The middle class in America is disappearing. Hotels have to choose between 2 distinct paths to survive, says the man who invented boutique hotels

Feifei Cui-Paoluzzo / Getty Images

The middle class in America is disappearing, and hotels need to adapt.

• The middle class is disappearing in the United States.
• Ian Schrager, the legendary hotelier credited with inventing boutique hotels, says hotels will make two major changes in order to keep up with the changing demographics.
• In the US, "you have the 1% and then you have everybody else, with a declining middle class," Schrager told Business Insider. "And I see hotels following the same thing."
• Hotels will either become super-luxurious and expensive to cater to the 1%, or they will be more value-oriented, with "nothing in the middle," Schrager said.

The middle class in the US is on the decline.

Middle-income Americans represented about 61% of the country in 1971, but only 52% of American adults were classified as middle income in 2016, Pew Research data shows. And only 44% of Americans said they considered themselves middle class in 2014, compared with 53% in 2008, according to Pew.

The Pew Research Center defines the US middle class as those earning two-thirds to twice the median household income, as Business Insider's Hillary Hoffower previously reported.

The median household income was $61,372 in 2017, meaning middle-class Americans were earning about $40,743 to $122,744.

Read more: Silicon Valley is so expensive that people who make $400,000 think they're middle-class - here's what the middle class actually is in the 25 largest US cities

This shift has been mirrored in many industries. In the retail world, high-end and budget stores have become the most successful areas, while those in between struggle.

Read more: The death of the American middle class has brought department stores down with it

According to Ian Schrager, the legendary hotelier credited with inventing the boutique hotel concept, hotels will likely follow the same path.

Hotels can choose between 2 paths to adapt to the shrinking middle class

Schrager told Business Insider that hotels are "manifestations of popular culture and the people."

According to Schrager, who's behind hotel brands EDITION and PUBLIC, "the US is headed in a direction where you have the 1%, and then you have everybody else, with a declining middle class. And I see hotels following the same thing."

Chad Batka

Ian Schrager pioneered the boutique hotel concept.

Reflecting the changing population, Schrager expects hotels to either become ultra-luxurious and expensive or very value-oriented over the next 10 years or so.

Luxury hotels will get much smaller, with only 80 to 90 rooms, but the rooms will be "much larger," Schrager says. These more intimate hotels will also be "very expensive" with the finest details, "catering to that 1%," he said.

Schrager says he also expects to see a lot of "less expensive, value-oriented hotels, but very sophisticated and very cool," with diverse entertainment and food and drink options.

As Schrager sees it, hotels will have to take one of these two routes to survive.

"I see nothing in the middle," he said.

Schrager's PUBLIC Hotel in New York's Lower East Side offers a modern luxury experience with rates as low as $150 per night, as Business Insider's Noah Friedman and Lamar Salter previously reported. His newest hotel, the Times Square EDITION in New York City, has 452 guest rooms and nightly rates that range from $430 to about $2,800.