properties are emerging. From the Okavango Delta in Botswana to Kangaroo Island in southern Australia, luxury accommodations are popping up. Saudi Arabia is even constructing eco-resorts on the Red Sea with a collective 8,000 rooms, which are being hailed as the “new Maldives.” With the demand for luxury travel experiences on the rise, these developments can’t come fast enough for affluent globetrotters.

The Booming Business of Luxury Travel

Compared to mid-range hotels, luxury accommodations are currently experiencing a boom in the travel industry. Experts predict that travellers will spend a whopping $1.5trn on luxury trips this year, almost reaching pre-pandemic levels. This figure is expected to rise to $2.3trn by 2030. The definition of luxury may vary, but the allure of indulgence is unmistakable.

Rising Demand for Exclusive Experiences

The increase in big spenders worldwide has led to a surge in luxury travel offerings. By 2022, the number of dollar millionaires doubled to nearly 60m, with a collective fortune exceeding $200trn. Not only the ultra-rich but also the well-to-do are splurging on exclusive experiences, from corporate retreats to leisure add-ons during business trips. As demand for luxury accommodations grows, hoteliers are finding it challenging to keep up.

Luxury Hotels: A Lucrative Investment

The imbalance between supply and demand in the luxury hotel sector is driving up nightly rates, making it a lucrative asset class for investors. In an industry where the focus is on exclusivity and scarcity, hoteliers are reaping substantial profits. This trend is attracting a wide range of investors, from property developers to high-profile fund managers.

© 2024, The Economist Newspaper Ltd. All rights reserved.
From The Economist, published under licence. The original content can be found on www.economist.com

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