London hoteliers are steeling themselves for the biggest number of luxury room openings in more than a decade this year, prompting concerns of oversupply and price cuts in the fiercely competitive market.
The 146-room Chancery Rosewood will open in the former US embassy in Grosvenor Square in the summer, while later in 2025 Six Senses will launch a new hotel in the former Whiteleys department store in Bayswater.
Around the same time, luxury operator Auberge Resorts Collection will open the 102-room Cambridge House in what used to be the In and Out naval and military club in Mayfair, with other launches due across the city.
The flurry comes after openings in 2024 such as the 50-room Mandarin Oriental Mayfair and Park Hyatt London River Thames, as well as renovation projects at The Savoy and London Hilton on Park Lane.
The openings will result in 757 new luxury hotel rooms in 2025 in Greater London, the biggest annual increase since 2014, according to analysis of figures from data provider AM:PM Hotels by real estate group Savills. The total number of luxury hotel rooms will rise by 4 per cent to 19,535.
“Overall, demand is weaker in London, but the offer [in the city] is increasing. So it’s a perfect storm,” said Gianluca Muzzi, co-chief executive of Maybourne Hotel Group, which owns Claridge’s, where the average daily rate is £1,800.
Fellow Maybourne co-chief executive Marc Socker said “various things may have stopped people coming to London” last year, citing the Paris Olympics and the UK government’s refusal to reinstate duty-free shopping.
Franck Arnold, managing director at the Savoy, said the five-star hotel had been forced to bring its daily rate below £1,000 in 2024 after suffering a 5 percentage point decline in occupancy in the first quarter.
Supply in London was continuing to increase at “a rate never experienced before”, which risked a “slight dilution of demand”, he added.
High-end hotels around the world have benefited in particular from the post-pandemic travel boom, with London no exception.
Luxury hotels in the UK capital make up about 16 per cent of the total of more than 110,000 hotel rooms, according to AM:PM. Their average daily room rates soared by 42 per cent between 2019 and 2023, according to CBRE, in contrast to a 27 per cent increase for the whole London market in the same period.
The real estate agency found the subsector had drawn wealthy travellers from the US and the Middle East, with the coronation of King Charles in May 2023 providing an extra boost.
Kenneth Hatton, head of hotels in Europe at CBRE, said that while Paris and Milan — which offer VAT-free shopping to international visitors — had enjoyed similar increases in daily rates, “London is by far the most visited city in Europe, and I would feel very good about the luxury sector in London”.
He added that demand had been helped by the increase in “high net-worth individuals” — with net assets valued above $1mn — around the world.
“Those luxury hotels that will stand the test of time will hold their room rate, they will accept a little lower occupancy”, and performance would eventually “ramp up”, Hatton said.
Richard Cooke, general manager of Brown’s Hotel in Mayfair, the oldest hotel in London, said “‘fear’ of oversupply is the wrong word . . . I’ve been aware of what was going on [and] what you have to change because you know it’s coming”.
The five-star flagship owned by Sir Rocco Forte, which was built in 1832, has undergone a series of recent refurbishments, including unveiling a new suite by British fashion designer Paul Smith, whose furnishings can be purchased by guests. A new spa and renovated fitness space will open in the next 18 months.
Cooke said the changes were aimed at “elevating the experience to engage guests” but that “if there is oversupply and under demand . . . you will see prices change for sure”, as he called for VAT-free shopping, abolished in 2021, to be restored.
The UK Treasury, which said before axing the scheme that tax-free shopping was a costly system, told the Financial Times in a statement that it had “no plans” to introduce a new framework in Great Britain.
Marie Hickey, director of commercial research at Savills, said that while luxury hotel openings had increased over the past few years, providers were focusing on suites, which used to be limited in London compared with rival cities such as Paris.
“We don’t think [the openings] will have a detrimental impact [on the market], because it’s just elevating the average daily rate,” with higher-end products, she said.
But in the short-term, hoteliers are navigating increased market pressures, especially as room rates start to normalise after last year’s jump. Industry figures said promotions such as four nights for the price of three were on the up.
Maybourne — which Socker said had invested “hundreds of millions of pounds” as part of a seven-year renovation of Claridge’s — last year opened the Emory, where every room is a suite.
Arnold at the Savoy said renovations to rooms, with the first expected to be unveiled in summer 2025, meant fewer rooms were available, which had helped “contain the rate erosion [and] optimise the remaining inventory at the higher rate”.
“There will be a bit of a slump within the next two to three years, in order to absorb [the new supply] but gradually, things will get better,” he added.
Other hotel groups are more confident of the near-term outlook for London’s high-end market, with US hospitality company Hilton planning to open its first Waldorf Astoria in the capital at Admiralty Arch in 2026.
Simon Vincent, Emea president at Hilton, said people were “still on a post-Covid high as it relates to travel. London has enough unique attributes to continue to thrive as a luxury destination, and they’re here to stay for a period of time.”
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