The luxury segment now accounts for close to 20% of all hotel transactions in the region, more than double the 8% share seen in 2017 and above the 16% recorded before Covid-19, according to JLL, as investors favour experience-driven assets over traditional commercial real estate.
“Luxury hotels are increasingly being viewed as a combination of trophy assets, capital preservation plays and long-term growth investments,” says Xander Nijnens, head of advisory and asset management, Asia Pacific, at JLL Hotels and Hospitality Group.
He notes that demand is now being driven by a wider pool of buyers, including private wealth investors and cross-border capital seeking exposure to premium hospitality.
The sector’s rebound has also been aided by changing travel patterns, reports JLL.
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While luxury hotels have traditionally relied on high room rates, the occupancy gap between luxury and mainstream hotels has narrowed considerably in recent years, which JLL says suggests affluent travellers are increasingly filling rooms year-round rather than only during peak seasons.
This stronger operating performance has encouraged continued development, although supply growth remains measured, says JLL. Luxury hotel inventory in the Asia Pacific has expanded at an average annual rate of 4% over the past decade, maintaining roughly 8% of the overall hotel market.
Calling it a “disciplined pace of expansion”, JLL says this has prevented oversupply issues that once plagued parts of the hospitality sector, supporting healthier pricing dynamics for owners.
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Operators are also refining luxury offerings to capture specific guest preferences, notes JLL, citing wellness retreats, culturally immersive stays and ultra-personalised experiences as key differentiators in an increasingly “brand-driven” market.
The ultra-luxury segment, in particular, has become more fragmented, giving investors opportunities to align assets with highly specific traveller demographics.
“The luxury hospitality landscape has fundamentally evolved,” says Marina Bracciani, vice-president and hotels research lead, Asia Pacific, at JLL. “The combination of strong rate power, strategic repositioning and sustained demand from affluent travellers positions the segment favourably for continued growth.”
Luxury hotels rack up operating costs that are almost double that of the broader hotel market, driven by higher staffing ratios, premium food and beverage offerings and bespoke guest services. Still, JLL says luxury hotels continue to generate gross operating profit margins comparable to the wider sector, a reflection of the pricing power that premium operators are still able to command.
Performance, however, remains uneven across the region. According to JLL, luxury hotels in Tokyo, Hong Kong and Seoul have emerged as standout performers, with the ultra-luxury category outperforming even the broader luxury segment.
