Revenge travel fades, but ultra‑luxury hotel demand soars globally

“It is a lot,” Baxter says, addressing the cost difference between Canada and the States. “In addition, luxury hotels in Canada haven’t grown as fast as those in the U.S. Since 2019, there’s been about a 30 per cent growth for luxury hotels in the U.S. In Canada, the uplift is about 25 per cent.

“One reason is Canadian hotels have to deal with seasonality,” she explained. “In the U.S. there’s not as much difference between low and high season.”

Baxter says Canada isn’t building as many new luxury hotels as the U.S., even on a per-capita basis.

The U.S. has some 8,600 luxury rooms under construction right now, she says, while Canada only has a single hotel, the Nobu Toronto. There are others in the final planning stages, including the Clayfield Unbound Collection property by Hyatt in Niagara-on-the-Lake and a new Hyatt in Orillia, Ontario called Cape Resort. But they’re not yet under construction.

Pearle Hospitality is turning the Toronto Power Generating Station in Niagara Falls into what it says will be a five-star waterfront hotel, but Niagara Parks says it likely won’t open until 2027.

The CoStar report indicates that high ADRs are likely to continue around the world due to a couple of trends.

“For one, hotels will continue to monetize the demand for their high-end offerings. In addition, hotel developers will continue building properties to target the high-end income level, and the number of properties reporting an ADR of over $1,000 will likely steadily increase.”

"We're seeing a bifurcation by hotel class," Jan Freitag, national director, hospitality analytics, at CoStar Group in the U.S. said earlier this year. "The higher-end traveller and, therefore, the higher-end hotels are showing robust growth in demand and room rate. But the same cannot be said for the lower end of the market."

The hotel industry has indeed seen notable shifts in room rates, largely due to escalating operational costs across our sector according to Adrienne Foster, vice president, policy and public affairs for the Hotel Association of Canada. “In Canada, hotels are navigating a high-cost environment with significant increases in wages, insurance, energy, and supply chain expenses,” she says.

“These rising costs have made price adjustments essential to maintaining service quality and operational sustainability, especially as we continue to address workforce shortages and meet evolving guest expectations. Canadian hotels remain focused on offering value while adapting to these economic pressures, ensuring high standards are upheld across the country.”

Frederic Dimanche is the director of the Ted Rogers School of Hospitality and Tourism Management at Toronto Metropolitan University. He suggests that “revenge travel is a factor that has led to increased demand and, as a result, increased prices, especially in the luxury hotel sector where supply may be limited. The pandemic and the recent worldwide inflation also resulted in increased costs of operating. For example, labour shortages in hospitality have led to increased wages for skilled employees to attract and keep them.”

Dimanche also says the most important factor in explaining the rising demand for luxury travel is that global statistics indicate the number of wealthy people in the world is growing steadily.

Baxter says the recent slump in the Canadian dollar might boost Canadian luxury hotel business.

“I think it would definitely help. With the strong U.S. dollar, outbound travel by Americans has spiked. They’re travelling more than they did pre-pandemic, and we know Americans like to travel to places where their dollar goes further. Canadian hotels should certainly benefit.”