How the global tourism boom is changing hotels

Those who will be travelling internationally in 2025 will be in good company: in 2024, 1.4 billion overnight international visits were recorded, up 11% on 2023, and this year is set to exceed this level – but what does this mean for real estate?

Who’s queuing at passport control?

Firstly, it’s worth looking at the macro trends of where these tourists have been coming from and where they’ve been going over the past five years. Germany, the US and China remain the top three outbound markets for international visitors, although relatively speaking Chinese tourists have fallen over the past few years and it’s not until next year that they will return to 2019 volumes. Largely, the growth in demand for international travel is from the expanding middle classes in emerging markets and consumers prioritising experiences over goods.

In terms of destination trends, the Middle East has shot up the charts in popularity recently, recording an over 30% increase in international tourists in 2024 compared to 2019, with both European and Caribbean destinations seeing an 8% increase. Even those markets that have seen a relative decrease in arrivals are set to see demand rise again over the long-term trend of consumers looking to enjoy different cultures and environments.

In the last couple of years, we’ve reached more of an equilibrium and the stage where employers are adapting their initial hybrid working policies to differing regional and generational preferences. New best practices have emerged as businesses look to harness the benefits of hybrid working while managing the practicalities of seeing offices fully occupied on some days.

Interestingly, a poll of our global network at the start of the year found that, while overall almost 90% anticipate that companies will increase daily office attendance requirements this year, especially in North America where the return to office has tended to lag other markets, there are likely to be regional differences.

In Asia Pacific, almost half of markets don’t expect any change and 11% actually anticipate the introduction of more flexible arrangements – probably largely due to strict office-attendance models already being the order of the day – while in EMEA there’s likely to be a small uptick in employer mandates, although most anticipate little change.

Hotel growth cleared for take-off

All these visitors need somewhere to stay and, although the choice of different types of accommodation has expanded in the last decade or so, hotels are still the default choice for most. Shanghai, New York City, London and Dubai are the cities forecast to open the most hotels rooms in 2025, according to data from CoStar.

The strong underlying trends supporting international tourism mean that hotels as an asset class are increasingly popular with investors. Globally, room occupancy levels are high and, in 2024, average daily room rates (ADR), rose 2.6% to US$142 per night. This increasing income return can be a strong hedge against inflation, and hotels are increasingly being considered by buyers as a mature asset class.

However, it should not be forgotten that this is an operational real estate sector: hotels require ongoing intensive management. Tourism trends and expectations change rapidly, and assuming you’re operating above the budget level, it is no longer enough to just deliver a hotel that just ticks the boxes in terms of facilities and appearance. Most visitors will be looking at the wider space on offer, and the amenities, and ideally will be seeking a hotel experience that is more adaptable, sustainable and authentically in keeping with the character of their destination.

Your guests may be kicking back and relaxing, but hoteliers cannot afford to chill out if they want to keep on top of the global boom in tourism. The rewards, however, for investors and operators may be worth checking in for.