The US will have 1,067 luxury hotels by the end of 2019. This is expected to increase to 1,123 by 2022, at a compound annual growth rate (CAGR) of 1.7%, driven by increasing numbers of Chinese tourists, says GlobalData, a leading data and analytics company.

GlobalData’s latest report: ‘Destination Market Insights: US’ states that although this growth is not expansive, it showcases the gradually increasing demand from international and domestic source markets for more luxurious offerings within the US.

Chinese tourists are a high spending source market and their visitation numbers to the US have been growing rapidly in recent years. A CAGR of 8.7% was recorded in Chinese visitation to the US between 2014 and 2018, and luxury hotels such as Four Seasons state that China is their second-largest source market. Revenue from Chinese travelers has increased steadily for the company, with double-digit growth in revenue in recent years.

The report also states that the average spend per inbound tourist in the US is expected to carry on its upward trend. From 2016 to 2018, average expenditure has risen at a CAGR of 3.2% from US$2,534 to US$2,700. 

Ralph Hollister, Travel & Tourism Associate Analyst at GlobalData, comments: “This increase in average expenditure is creating a rising demand for luxury services whilst on vacation, especially in the accommodation sector.” 

Luxury hotels are now being constructed in up-and-coming areas which may not necessarily be located in tourist hotspots – Nobu and the Hoxton will both open their doors in 2019 in Chicago. Both hotels are situated in the meatpacking district, a gritty, industrial area which is undergoing a rapid transformation.

Hollister continues: “Hotels opening in up-and-coming areas away from city centers will help to reduce the effects of overtourism and are more socially sustainable. The meatpacking district is known for independent eateries and shops, so money spent there will stay in the local economy and won’t be leaked out of the area via multi-national corporations.”

An increasing number of downtown areas in major cities within the US are being gentrified in order to increase capacity, attract higher spending market segments, attract further investment in to the city and improve the overall brand image of the destination.

An example of successful gentrification would be Industrial Way in Buellton, California. Industrial Way was for years a collection of warehouses and light manufacturing buildings. In recent years, developers have added restaurants, breweries and distilleries to the area and it is now a popular destination for wine tasting.

Hollister concludes: “Luxury hotels opening in once industrial or downtown areas within large cities will be a continuing trend. Luxury consumers are moving away from standardization as the millennial market grows in size. Old industrial and downtown areas within cities often provide a vibrant mix of architecture, culture and are often non-commercial. This gives these areas an alternative image, which attracts younger market segments.”