Luxury stands its ground — but it is not immune

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Even as economy and mid-scale hotels falter, premium hotels face their own headwinds

Nov 14, 2025

While recent trading updates from global hotel groups show that economy and mid-scale hotels continue to feel the squeeze, the luxury segment has largely held stronger — yet new 2025 data indicate that even the top tier is facing softening demand, cost pressure, and shifting traveller behaviour. The resilience is real, but the margin of safety is narrowing.

Key takeaways

Segmental divergence persists: Full-year 2025 RevPAR growth for U.S. hotels is forecast at barely above zero, underlining a weak macro environment in which mid-scale and economy segments are under the most pressure.
Luxury still out-performing: Year-to-date RevPAR for luxury and upper-upscale properties is up more than 5% through August 2025, while the economy tier shows a negative trend. Luxury ADRs remain around 5% higher year-on-year.
Premium pricing power holds — for now: Strong ADR has been the main buffer for luxury hotels, compensating for softer occupancy and weaker corporate travel. In several markets, luxury performance is the only reason average rates have not fallen overall.
Structural risks are growing: Luxury operators now face weaker demand from younger and aspirational travellers, new supply in key leisure destinations, and shifts toward value-driven spending — pressures that suggest luxury’s resilience is no longer guaranteed.
Growth remains modest: Forecasts for the luxury-hotel segment point to steady but unspectacular expansion — generally around 4–5% CAGR in major regions — rather than the rapid acceleration seen in earlier years.
Investment focus remains premium: Investor appetite continues to favour luxury and upper-upscale assets for 2025, even as broader hotel-transaction volumes soften. This raises competitive standards and increases pressure on operators to maintain differentiation.
Strategic implications for hoteliers: Relying on the luxury label is not enough. Operators must reinforce brand distinctiveness, elevate experiential value, and manage rising costs with more discipline to avoid margin erosion in a tightening market.