AI is Hotel’s New Frontier as Ultra Luxe Leads Way: Paul Salter

Luxury is on the rise and AI-enabled efficiencies are the new frontier for the hotel sector. That’s according to Salter Brothers managing director Paul Salter, who was speaking ahead of The Urban Developer ’s Hotel Developer Summit in partnership with Gatehouse Hospitality to be held in Sydney on March 25. Recently returned from a round-the-world tour, Salter says the global hotel market is continuing to bifurcate, and ultra-luxury is delivering exceptional growth. “In that segment, boutique luxury, experientially driven hotels with wellness and high-end food and beverage are all important, and are the characteristics that are really cutting through,” Salter says. “And what you’re seeing globally is being replicated in Australia.” That divergence of luxury from mid-range is playing out against a backdrop of already strong trading conditions. Comparing 2024 to 2025, RevPAR (revenue per available room) grew 7 per cent Australia-wide—well above the 2 to 3.5 per cent average of preceeding years. “Any time you’re starting to outgrow those long-term averages, you’re having some strong demand years,” Salter says. High-end segment fires up The outperformance is even more pronounced at the top end of the market, particularly across upscale and luxury brands such as Marriott, Ritz-Carlton and InterContinental. “If you look at some of those ultra-luxury hotels on a global basis, they were up 11 per cent in RevPAR in the previous year, then luxury was up 6 per cent and upper upscale at 3 per cent,” Salter says. “That really high-end segment is extremely strong. There are more people in those segments prepared to pay and there’s now demand for them, which there never has been historically.” ▲ Salter Brothers managing director Paul Salter: Australia is following global trends. At the Presidential Villa at Crown Towers Sydney, for instance, a single night can cost $38,888. While that level of pricing is rare in Australia, Salter says travellers are increasingly willing to pay several thousand dollars a night for ultra-luxury experiences. “Sydney hotels as a whole had an 8 per cent RevPAR increase, but Sydney luxury did 12 per cent in RevPAR growth,” Salter says. Salter Brothers’ own strategy has reflected that shift. Last year, the group announced a wholesale repositioning of its hotel brands with IHG Hotels &amp; Resorts, striking a $1-billion deal to upgrade a portfolio of Crowne Plaza hotels to the more upmarket InterContinental and Regent brands. Salter believes this bifurcation of upscale offerings and the truly high-end luxury properties is only going to intensify. But while demand for luxury is strengthening, the economics of delivering new supply are increasingly challenging. The rise of repositioning New hotel development has been a trickle rather than a flood for the past few years. Colliers reports that 2339 hotel rooms were delivered across Australia’s major accommodation markets in 2025, lifting total supply by just 1.3 per cent to 135,579 rooms. A further 7272 rooms are under construction and scheduled to open by 2028, Colliers found, and many new hotels are embedded within larger mixed-use developments rather than delivered as standalone assets. “We are at the end of development cycles in many markets and now there are so few standalone hotel developments because with the cost of construction, the economics look challenging,” Salter says. ▲ The new Rick Stein restaurant at the InterContinental Sydney Coogee Beach. Image: Jack Fenby “You need to be looking at the mixed-use development or branded residence, or there needs to be something special about your project today to make the economics stack up given the cost of new build construction.” This is why hotels are following the same trajectory as residential; skewing to the higher-end so projects stack up. “It all comes down to how much it costs to build and what you think you can charge from an ADR (Average Daily Rate) perspective,” Salter says. “Given this propensity for people to pay more money for luxury product, one option is taking something that is existing and repositioning it with capex and up-branding it, because then you’re playing into this growing demand. “From an ADR perspective, that higher rate exists where you’re delivering some sort of destination or food and beverage offering, some sort of wellness product, some sort of localisation or mix thereof with brands where people perceive more value.” That strategy underpinned Salter Brothers’ repositioning of the Coogee Beach Crowne Plaza, now InterContinental, which included room upgrades, a new club lounge and a Rick Stein restaurant. “In doing that, we’ve taken it from that upscale product to a luxury product. We haven’t opened all of the elements yet, like the pool, lounge and wellness facility but we’ve already seen a 50 per cent uplift in ADR,” Salter says. “So we know there’s demand for product, but ... how do you optimise? How do you think about a particular asset and make sure that you’re getting the most value out of it?” High construction costs are also expected to keep new supply muted, supporting continued upward pressure on room rates. “Existing hotel owners will benefit from that in the short term, as demand outstrips supply,” Salter says. “We’re expecting increasing ADRs or occupancy or both, until the economics of new builds make sense again, because the RevPAR has gone up to a point where it works.” That outlook is being reinforced by a growing push for operational efficiencies across all segments of the hotel sector. AI supporting hotel efficiencies For existing assets, the focus is increasingly on extracting better margins rather than chasing further ADR uplift. “Automating check-in, minimising back-office costs in things like accounting and admin with automation and AI, are key,” Salter says. “But the industry is still questioning how we use technology to make it more efficient for us to operate those assets. “While you mightn’t be getting a large ADR uplift in some segments or markets, it’s all about how you extract better margins by operating them more efficiently.” ▲ The Pacific Suite at the InterContinental Sydney Coogee Beach. Global PwC analysis found that AI has reduced call abandonment rates by 6 to 8 per cent and increased reservation conversion by 25 to 35 per cent, highlighting the potential upside from even incremental technology adoption. AI is already being applied across a range of back-of-house functions. The Gausium Phantus, for instance, is an AI-driven cleaning robot used in hotels such as the Mercure Melbourne Southbank and Sebel Sydney Martin Place. However, Salter says the next major frontier lies in energy optimisation. “Hotels are massive users of air conditioning, heating and energy in general,” he says. “To an extent, we can put solar panels up and optimise systems to manage mechanical operations like air conditioning. “But taking it to the next level, where you have AI sitting inside a hotel, turning things off and on so you’re getting super efficient inside the hotels as well. “There’s an evolution of applying AI with energy saving and optimisation techniques, using AI within the assets themselves. And that’s not just hotels, that’s in real estate generally.”

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