luxury hotels stems not only from growing fundamental performance , but also rising yields ( cap rates ). With some exceptions , luxury hotels have historically generated lower profit margins and lower long-term real estate yields relative to the broader lodging industry which has often precluded REITs and other institutional buyers from acquiring these assets . Instead , HNWIs , foreign investors and family offices have been the largest acquirers of luxury hotels . This has begun to change as REITs and private equity have become much more acquisitive in tandem with rising yields , evidenced by Ryman Hospitality Properties ( REIT ) $ 800-million acquisition of the JW Marriott San Antonio earlier this year . Expect institutional investment for luxury hotels to accelerate further as debt market volatility persists and luxury yields continue to trend at historic highs .
URBAN RETURN In the immediate aftermath of COVID , investors predominantly targeted luxury hotels in resort destinations underpinned by historic RevPAR in many of those markets . As travelers have returned to cities driven by an uptick in international travel following the reopening of borders , investors have pivoted focus , with luxury hotels often the largest beneficiaries . Through August , urban markets have accounted for 57.4 % of luxury liquidity , the highest portion since 2016 . Cities like Barcelona , Boston , London , New York , Sydney and Tokyo have all seen significant increases in luxury hotel investment volume in tandem with accelerating fundamental performance .
Luxury hotels , particularly in gateway urban markets , stand to benefit significantly from the continued recovery of international travel . Not only do international travelers typically stay longer and spend more , which should aid in the continued growth of ADRs , but there is also a strong correlation between inbound international arrivals and urban luxury hotel occupancy . Now that all travel restrictions have been removed , following China ’ s reopening in early 2023 and their subsequent removal of the ban on group travel in August , look for urban luxury hotel performance to increase even further . This should also lead to an increase in foreign hotel investment , which has been largely absent for the past three years .
CROSS-BORDER INVESTMENT From 2012-2019 , foreign investment into luxury hotels averaged $ 3.9 billion annually . As international travel resumes , so , too , should cross-border investment , which means that luxury hotel liquidity will likely accelerate even further . Look for cash-rich Middle Eastern investors to deploy capital across Europe and in select U . S . markets , such as Miami and New York . Expect safe-haven cities to remain key for luxury investment , with Asian and Middle Eastern investors likely to focus on gateway markets in Europe , such as London and Paris . In Asia Pacific , expect European investors to deploy capital into Japan , Singapore , Melbourne and Sydney .
As the global lodging industry continues its post-COVID recovery , look for luxury hotels to lead the pack . Amidst ongoing economic and geopolitical volatility , luxury performance has remained robust and thus garnered increased investor interest . Expect traditional luxury hotel brands to seize on this growing demand and expand into new verticals , such as The Ritz-Carlton Yacht Collection or Aman ’ s private membership club , as they look to own the entire traveler experience . This in turn should create new investment opportunities as investors look to capture an increased share of the growing HNW population .
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