“Think of the branded residences sector as a triangle,” says Chris Graham, managing director of Graham Associates & author of industry reports on branded residences. “We have been focused mostly at the very top with luxury but if you move down a couple of notches, the size of the market grows exponentially.”
This point was one echoed by many at BxR EMEA, the IHIF EMEA’s dedicated branded residential programme including Wyndham’s president EMEA Dimitris Manikis who spotlighted what he called a clear market gap in the midscale. Speaking to Hospitality Investor, he noted that while luxury still accounts for over two-thirds of the market, but premium and upper midscale segments are projected to grow from roughly 25 per cent to 36 per cent by 2031.
Data from Savills supports the point. Roughly 70 per cent of completed branded residential schemes globally still sit in the luxury segment, with Europe slightly more diversified at around 55 per cent. Yet the pipeline is beginning to shift, particularly outside Europe, with a growing share of upper upscale and upscale product.
“If we look into the pipeline, globally the luxury segment is set to fall from its 69 per cent perch and we see an increase in upper-upscale and upscale brands,” says Louis Keighley head of Savills Global Residential Development Consultancy.
While the pipeline for the projects in Europe shows luxury’s share increasing slightly, the seeds of change are visible, particularly in Southern Europe and Eastern markets where brands like Radisson Hotel Group and Wyndham Hotels & Resorts are expanding branded residential offerings in more accessible destinations.
“I believe there’s a clear market gap when it comes to branded residences and that gap is in the midscale,” Manikis says, adding “Our strategy focuses on democratising luxury through an established portfolio of trusted brands in the premium economy and upper midscale markets. This positioning allows us to serve the growing segment of discerning buyers who want international quality standards and exceptional experiences but at more accessible levels than ultra-luxury alternatives.”
The most immediate advantage of midscale and upscale branded residences is simple: volume. Move down the pricing ladder and the addressable market expands dramatically. Instead of catering to the top 1 to 2 per cent of global buyers, developers can tap into a far broader demographic. Put simply by Graham, “you’re able to sell to a much bigger audience”, an audience made of rising middle classes who are increasingly drawn to the idea of branded living but can only access it at a more attainable price point. These potential buyers don’t need all the bells and whistles but instead are more concerned with brand recognition and reliable service standards.
As for the financial case for upper upscale to midscale branded residences, Graham points to secondary and tertiary locations as the key to unlocking these schemes. These locations have the benefits of lower land costs, fewer planning constraints and faster development times, amongst others. According to HVS’s 2024 U.S. Hotel Development Cost Survey, median development costs for midscale extended-stay projects can be nearly 60 per cent lower than full-service hotel equivalents. For upper upscale to midscale branded residences, this translates directly into lower unit pricing and more resilient development underwriting. At a time when construction costs, labour pressures and financing constraints are squeezing returns across the board, a leaner and more efficient product is simply more viable.
For operators, making this work requires stronger operational frameworks to deliver consistent service at lower price points, flexible brand standards and greater localisation of product and experience.
The benefits of, and the increasing prevalence of conversations around branded residences lower down the chain scale suggests a continued expansion of the model As prime urban sites become harder to secure and ultra-luxury competition intensifies, the logic of moving down the pyramid will become increasingly compelling and result in what Graham describes as a potential genie out of the bottle moment where once the model proves itself at scale, growth could accelerate rapidly.
And perhaps that is the real takeaway from BxR this year: if you thought branded residential only had so far to go based on location constraints and a reliance on luxury, think again. Because it seems it’s only just getting started.