Ultra-high-net worth wealth fuels European hotel development

As reported in our recent “Evolution of Global Luxury Hospitality” research paper, we are witnessing a rise in global wealth. Not only from HNWIs who contribute 70% of luxury travel spend worldwide, but also from the rising UHNWI population – those with a net worth of at least $30 million. Four fifths of UHNWIs either own their own business or are C-Suite executives so travel is rarely, if ever, solely for vacation. As such, time is often the largest constraint and therefore travel experiences that cater to privacy and connectivity are in high demand. The hotels that cater for this segment of the population fall into the “ultra-luxury” category, offering extraordinarily personalized service and amenities and many are renowned globally. As a result, they command significantly higher room rates relative to the luxury sector overall and are located in highly sought-after iconic destinations such as New York, London, Paris and some of the most sought after leisure and resort destinations. While luxury average rates across Europe reached c. €450 during 2022, ultra-luxury hotels in cities such as London and Paris command average rates of more than €1,000 a night and some ultra-luxury resorts, although on a seasonal basis have average rates as high as €2,500.

Up until the turn of the century, the ultra-luxury landscape in Europe was dominated by historic hotels, many dating from the early 20^th century, which, until recently, struggled with the limitations imposed by the constraints of the buildings which were constructed when the requirements of luxury travelers were very different. But in the last two decades, with new ownership and changing guest demands, the ultra-luxury landscape in many European cities has evolved, with new build hotels opening and existing historic properties undergoing significant transformations. The top performing cities in Europe have seen perhaps the most significant changes. London is currently in the midst of a dramatic evolution in the ultra-luxury segment, whilst Paris’s transformation is, for now, largely complete and Rome appears to be the next big luxury destination with around €1.3 billion transacted in the last four years for the acquisition of assets that will be converted into new hotels, many at the luxury plus end.

What impact has all this investment had on the ultra-luxury hotel market in London? Performance amongst the top hotels has soared in the last 10 years. Average rates for a set of stable hotels – not undergoing refurbishment, extension, or renovation – have grown by 94%. However, the transformation of hotels that have undertaken works has been even more significant, up almost 150% compared to 2011. The London market as a whole saw significant uplift in 2022, with the impact of pent-up demand following the pandemic, as well as a reduced volume of lower rated corporate and group business. Despite this, looking at growth between 2011 and 2019, average rates amongst the refurbished hotels were still some 65% higher compared to the stable hotels at 40%.