With nearly 4,000 luxury hotel rooms having opened in London since 2005, the capital now has a challenge on its hands in the years ahead, according to accountants PwC.
The London 2012 Olympic Games was the catalyst for the development on a scale unlikely to be seen again, with the number of luxury bedroom increasing from 11,430 in 2005 to 15,220 this year, while the budget sector has grown from 16,300 rooms to 26,000 during the same period.
Meanwhile, the expansion of the luxury sector has seen a 23.6% increase in average daily rate from £239.38 in 2005 to £295.78 during the first eight months of the year in 2012(an increase of £101.95 in nominal terms), and a 36% increase in revenue per available room from £165.29 to £225.05 during the corresponding period.
Occupancy levels amongst luxury hotels over the past seven year have seen a rise of 10.8% from 60.1% in 2005 to 76.6%, up until August 2012.
Liz Hall, head of hospitality and leisure research at PwC, said that there are now 33% more luxury hotels in London, compared to 2005, and five-star properties account for around 12% of the city's rooms.
"Looking at recent performance, luxury hoteliers tell us "so far so good"", she explained. "In fact luxury has outperformed expectations in the 10 months to October and is holding up well, especially given all the extra supply.
"But it's still hard to feel confident about 2013; there will be winners but a weak economic and travel environment, a fight for market share and more new rooms to fill mean many will feel the hit. However, operators are positive about London's prospects and are encouraged by the global awareness of the capital as a destination and the on-going improvements in infrastructure.
"With no major events taking place in London in 2013, the question is, where will demand come from? Will it be post games global awareness, emerging market visitors and the proposed new streamlining of the Chinese visitor process?
"London's luxury hotel sector has a challenge on its hands. But the city is a global gateway with increased global awareness after the 2012 Games and continues to compete well with the other major cities in the world when it comes to top end hotels."
By Janet Harmer
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