U.S. Sees Decline in Large Luxury Hotel Construction

Four Seasons New York

Developers are eschewing large new luxury hotel projects in the United States, according to this recent Bloomberg article. Just six major luxury properties are scheduled to open this year, down from 23 three years ago. Investors are seeing higher returns on "upscale" properties that lack the services and amenities of true luxury properties but are much more cost-efficient to manage. Net operating margins hover in the mid-20 percent for these properties, compared to the mid-teens for luxury hotels. While there may be fewer large city options in the future for luxury travelers (many current luxury hotels are downscaling to attract more revenue), we hope this new economic environment provides opportunities for smaller properties with a unique sense of place.