High-end hotels in resort locations have become a favorite of guests and investors alike. Once COVID-related travel restrictions lifted, Americans were eager to leave their homes to take advantage of the newfound ability to travel and work from almost anywhere. In addition, high levels of accumulated savings supported robust spending on experiences. This led to room rate increases well above the level of inflation as hotel operators took advantage of the strong demand.

Through September of this year, room demand for luxury resorts was 5% below the comparable period in 2019. But room rates for the first nine months were almost 40% higher than three years ago. In talking with resort operators, the main topic of conversation is not around room demand or rate growth but always comes back to the issue of staffing. In the current labor market environment, attracting the right personnel to meet high-end guest expectations who routinely pay more than $400 per room remains the main challenge that owners and operators say they must contend with.

Even with higher labor costs, strong bottom-line performance coupled with asset price appreciation has attracted healthy investor appetite to this asset class, which has garnered a reputation of being almost “recession-proof.”

In rapid succession, three luxury resort acquisitions were announced in one week, at prices per key that show that the acquiring real estate investment trusts, or REITs, and high-net-worth individuals value marquee names in prime locations above all else. The three properties were assembled by Laurence Geller as part of the Strategic Hotels portfolio in prior decades and later sold to Chinese insurance company Anbang in 2016. Following a shake-up in Anbang’s senior leadership, the company was renamed Dajia Insurance Group. At the time, it was assumed that the resorts would be marketed once favorable sale conditions reemerged. Following the recent robust performance of high-end resorts throughout 2021 and 2022, the current ownership put the three properties on the market and transactions were soon announced.

The 260-room Montage Laguna Beach, located between Los Angeles and San Diego, California, on the rugged Southern California coastline sold for an estimated $650 million, or $2.5 million per key. Built in 2003 and renovated in 2019, the property is arguably an irreplaceable asset since construction on the California coast is traditionally very complex, time-consuming and expensive. The buyer is Texas-based billionaire Tilman Fertitta, who also made news around the same time as the acquisition for purchasing 6.1% of the outstanding stock of Wynn Resorts.

The Four Seasons Troon North, located north of Scottsdale, Arizona, sold for $267 million, or $1.3 million per key, to Braemer Hotels & Resorts. Late last year, Braemer also bought the 96-room Dorado Beach, a Ritz Carlton Reserve hotel in Dorado, Puerto Rico, for $186.6 million or $1.7 million per key, inclusive of 14 residential units in the rental program.

The 125-room Four Seasons Resort and Residences in Jackson Hole, Wyoming, was purchased by Host Hotels & Resorts for $315 million, or $2.5 million per key. In late 2021, Host was also the buyer of Alila Ventana Big Sur for $150 million, or $2.5 million per key, after shedding the Sheraton Times Square in New York City, underscoring its shift in strategy away from city center locations to leisure destinations.

Given the strong performance on the highest end of the market, expect more deals that involve marquee names in premier destinations. Higher interest rates and a looming recession are clearly not deterrents for buyers, or guests, of these iconic properties.