London hoteliers are bracing for the biggest number of luxury room openings in more than a decade this year, fueling concerns of oversupply and price cuts in a fiercely competitive market.
The 146-room Chancery Rosewood will open in the former US embassy in Grosvenor Square this summer, while later in 2025 Six Senses will launch a new hotel on the site of the former Whiteleys branch in Bayswater.
At the same time, the Auberge Resorts Collection operator will open the 102-room Cambridge House in a former beach club and military barracks in Mayfair, with other launches across the city.
This comes after 2024 openings such as the 50-room Mandarin Oriental Mayfair and Park Hyatt London River Thames, as well as refurbishment projects at the Savoy and London Hilton on Park Lane.
The opening will result in 757 new luxury hotel rooms by 2025 in Greater in Londonthe biggest annual increase since 2014, according to an analysis of figures from the data provider AM: PM Hotels by the real estate group Savills. The total number of luxury hotel rooms will increase by 4 percent to 19,535.
Overall, demand is decreasing in London, but supply (in the city) is increasing. So it's a perfect storm,” said Gianluca Muzzi, chief executive of the Maybourne Hotel Group, which owns Claridge's, where the daily average is £1,800.
Maybourne chief executive Marc Socker said “various factors may have put people off coming to London” last year, citing the Paris Olympics and the UK government's refusal to restore jobless shopping.
Franck Arnold, managing director at the Savoy, said the five-star hotel was forced to bring its daily rate below £1,000 by 2024 after suffering a 5 per cent drop in occupancy in the first quarter.
Supply in London was continuing to rise at an “unprecedented rate”, which posed the risk of a “slight reduction in demand”, he added.
High-end hotels around the world have benefited the most from the post-pandemic boom, with the exception of London.
Luxury hotels in the UK capital account for around 16 per cent of the total of more than 110,000 hotel rooms, according to AM:PM. Their average daily rents have increased by 42 per cent between 2019 and 2023, according to CBRE, in contrast to a 27 per cent increase for the rest of the London market over the same period.
The real estate agency found that the sector has attracted wealthy travelers from the US and the Middle East, with the coronation of King Charles in May 2023 providing a boost.
Kenneth Hatton, head of European hotels at CBRE, said that while Paris and Milan – which offer VAT-free shopping for international tourists – enjoyed similar daily price increases, “London is the most visited city in Europe, and I can feel good about the luxury sector in London.”
He added that demand has been helped by the rise of “high net worth individuals” – those with assets worth more than $1 million – around the world.
“Those luxury hotels that will stand the test of time will hold their room rates, will accept less accommodation”, and performance will eventually “go up”, Hatton said.
Richard Cooke, general manager of Brown's Hotel in Mayfair, London's oldest hotel, said that “'fear' of acquisition is the wrong word . . . I know what's going on (and) you have to change because you know it's coming”.
The five-star flagship owned by Sir Rocco Forte, built in 1832, has been completely renovated, including unveiling a new suite by British fashion designer Paul Smith, whose clothes can be purchased by guests. A new spa and fitness center will open in the next 18 months.
Cooke said the changes are aimed at “increasing the guest experience” but said “if there is oversupply and underdemand . . . you will see prices change for sure”, as he called for purchases without VAT, which was abolished in 2021, to be reinstated.
The UK Treasury, which said before axing the scheme that tax-free shopping is a costly process, told the Financial Times in a statement that it “has 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 had focused on suites, which had previously been limited in London compared to rival cities such as Paris.
“We don't think (the opening) will have a negative impact (on the market), because it just increases the daily average,” he said.
But in the short term, hoteliers face increased sales pressure, especially as room rates start to stabilize after last year's jump. Industry figures say such promotions are four-night-on-three price hikes.
Maybourne – which Socker says has invested “hundreds of millions of pounds” as part of a seven-year refurbishment of Claridge's – last year opened the Emory, where every room has a suite.
Arnold at the Savoy said the refurbishment of the rooms, with the first expected to open in summer 2025, meant fewer rooms were available, which helped to “contain rate erosion (and) increase the remaining inventory at a higher level”.
“There will be a slow decline in the next two to three years, to absorb (the new supply) but gradually, things will improve,” he added.
Other hotel groups are more optimistic about the near-term outlook for London's high-end market, with US hospitality company Hilton planning to open its first Waldorf Astoria at its headquarters in Admiralty Arch in 2026.
Simon Vincent, president of Emea at Hilton, said that people “are still at a post-Covid high as far as travel is concerned. London has enough qualities to continue to succeed as a luxury destination, and they are here to stay for some time.”