Pop goes the luxury five-star hotel bubble, as investors focus on upscale
Photo Caption: The exterior of the Time Warner Center which hosts Mandarin Oriental, one of the five star luxury hotels in New York City.
Skift Take
The high-manpower, high-costs five star luxury hotels haven't recovered since the recession, and investors are more interested in smart upscale, one or two notches below, as that market -- competing with boutiques -- has been booming over the last year or so.
Developers are shunning luxury hotels in the U.S. as room rates fail to rebound to peak levels and profits are squeezed by the costs of offering swanky amenities such as spas and trendy restaurants.
Six luxury hotels are expected to open in 2013, the same as in 2012 and down from 23 just three years ago, according to Lodging Econometrics, a Portsmouth, New Hampshire-based research and consulting firm. Investors are instead focusing on the so- called upscale category, where new properties are forecast to climb 49 percent from last year to 131 hotels.
The decline in construction, combined with conversions of existing properties into cheaper options, signals there may be fewer five-star choices in the future for travelers seeking the highest-quality rooms and amenities. Lower margins for luxury hotels have made them less attractive for property owners, said Steven Goldberg, head of real estate investment banking at Robert W. Baird & Co. in McLean, Virginia.
“It’s nearly i
