Why Hospitality’s Growth Is Moving Beyond Luxury – and What It Means for Investors & Operators
The global Hospitality Market is undergoing a major structural shift: growth is increasingly driven by mid-scale, affordable lifestyle, hybrid, and extended-stay concepts, while luxury stabilizes and becomes more curated.
Extended-stay and middle-tier conversion brands have grown globally by more than 40% over the past five years, making them the fastest-expanding segments (CBRE Hotels Research 2025).
This trend is visible worldwide – from North America to the Middle East to Asia Pacific – and is particularly reinforced by mature markets such as Europe, where economic pressure, dense urban footprints, and high development costs accelerate the move toward more efficient and flexible models.
What’s Driving the Shift
1. Pricing Pressure & Value-Driven Travel
Across all regions, travelers are looking for design and experience without luxury pricing. This has fueled the rise of:
- affordable lifestyle brands
- conversion-friendly mid-scale concepts
- hybrid hotel/hostel and hotel/apartment models
European-born brands such as The Social Hub, Zoku, Locke, citizenM, Meininger, and Ruby have become global benchmarks for these categories.
For Operators and Senior Executives, this shift requires a stronger focus on leaner cost structures, flexible design, and brand concepts that deliver high perceived value without luxury-level operating costs.
2. Conversions and Adaptive Reuse Everywhere
Globally, operators and owners are prioritizing conversions over new builds due to high construction costs and long development cycles. This is especially relevant in dense, historic cities – where European operators have long perfected the playbook. Hotel renovations and brand conversions in Europe rose by 32% year-over-year in Q1 2025 (Lodging Econometrics)
As a result, many leading brands are launching or expanding conversion-focused flags and soft lifestyle collections.
3. The Rise of Extended Stay and Hybrid Hospitality
Extended-stay, serviced apartments, and hybrid models are now among the fastest-growing Hospitality Segments globally. Their appeal is universal:
- lower operating costs
- higher length of stay
- diversified revenue
- relevance for leisure, corporate, relocations, digital nomads, and project workers
European innovators have become influential in setting global standards for flexible, lifestyle-driven long-stay products.
4. Technology-Enabled Lean Operations
Across markets, operators are shifting toward leaner, tech-supported operating models to counter staffing shortages and rising labour costs. Automated check-in, mobile-first guest journeys, digitally managed housekeeping, and modular staffing structures are becoming standard – refining operational efficiency without sacrificing guest experience.
5. Luxury Becomes More Selective and Experiential
Luxury remains strong worldwide, but growth is now strategic rather than expansive.
Instead of scale, luxury brands focus on:
- experiential wellbeing
- craftsmanship and culinary identity
- authentic local integration
- iconic destinations with long-term demand
The performance gap within luxury widened to nearly 7% between 2019 and 2024, with the strongest luxury brand achieving a 41% cumulative RevPAR premium CBRE Hotels Research (2025).
This mirrors mature-market behaviour, where luxury evolves through curation rather than proliferation.
Regional Insights
Europe: Midscale Profitability Leads the Market
Across Europe, midscale hotels continue to outperform. GOP margins reached 42% in 2025 (HotStats). Their lean operating models allow them to absorb rising labour and utility costs far more effectively than the luxury segment. Topline momentum follows the same pattern: midscale RevPAR increased by 5.1% in H1 2025, outpacing luxury performance (HotelNews).
This shift reinforces the need for leaders who can drive efficiency, optimise margins, and scale experience-focused mid-market products in structurally high-cost environments.
Middle East: Fastest Mid-Market Acceleration
In the Middle East, the mid- and upper midscale segments are the region’s fastest-growing categories, expanding at an estimated 6% CAGR between 2024 and 2029. Growth is strongest in emerging destinations such as Ras Al Khaimah and AlUla, where demand for “affordable quality” is outpacing traditional upscale offerings. (AGBI / Mordor Intelligence) Operators are scaling mid-market concepts rapidly, evidenced by new openings like Moxy Dubai Al Barsha (480 rooms) and Mama Shelter Business Bay (197 rooms). This requires leaders who can manage scale, navigate owner-driven markets, and operate within national tourism strategies tied to economic diversification.
Asia Pacific: World’s Fastest Midscale Growth
Asia Pacific is projected to be the world’s fastest-growing midscale hotel region, recording a 7.2% CAGR (Market Intelo). China alone counts 1,194 upper midscale projects – 32% of its entire pipeline (Lodging Econometrics) Rising domestic travel, an expanding middle class, and strong digital adoption fuel this demand. Operators increasingly require executives capable of scaling mid-market brands across culturally and regulatory diverse markets, balancing localisation with high-efficiency, tech-enabled service models.
What This Means for Industry Stakeholders
For Operators
- Expand mid-scale lifestyle and hybrid brands
- Adopt lean, tech-enabled operating structures
- Leverage conversion opportunities to scale faster
For Owners & Investors
- Reposition existing assets into modern lifestyle or long-stay concepts
- Prioritise efficient operating models with stable RevPAR
- Focus on markets where mid-scale demand is outperforming luxury
For Brands
- Offer strong design and community at accessible price points
- Maintain sustainability and local relevance as core differentiators
- Create products that perform in both primary and secondary cities
- Keep extended-stay and multi-use spaces central to brand strategy
Why This Shift Matters for Executive Search
For Hospitality Organizations, this transition reshapes leadership requirements across markets. Mid-market acceleration demands Senior Executives who combine operational discipline with commercial acuity, understand the new performance economics, and can lead teams through continuous model innovation.
As your Executive Search Partner, LHC International identifies leaders who bring the right balance of strategic foresight, execution strength, and international experience to create value in a mid-market-driven Hospitality Landscape.
If you want to discuss future-ready leadership, strategic hiring, or organizational transformation, reach out to us for a confidential conversation – Let’s Connect