Luxury hotel sector outperforms amid rising demand and limited new supply

The expanding global luxury market is driving growth for the Australian and New Zealand luxury hotel sector with increasing demand, widening rate premiums and limited development pipeline fuelling investment across established assets.

CBRE’s Luxury Hotel Market report found luxury assets are outperforming the wider sector with demand across major Australian and New Zealand markets growing at a 2.9% CAGR since 2019, more than twice the broader hotel market’s 1.3%. 

Occupancy across luxury hotels has remained stable at 78%–79% despite new supply. Since 2020, 20 hotels comprising 3,517 rooms have opened across Australia and New Zealand. In Australia, luxury represented approximately 33% of all rooms delivered during the period.

The analysis shows the median transaction price per key increased by 81%, from around $396,000 in 2011–2014 to $718,000 in 2023–2026 year to date.

This growth is attracting new global brands to the market and supporting expansion through conversions, repositioning, branded residences, and independent operating models.

The report shows since 2021, approximately A$3.2 billion in luxury hotel assets transacted across Australia and New Zealand. CBRE advised across approximately A$1.75 billion, representing 55% of total transaction value. 

CBRE’s Head of Hotels, Capital Markets, Pacific, Michael Simpson noted international capital has been an important driver of investment. 

“These transactions have established new benchmarks for absolute price, price per key and yield, attracting both domestic and international capital. Outcomes have been achieved across different market conditions, from transactions executed during pandemic lockdowns to major sales completed as investment activity recovered,” he said.

“China and Hong Kong investment was particularly active between 2012-2018. Singaporean and Malaysian capital has been steady with a more diversified buyer pool in recent years This depth of offshore interest has supported liquidity and helped establish new pricing benchmarks alongside active domestic capital,” Mr Simpson added.

CBRE’s Director, Hotel Research, Ally Gibson notes the report analysis shows luxury hotel performance is supporting the pricing outcomes across its transactions.

“Since 2019, luxury ADR increased across every market analysed and premiums over the all-scales sector are widening considerably,” Ms Gibson said.

“In Australia, the average luxury ADR premium over the all-scales sector increased by 53%, from $62 in 2019 to $94 in 2026. Queenstown’s premium rose from approximately NZ$78 to NZ$140, the highest of any market analysed, reflecting its position as a tightly supplied luxury leisure destination.

“Overall, ANZ’s luxury sector is broadening and upgrading. Sydney continues to deliver the strongest major gateway performance at scale and new product is establishing higher rate benchmarks,” she added.

Looking ahead, the report shows 11 ANZ luxury hotels comprising approximately 1,979 rooms are under construction, with most delivery expected in 2026 and 2027.

“Beyond the current development cycle, the confirmed pipeline thins materially as feasibility constraints limit new projects. Strengthening demand and limited new supply should support the performance and value of established luxury assets, particularly in markets with high barriers to entry,” Ms Gibson added.