In February, Driftwood Capital launched its Driftwood Lifestyle & Luxury Division (DLLUX), enhancing management, investment, and development services and initiatives within the luxury, lifestyle, and branded residences sector. Since 2019, the firm has invested more than $2 billion in that sector with developments such as the Westin Resort & Spa Cocoa Beach, Dream Miami, Canopy by Hilton West Palm Beach, and Canopy by Hilton Tempe. At launch, DLLUX assumed oversight of 12 assets that had been managed by Driftwood Hospitality Management, eight of which are also owned by Driftwood-sponsored funds.
In an exclusive interview with LODGING, Managing Director, Luxury and Lifestyle Investments Alinio Azevedo, who leads DLLUX, described Driftwood Capital’s thoughtful expansion within the sector: “Driftwood had established itself primarily in upper-upscale branded hotels but strategically expanded into the lifestyle sector through both development and acquisitions since 2015. This evolution led to the successful management of 12 lifestyle and resort assets. The expansion into the luxury and branded residences sector was part of a broader strategy to capitalize on the growing demand for immersive and high-end travel experiences. It is also part of our strategy to diversify our portfolio into the fastest-growing, and most resilient, segment of the industry. Lastly, it is also a function of requests from our existing investor base to place capital in this segment.”
Azevedo, the former CEO of Aspen Hospitality—which develops, owns, and manages luxury hotels, clubs, and branded residences—explained that the sector has “emerged stronger post-pandemic” due to numerous factors including demand from high-net-worth individuals (HNWIs), experiential-driven travel demand, supply constraints, and pricing resilience. “Institutional investors remain bullish on high-end hospitality real estate, citing limited new supply, high barriers to entry, and pricing power as key investment drivers,” Azevedo said. “ESG-focused luxury developments are also gaining traction as sustainability becomes a critical consideration.”
He identified the following distinct trends in luxury & lifestyle and branded residences, respectively:
- Luxury & Lifestyle Hotels: “RevPAR and ADR in the luxury segment have outpaced broader market growth. ADRs for luxury hotels increased 29 percent from 2019 to 2023, with properties frequently exceeding $1,000 per night. High-end resorts, wellness-focused properties, and experiential travel continue to see sustained demand from affluent travelers.”
- Branded Residences: “The branded residence sector has expanded rapidly, with global supply growing 160 percent over the past decade. Demand is driven by UHNWIs (ultra-high-net-worth individuals) and HNWIs seeking turnkey, serviced living experiences, with key growth markets in North America, the Caribbean, and select international gateway cities. Major hotel groups, including Four Seasons, Ritz-Carlton, and Aman, continue to expand their branded residential pipelines to meet demand.”
In addition to the operational consolidation, Driftwood launched a dedicated investment fund targeting markets across the United States and select international markets that fit the fund’s criteria, with planned capital deployments of over $3 billion. “The Driftwood Lifestyle & Luxury Fund (DLLX) is focused on both ownership and management,” said Azevedo, who oversees the fund. “The fund is dedicated to acquiring, developing, and lending on luxury and lifestyle hospitality assets, including branded residential properties.”
Crafting the kinds of guest experiences appropriate to the sector, Driftwood’s management division plays a key role in optimizing the DLLUX portfolio’s performance. “Travel is evolving toward more immersive and bespoke experiences,” noted Azevedo, who explained that Driftwood’s approach focuses on:
- Curating high-potential markets that appeal to affluent travelers seeking luxury experiences, while benefiting from supply-demand imbalances and favorable operating and development costs.
- Investment in experiential properties, focusing on high-end design, immersive amenities, and strong brand partnerships that cater to modern travelers’ desires for personalized services, meaningful travel experiences, and ability to connect to local communities.
- Branded residential components, which enhance returns while offering unique, service-oriented living experiences.
- Technology-driven operations, leveraging Driftwood’s proprietary Domino platform for real-time data and analytics to optimize hotel performance.