The luxury hotel bubble: A warning to the industry

Every day, between one to three new hotels open their doors somewhere around the world — each aspiring to claim its stake in the coveted luxury or lifestyle category.

Hotel closures are rare, creating an ever-expanding landscape of options for clients. In places like Bali, there are so many hotels that beaches and temples are overcrowded, and a mere 10-kilometer drive can take over two hours.

However, this relentless pursuit of global growth may be setting the stage for a spectacular crash that could reshape the entire industry.

The “asset-light” model adopted by most major hotel groups has fueled this expansion frenzy. With revenue growth primarily driven by new hotel openings and rising nightly rates at existing properties, there’s an insatiable appetite for more brands, more locations, and more rooms at higher prices. But this strategy begs the question: How long can this bubble continue to inflate before it bursts?

Right now, most hospitality brands project a positive outlook as experiences have become highly sought after post-pandemic. But the same scrutiny that clients apply to luxury items, including fashion, watches, leather goods, and accessories, could soon extend to luxury hospitality. This is a critical moment for companies and brands to recalibrate and ensure they’re delivering the value they promise before it’s too late.

Falling below expectations

The luxury hospitality sector is rapidly approaching a critical juncture where supply will outstrip demand, creating a hyper-competitive environment that may prove unsustainable. In my conversations with general managers of luxury hotels, many share the same concern. The problem isn’t just about quantity; it’s also about quality and differentiation — or the lack thereof.

Many self-proclaimed luxury and lifestyle hotels are falling short of their ambitious promises. The gap between marketing rhetoric and guest experience is widening, creating a dangerous disconnect that threatens to erode trust in the very concept of luxury hospitality. Too often, these properties offer little more than an illusion of luxury, failing to deliver the exceptional, personalized experiences that discerning travelers expect.

Compounding this issue is the industry’s ongoing talent shortage, a challenge exacerbated by the pandemic. As more properties open, the shortage is escalating rapidly.

The result? Guest services that often fall short of expectations, further widening the gap between promise and delivery. I’ve had countless underwhelming and disappointing experiences at hotels that believe they are the best of the best. During a recent luxury hotel stay in New Delhi, the butler service was lackluster. When I addressed the issue with the general manager, I was told their ambition was to be the best hotel in the world in terms of service. Yet, internal ambition and external perception couldn’t have been further apart.

At a luxury property in Las Vegas, the food was awful, and the service felt arrogant and off-putting. At another luxury hotel in Singapore, I found a complete lack of empathy and warmth. The list goes on.

Of course, there are notable exceptions. During a stay at the Four Seasons Hotel George V in Paris, every need was anticipated by the staff in the most effortless and elegant way. At the Edition in Madrid, staff members provided an incredibly personal, authentic, and memorable experience, with every touchpoint exceptional.

However, even in so-called luxury hospitality, exceptional experiences are rare. They are not the norm. The norm is underwhelming and lackluster.

A sea of sameness 

Perhaps most concerning is the “commoditized sea of sameness” engulfing the luxury hospitality sector. From design to service, many luxury hotels have become virtually indistinguishable, offering little to justify their premium pricing or to capture the imagination of well-traveled guests.

This lack of differentiation isn’t just a missed opportunity — it’s a ticking time bomb. As the supply of luxury and lifestyle hotels grows, those unable to carve out a unique identity risk getting lost in the crowd, unable to command the rates or loyalty needed for long-term success.

Additionally, since hotels under the same brand are often owned and operated by different entities, the brand experience can vary dramatically between properties. If a guest has a disappointing stay at one location, they may be hesitant to return to any other property of the same brand.

A way forward

So what can be done to avert this impending crisis? The luxury hospitality industry must radically rethink its growth strategies and value propositions.

First, hotel groups should prioritize genuine innovation over expansion for expansion’s sake. This means investing in truly unique concepts, experiences, and service models that can’t be easily replicated. It’s about creating properties that actually redefine what “luxury” and “lifestyle” mean in the context of modern hospitality.

Secondly, there must be a renewed focus on talent development and retention. The guest experience is the lifeblood of hospitality, and no amount of plush furnishings or high-tech amenities can compensate for subpar service. Hotels need to invest heavily in training, career development, and employee satisfaction to build teams capable of delivering truly exceptional experiences.

Thirdly, brand differentiation must become a top priority. Each brand within a hotel group’s portfolio should have a clear, compelling identity that sets it apart from the competition. This differentiation must go beyond surface-level aesthetics to shape every aspect of the guest experience, from check-in to check-out. Too many brand stories in hospitality are alike, and emotional brand markers are often undefined, making it difficult for staff to deliver truly brand-specific experiences.

Lastly, the industry must embrace a more sustainable approach to growth. This goes beyond environmental sustainability to include economic and operational sustainability. The focus should shift from quantity to quality, from rapid expansion to thoughtful development that adds genuine value to both the brand portfolio and the guest experience.

The luxury hospitality industry stands at a crossroads. The path of unchecked expansion and unmet brand promises is creating a bubble that, when it bursts, will have devastating consequences. The alternative — a path of innovation, differentiation, and genuine value creation — offers the promise of enduring success.

Daniel Langer