Luxury hotels are increasingly confronting a new internal divide. While ultrawealthy travelers are snapping up top-tier suites and private villas at record rates, entry-level luxury rooms are often left unsold — a sign that the luxury sector itself may be splitting into two distinct markets.
“Around the end of 2024, we started noticing that deluxe rooms were becoming much harder to sell than suites,” said Jack Ezon, founder and managing partner of luxury travel advisory Embark Beyond.
In the company’s Q4 2025 Travel Trends Report, Ezon described the shift as a tale of two markets.
“Luxury travel has become distinctly bifurcated — the ultrawealthy and the, well, the poor rich,” he wrote. “Inflation continues to squeeze the aspirational luxury traveler. Suites are commanding higher rates than ever and selling out quickly, while base-rate deluxe rooms or opening categories are sitting empty.”
This divergence mirrors what economists have described as a broader K-shaped economy, where high earners continue to pull ahead while lower earners struggle to keep pace. A widely cited Moody’s report from 2025 found that the top 10% of earners accounted for nearly half of all U.S. consumer spending — a historic high.
The same pattern is evident across the hotel industry. Year-over-year RevPAR data through November from JLL Research and STR/CoStar shows luxury hotels posting 2.9% growth, while performance declined across other segments. Upper upscale properties grew just 0.4%, upscale hotels fell 1.5%, upper midscale dropped 1.9%, midscale declined 2.6%, and economy properties fell 4.1%.
A Second K-Shape Within Luxury
What is emerging now, however, is a second K-shape — one within the luxury category itself.
Carine Bonnejean, global head of hotels at U.K.-based advisory firm Christie & Co., said the widening gap reflects deeper demographic and wealth shifts.
“There is a clear widening of the luxury segment,” Bonnejean said. “The number of millionaires is increasing rapidly, and the luxury segment is segmenting even further to adapt to all types of clients — from entry-level, younger wealthy travelers to ultra-luxury high-net-worth individuals seeking the most exclusive, ultra-personalized experiences.”
In response, hotels are actively reshaping their physical inventory.
Jon Makhmaltchi, founder and CEO of luxury travel marketing firm J.Mak Hospitality, said many properties are removing standard rooms from inventory altogether, converting them into larger suites or adding villa accommodations.
“Hotels are actually taking rooms out of inventory and converting them into suites,” Makhmaltchi said.
He cited properties such as AlmaLusa Baixa/Chiado in Lisbon, which recently transformed existing rooms into a two-bedroom accommodation, and Saint James Paris, which purchased a neighboring property to create four luxury apartments.
“Their regular rooms were sitting empty, but their high-end inventory was fully booked,” he said.
To stimulate demand at the lower end of luxury, some properties are offering travel advisors enhanced commissions of 12% to 15% on entry-level rooms. Premium inventory, by contrast, requires no such incentives.
“Because if that presidential suite isn’t available, they’re not going to trade down,” Makhmaltchi said. “They’ll either change their dates to get it, or they’ll choose another property entirely.”
Further reinforcing the divide is a strategy highlighted in Embark Beyond’s Q4 report: many hotels are intentionally prioritizing rate over occupancy.
“They’re sticking to a model that says, ‘I’d rather be at 65% occupancy at a higher rate than full,’” Ezon said. “That also means hiring fewer staff, because operating costs are so high.”
Dan Peek, Americas president for JLL’s Hotels & Hospitality Group, echoed that observation, noting that the post-pandemic recovery has been largely driven by pricing power rather than volume.
“Luxury operators have been testing pricing limits,” Peek said. “They may have pushed the envelope far enough that aspirational travelers are starting to get priced out — though at this stage, that evidence is more anecdotal than data-driven.”
Is the Model Sustainable?
Despite these concerns, Peek emphasized that luxury fundamentals remain strong, pointing to supply-and-demand dynamics that continue to favor high-end operators.
“We’ve increased the supply of luxury travelers,” he said. “But we haven’t meaningfully increased the supply of luxury assets. As long as these travelers feel confident and liquid, they will continue to travel.”
Ezon, however, is less convinced that the current trajectory can hold indefinitely.
“I’m not sure how sustainable this is,” he said. “In my 25-year career, I’ve never seen luxury hotel rates accelerate as dramatically as they have over the past four years.”
He warned that pricing out entry-level luxury travelers risks severing the pipeline that feeds future demand.
“You lose that new generation if you alienate them,” Ezon said. “Ownership needs to be more humble and take a longer-term, strategic approach.”
While the luxury market remains strong for now, Ezon stressed its dependence on broader economic conditions.
“As long as financial markets are strong, this model works,” he said. “But if markets weaken, even the wealthiest consumers change how they spend.”
Not everyone sees the trend as a stark bifurcation. Henley Vazquez, co-founder of travel advisor network Fora, said the reality is more nuanced, with affluent travelers increasingly blending experiences and price points.
“They might choose lifestyle hotels in cities and then splurge on ultra-luxury resorts for family vacations,” Vazquez said.
“Luxury travel is healthiest when it serves a spectrum of travelers — not just the very top,” she added. “Advisors play a key role in maintaining that balance, ensuring luxury remains aspirational and accessible rather than exclusionary, while helping travelers navigate an increasingly complex landscape with confidence.”
