Note: This article first appeared on Travel Weekly.
Global Report – The luxury hotel market appears to be undergoing a shift toward luxury, with the number of lodging establishments charging average room rates of $1,000 or more around the world increasing significantly.
The United States, Italy and France have seen the largest increases in the number of hotels reaching or exceeding the $1,000 average daily rate (ADR) threshold in recent years, according to data from CoStar. In the US, for example, the number of hotels able to maintain annual ADRs of $1,000 or more increased from 22 in 2019 to about 80 in the first half of this year.
In Italy, over the same period, the number grew from less than 20 to nearly 70. Additionally, in France, the number of ADR properties priced over $1,000 increased from just over 20 properties to nearly 50 properties. (And it’s worth noting that these numbers are likely an underestimate. CoStar excludes many small, ultra-luxury hotels from reporting, so the true numbers are below That’s right.)
If these numbers seem alarmingly high, you’re not alone. A Wall Street Journal columnist who wrote an article about this trend earlier this month titled “The Rise of the $1,000-a-night Hotel Room” said: According to U.S. statistics, they were “surprised.”
Jan Freitag, senior vice president of lodging insights at STR and national director of hospitality analytics at CoStar Group, suggested this trend reflects a broader “bifurcation” occurring across the hospitality industry. I’m doing it.
“Generally speaking, this means that the top end of the market is still doing well, but the bottom end is not,” he said.
Freitag cited data from CoStar showing RevPAR for U.S. economy hotels fell 4.2% from 2024 through July. At the same time, RevPAR for luxury full-service properties increased by 2.1%.
“I think it’s a natural assumption that inflation is hitting the lower income groups harder and putting pressure on their travel budgets,” Freitag said. “But if you look at the other side,[consumers]are doing so well that they have money to fly to Paris.”
But Freitag says there’s another level of bifurcation happening at the high end.
“When there’s luxury, there’s super-luxury,” he said. “Obviously, there are no limits in ultra-luxury properties. The customer just says, ‘I want what I want, when I want it, and yes, I’ll pay for it.'”
Peter Ricci, director of the Hospitality and Tourism Management Program at Florida Atlantic University, said he has noticed an increase in the prevalence of $1,000-per-night lodging in Florida markets such as Palm Beach and Boca Raton.
“You’ve always expected to pay a premium if you’re in Paris, New York or London, but now we’re seeing it in other places as well,” Rich says. “It varies by market and time of year, but only a small percentage of travelers can reach that price point.”
Other luxury travelers may find this price point difficult to swallow.
Beth Washington, founder of Washington-based Getaway Guild, has seen a dramatic increase in hotel prices, causing some of her clients to adjust their travel plans.
She pointed to one set of customers traveling to Italy this fall as part of a trip that was rescheduled during the pandemic.
At the time of the first booking in 2019, customers’ prices for five-star accommodation ranged from $612 to $723 per night. When rebooking last year, Washington discovered that prices for identical rooms during the same season had soared, with two properties exceeding $1,660 a night and a third reaching $945.
“In this case, the client decided to splurge on one of the hotels and reduce the other two hotels to four stars in order to get closer to their original budget,” Washington said. “We feel that the current normal hotel prices are challenging for ambitious travelers who could have stretched their budget to buy a five-star hotel a few years ago. But now, paying these fees has a huge impact on your overall travel budget.”
Given the fluctuations in hotel rates due to dynamic pricing, Washington advises clients to book flexible rates as early as possible to lock in current rates and avoid price increases.
That said, travel advisors are seeing a silver lining amid the surge.
“Travel advisor revenues have increased as fees have increased,” Washington said, adding that not only more expensive travel, but also increased demand for advisors and their services has helped boost revenue.
But it’s unclear whether the rapid rise in $1,000 hotel rates across the U.S. and Europe will continue at its current pace.
Sarah Fazendin of Bidere Travel in Denver said the surge in demand caused by the pandemic that drove up prices appears to be peaking.
“It looks like interest rates are flattening out a little bit,” Fazendin said. “We saw a significant increase immediately after COVID-19 before customers really started to rebound, but the recent increase has been less significant and less concerning.”