Luxury hotels are now becoming destinations. Here’s how it’s reshaping the industry.
Luxury hotels are no longer just places to stay; they are increasingly the primary reason travelers choose a destination. Recent large-scale developments—including Nobu Barbuda, a 391-acre property in Barbuda, and Canyon Ranch Austin’s 600-acre wellness campus—exemplify this shift toward self-contained hospitality ecosystems rather than traditional lodging assets.
For instance, the Nobu property consists of a restaurant and beach club and accommodations of 1- to 3-bedroom bungalows with private pools, most with direct beach access, providing an immersive experience. Similarly, Canyon Ranch Austin offers a full wellness campus with spa, fitness and nutrition facilities, multiple dining concepts and private villas, allowing guests to stay on property for the entirety of their visit while accessing a comprehensive health and lifestyle experience.
This evolution extends beyond the luxury segment. Hotels integrating wellness, residential, culinary and experiential components are reshaping development strategies, capital structures and guest expectations across the industry.
The Rise of the Destination Hotel
Affluent travelers increasingly favor all-in-one experiences that reduce the need to leave the property. Responding to this trend, developers are starting to build expansive campuses combining lodging, private villas, wellness facilities, multiple dining concepts and curated programming.
A key element is branded residences, which allow hotels to sell homes tied to the brand while offering access to hotel services. Brands such as The Ritz-Carlton and Auberge Collection leverage these sales to monetize land value, diversify revenue and reduce reliance on nightly rates. From a capital perspective, branded residences provide early liquidity, offset construction costs and improve underwriting certainty, particularly in large, resort-style developments.
While most visible in luxury, this trend influences the wider market. Luxury properties set guest expectations, which cascade to upper-upscale and lifestyle segments. Social media, hotel-focused TV shows like The White Lotus, and media coverage amplify these standards, emphasizing personalization, on-site experiences and integrated amenities.
Implications for Operators and Developers
This evolution requires a rethink of service, design and programming, and there are at least several key implications for operators and developers:
- Service models are evolving. Hotels emphasize curated experiences. Instead of daily housekeeping, think wellness, culinary and activity partnerships requiring sophisticated agreements covering liability, brand standards and revenue sharing.
- Design is a strategic asset. Architectural design is a strategic asset in luxury hospitality. Purposeful spaces —and the way guests move through them—shape perception, engagement and revenue. From arriving by boat to traveling between amenities by bike or cart, journeys through the resort are integral to the experience.
- Amenities are expected. Wellness, flexible gathering areas, coworking lounges and immersive outdoor amenities are no longer perks—they are core expectations that define the modern luxury resort. As these destinations evolve into mixed-use environments, they increasingly function like master-planned communities, bringing complex architectural, zoning and governance considerations that demand an integrated vision and execution.
- Programming is a revenue driver. On-site offerings, from targeted wellness retreats to culinary events, generate new income streams but introduce operational and legal complexity. Hotels must navigate insurance, regulatory compliance and consumer disclosure for activities extending beyond lodging.
What to Expect
Destination-oriented luxury hotels are reshaping the competitive landscape. Hotels now compete not only with nearby properties, but also with wellness retreats, private clubs and lifestyle communities offering a sense of place, exclusivity and a “wow factor” (e.g., access requiring a boat or flight from the mainland).
For owners and investors, success depends on more than RevPAR and occupancy. Revenue diversification, strategic design and long-term guest engagement are increasingly central to asset value. At the same time, hotels functioning as mixed-use communities face heightened legal and regulatory complexity, from residential governance and zoning to consumer protection and tax considerations.
As luxury hospitality continues to redefine expectations, the industry must adapt. In a market where travelers demand more than a room, the hotel itself, including its layout, programming and legal structure, has become the product.
While the partners are buying into the San Francisco market rebound, it is growing its credit business to differentiate their strategy.
LOS ANGELES – EOS Investors Jonathan Wang and Christopher Jordan are still looking to invest in both urban and resort opportunities with clear upsides, but they admit those deals are too few and far between. As a result, and not unlike a few others in the hospitality space, they are growing their credit business because they say the risk-return of credit feels better than equity side right now.
Jordan joined Wang from Wells Fargo, where he did a lot of hospitality lending, and is helping grow EOS’s credit business because they believe the move in this direction is more structural than temporary.
The duo also talked about their strategy on the investment side in markets like San Francisco, where they have acquired two properties in the last 18 months, as well as why they are more optimistic than the forecasters on broader industry performance in 2026.
ALIS Boardroom panel on dealmaking focuses on, among other things, when to buy and when to walk away.
LOS ANGELES – If there was any consensus coming out of ALIS 2026 last month in Los Angeles, it was that it is hard to get development to make sense with razor thin margins and the deal trough has still not opened with buyers unable to justify the spreads.
With the as a backdrop, high-profile developers and private credit providers from Peachtree Group, RIDA Development, KHP Capital Partners and EOS Investors gathered on stage to explore how different stakeholders from different perspectives underwrite the risk and values of opportunities and how they decide when to act.
The conversation was led by Clint Hodges of Hodges Ward Elliott and Robert Webster of CBRE who first asked what aspects of a potential deal give them confidence to proceed or walk away.
Ira Mitzner of RIDA Development said they look for growth markets and because they trade in 1,000-room convention hotels they ask if there is a reason why groups continue to come to that market or region. “Hence, both our acquisitions and as well as our new developments have been over the last 20 years in the Sun Belt, Texas, Florida, Colorado and now California,” Mitzner said. “While San Francisco is an interesting turnaround opportunity, it’s really hard to make a case where RevPAR growth is diminishing, where groups are not attracted to that particular city.”
Peachtree Managing Principal and CEO Greg Friedman agreed that acquisition and development decisions come down to brand, basis, location and what’s driving demand.
“We are focused on mid-tier hotels, and a big part of it is just making sure we have hotels that have very sustainable demand drivers. I’m also a big believer that you make your money on the buy side.”
KP Patel, chairman of AAHOA and a hotel developer out of Santa Cruz, California, said he “ultra-backset right now. Unless it’s a perfect deal and it meets all my criteria, I’m not touching it... Unless I know I can pay out of pocket for at least five years, I’m not touching it.”
Patel added that he also is concerned about meeting loan covenants based on flawed revenue projections. And for his AAHOA members and new investors he suggested, “The most important aspect of purchasing and making sure that you’re in a successful opportunity requires educate yourself,” he continued. “Understand that it’s more than purchase price and location. Understand that there are regulatory pressures. There are terms and conditions you can always negotiate, but you’re not going to understand that unless you learn from each other and then use a lot of the resources that AHLA and AHOAA have to offer.”
KHP Capital Partners Ben Rowe said they are focused on value-add opportunities in the lifestyle hotel space. “It starts with what is the top-line growth potential,” he said. “How much do we think we can move RevPAR and particularly ADR relative to the competitive set? And how is that going to be achieved? Is it a different brand and manager? Is a better revenue management strategy? Is it a better service experience. Or is it a better product? What's it going to cost to ultimately get there?”
Rowe also referenced the F&B component, particularly for lifestyle hotels, and how it is performing relative to potential. “How much space is there that we can work with to create more of an experience? Some of that is about driving incremental profit, but it's really about the overall experience and how that translates into incremental ADR,” he said.
The conversation moved to RevPAR growth potential with EOS Investors’ Wang saying the past four years have been so hard to predict. “You have urban markets that revenues are far below what they were in 2019, resort properties that spiked,” he said. “Now it is coming backwards and more market by market right now than ever. I’m more bullish than the expert predictions this year for the overall U.S. RevPAR growth.”
Capex complexities
The accrual of capex with its increasing costs and how it could move the needle on dealmaking was the next topic of conversation with Patel suggesting brand are starting to “turn the page” in a positive way for franchisees and asset holders.
“They’re looking at what we used to be accustomed to, and what we're looking at what we've been able to do in the past, which is not realistic... I do believe the brands are now seeing that and are starting to understand that the traditional model is not a sustainable one.”
That said, Rowe talked about contending with tariffs and the impact on renovation costs. Most of their FF&E pieces are custom designed, manufactured overseas and costing more. “Manufacturers are eating some of that cost, for renovation projects where the largest component of the renovation is labor, the overall increase is manageable,” he said.
Rowe added that KHP is now developing model room furniture packages with multiple vendors in different countries to create optionality depending on the direction of tariffs. “We’ve negotiated cost- sharing agreements to the extent that tariffs increase relative to where they are today,” he said.
Rowe also said because of the uncertainty surrounding the cost of renovations, fewer buyers want to acquire these types of properties and underwriting is assuming more of a worst-case scenario. “The decline in values of those properties over the last year has been greater than those that don’t need renovation. That discount is often greater than the increase in renovation cost, making those opportunities actually more compelling than they were before,” he said.
While Wang agreed with Rowe’s capex assessment, he said capex has been manageable with maximum price increases around 10%, more often below budget and on time compared to three or four years ago when supply chain issues were more acute.
On the construction side, Mitzner said what was a $600,000 per key budget about five or six years ago has ballooned to $900,000. “The challenge of new construction right now is not so much a regional challenge as it is the fact that our RevPAR growth hasn’t kept up with the inflationary cost of construction,” he said.
If developers can get the credit support needed to develop big box hotels, Mitzner said profitability of ancillary income is exceedingly important. He said big resort F&B profits can range from 38% to 50% when well executed. “So, imagine the importance of $120 million of F&B revenue,” he said.
Not surprisingly, Mitzner talked about the high profit margin for banquets, especially for RIDA’s big box convention hotels. “In October, when the groups come in, we will see an overall 60% profitability for F&B that month. And then December, when it is leisure transient business, we see 30% profitability. So. It’s really that ancillary part of the business is extremely important.”
Brand v Indie
Among the final questions to the panel was the value of brands today versus independents or soft brands.
Rowe was called on first and said most of their properties are affiliated with a brand, but mostly soft brands, where they get the benefit of distribution and loyalty while retaining flexibility to create an independent experience.
“Overall, the brands still do deliver real value in many circumstances, but not in all,” Rowe continued. “We have a number of properties, including the Hotel Viking [in Newport, Rhode Island] that will remain independent. It depends on the strength of the market and the nature of the demand. How much corporate business do you need where they care more about those points? Then, how saturated is that market with product affiliated with those brands, particularly at the higher end of the market where we’re competing? I think that’s a big factor. As the brands are adding more and more brands and product, that’s a real challenge in some markets. There’s just too many.”
Structuring luxury mixed-use projects is complex given the multiple stakeholders involved. Here are ideas on how to structure deals.
Create a site map
Most projects start on one parcel owned by one single purpose entity (SPE). That structure typically evolves as the project matures. As the project is developed, the land is often subdivided into components (e.g., hotel, residences, golf/club, beach clubs, common areas) and conveyed to separate SPEs. For residences, expect a condo or similar master association regime to handle governance, cost sharing, and common areas (i.e., the entity that controls and maintains shared facilities and amenities and pays common expenses).
Legal structuring matters because clean “boxes” make financing and management arrangements workable. In other words, the way you draw parcels and entities will show up in loan collateral descriptions, hotel/residential brand agreements, homeowners’ association (HOA) documents, and sales materials; think of each “box” as a future collateral package for a lender and a disclosure package for buyers. To assist in keeping a project financeable and avoiding restructuring down the line, prepare a site map identifying which entities are intended to own what components of the project early in the development planning and circulate it to counsel, lenders, and the hotel/residential brand company so all stakeholders are working from the same site map.
Define collateral - keep it clean, compartmentalized
When approaching the financing of the project, start with the foundational question: what exactly is the lender financing? In other words, what is the “collateral” (the assets pledged to secure the loan)? One lender may finance the whole project, but often different lenders finance different components (with other members of the capital stack filling in the gaps). The parcels and entities identified on the site map should align with the collateral and intended “borrowers” under the various financings.
Lenders expect clean separation of their collateral from all other elements of a project. Each lender wants an SPE that holds only collateral subject to the financing. If a lender finances only the hotel, that SPE should own only the hotel parcel and related personal property. The same principle applies to contracts and contractual liabilities: lenders want their borrowers’ contractual obligations to be limited to that lender’s collateral, and not extend to other elements of the project.
- A pre-opening/technical services agreement that addresses the pre-opening design and construction of the project as a whole, including pre-opening operations;
- A hotel management agreement that addresses the management of the hotel after opening;
- A hotel license agreement that governs the use of the brand’s name in the operation of the hotel after opening;
- A residential sales and marketing license agreement that governs the use of the brand’s trademark in the sales and marketing process for the residences; and
- A management agreement between the HOA for the project and the brand/management company providing for the management of the HOA after opening of the residential component of the project.
- Cross-termination and cross-default. These can be helpful for brand integrity but risky if an issue in one component destabilizes the entire project. Oftentimes, elective cross-termination with materiality and cure standards is preferred over automatic triggers (i.e., allow termination only for serious issues, after notice and an opportunity to remedy).
- Common ownership/control requirements (i.e., requiring that all components of the project be under common ownership and control). This requirement may conflict with a developer’s desire to finance elements of the project separately (because upon foreclosure of one of the financings, the foreclosed component of the project will be under separate ownership), potentially necessitating negotiation of which elements of a project may be sold or financed separate, and at what stage of the development process. The agreements should establish a clear transfer pathway (including lender transfers and post-foreclosure ownership) to avoid future deadlock.
- Multiple residence types. If there are multiple types of residences or multiple residential components under a common brand, the hotel/residential brand company will require consistent marketing and brand standards. Any ownership fragmentation that occurs in a structure that permits separate ownership of individual residential components of a project could threaten this consistency. As a result, depending on the type of residences, the brand may require common ownership of all residences at all times. If the brand company permits separate ownership (whether throughout the development process or only after certain milestones have been met), covenants requiring consistent marketing and brand standards that survive any sales of separate components may mitigate this issue (e.g., branded condos, villas, stand-alone homes, and fractional interests should follow the same brand rules and have consistent messaging).
- Agreements segmented by project component. If separate sales or financings of different components of a project are likely (and permitted by the hotel/residential brand company), create parallel, component-level agreements from the start. This approach is cleaner for defaults, lender step-in rights, and terminations while still preserving project-wide standards via master covenants and shared services, and avoids costly restructuring of agreements late in the development process.
Luxury brands want consistency across the project, which usually means a coordinated set of agreements covering pre-opening, hotel operations, HOA management, club operations, and residence sales and marketing. “Consistency” in this context means aligned design standards, service levels, marketing use of the brand, and guest/owner experience across components. Some agreements will be project-wide; others will be component-specific. For example, the typical suite of agreements for a luxury branded hotel and residential project includes the following:
When negotiating these agreements, there are a few important scenarios to think through:
Align credit support with reality
If only the component SPEs sign the brand/management agreements, this flexibility is preserved, but the developer will need to assure the brand/management company that the assets of the individual component SPEs are sufficient to support the developer’s obligations.
This is an especially critical issue when dealing with residential projects, where the SPE that owns the residential development by design will not have any assets once the residences are sold to third-party buyers (thus leaving no credit support for any obligations under the residential agreements that may exist after sell-out, such as indemnity obligations).
A middle path is available: have component SPEs be the contracting parties, with targeted parent guarantees for defined obligations (e.g., pre-opening costs, completion, indemnities), supported where needed by escrows, bonds, or insurance. This keeps day-to-day obligations with the right entity while giving brands (and lenders) comfort on completion and indemnity risk. Clear sunset provisions and survival terms should be added so guarantees phase out as risks naturally decline.
Design: Deliberately predictable
The best projects are exciting for guests and predictable for lenders and brand/management companies. To achieve this goal, aim for:
- Segregated ownership and collateral by component.
- Compartmentalized, lender-friendly brand and management agreements, with targeted credit support without unnecessary collateral damage.
- Cross-default/termination that protects standards.
Timing matters. Locking in the legal architecture before chasing financing and finalizing brand/management terms is far easier and more cost-effective than retrofitting them later. Retrofitting lender and brand and management protections at the end of a development is like adding an elevator after topping out—possible, but time-consuming and costly.
Takeaways
Structure, financing, and brand/management strategy for luxury mixed-use projects should be designed together, not in sequence.
Early in the process, developers should map parcels and SPEs to components, confirm how each piece will be financed, ensure all stakeholders are in alignment, and negotiate a thoughtful and flexible suite of brand and management agreements that preserves both brand integrity and protection and lender step-in rights.
Do this, and you’ll keep your options open for sales and financings, reduce closing friction, and deliver a project that feels seamless to guests and reassuringly uneventful to your lenders.
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