There could be a 27% increase in luxury rooms in London by 2012, with around 2,400 rooms in 18 hotels currently under construction or planned, according to PricewaterhouseCoopers (PwC).
It appears that investors are attracted to the potential returns to be had in what is regarded as a gateway city, where trading has remained strong throughout the recession.
While some of the major international hotel operators are still looking to gain a foothold in the capital, there are others looking to open a second or third hotel. Four Seasons, for example, has just been granted planning permission to develop its third hotel in London at Heron Plaza in the City of London, while InterContinental opens its second hotel in the capital - in Westminster - at the end of this year.
Liz Hall, head of hotel research at PwC said that hotel operators did not expect to see a significant negative impact on revenues as a result of the new openings, although there might be some knock-on effect upon trading.
"Some believed that the reopening of iconic hotels such as the Savoy and the Four Seasons, along with new (for London) names on the scene such as the Shangri-La, Bulgari, the Corinthia, the Renaissance and W, are expected to provide a positive halo effect, ensuring London continues to compete with the other major cities in the world with top-end hotels.
"Demand should strengthen as the Olympics near, but hotels will have to be pro-active with their marketing.
"In terms of revenue for hotels, room rate is king and this is particularly true for luxury hotels."
Hall said that according to STR Global, luxury room rates averaged £254 in 2010, compared with £228 in 2009, with an average of £127 for all London hotels. "However, some hotels, including those in the very elite ‘super-luxury league' will have enjoyed much higher rates," she concluded.
By Janet Harmer
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