With hotel openings in London offering ever-more opulence and impeccable service, what's the price of luxury now?
London is an ever-expanding sweet shop for the ultra-moneyed to eat, shop, play and now, sleep.
A raft of hotel openings have bolstered the capital's room count: in July US hotel group 1Hotel opened its first UK hotel in Mayfair, followed by the Peninsula London in Belgravia in mid-September. The Peninsula, 35 years in the making and costing £1b, was the first new-build, five-star property to open since the Bulgari 11 years ago. A mere 17 days later came Raffles London at the Old War Office (OWO) in Westminster which, while taking just a decade to come to fruition, came at a higher cost of £1.5b.
These three groups' first forays into the London hotel market might seem coincidental in timing, but the cumulative effect is a golden moment for luxury hotel development. According to commercial property analytics and data firm CoStar, there are a further 29 high-end hotels scheduled for development between now and 2028, with 12 planned openings. Many of these are from world-renowned operators making their first steps in the capital.
This expansion, according to Thomas Emanuel, senior director at hotel market data firm STR (a subsidiary of CoStar), is "not super-unusual" given London is a hotspot for hotel development. But, he added, their arrival is a sign there is a growing demand base at the top end of the market.
As Michelin prepares to announce the first recipients of its Hotel Keys accolade in 2024, a spokesperson said there had been a need for greater diversity in the city's luxury offering to reflect a changing market of top-end travellers who are "younger and have more taste for a bit of excitement in their travel experiences".
Similarly, hotel consultant Melvin Gold said such multibillion-pound investment programmes reflect the enduring popularity of London among the world's most wealthy travellers, particularly from America, the Middle East and Asia.
The fact such development programmes are taking place, with many in historic buildings adding a further layer of complexity and expense, is proof, Gold said, that developers and hotel groups are very confident they will work: "The people behind these projects wouldn't be doing them if they didn't think they could make money out of them," he said.
He added that the capital, which is the largest hotel market in Europe with more than 150,000 hotel rooms, has always been a place of experimentation over the course of many decades.
The ‘Golden Triangle' of London hotel locations
While world-renowned brands might be experimenting, they are doing so within the confines of tried and tested locations and prestigious properties; places which are tied to the city and the country's enduring cultural heritage and that give them sought-after gravitas.
Gold referred to the ‘Golden Triangle' of Mayfair, Park Lane and the eastern end of Knightsbridge, taking in Hyde Park corner, as a salubrious area where only the very top hotels can justify soaring average room rates (ARR).
Robbie Bargh, founder and partner at the Gorgeous Group, which delivers F&B experiences to luxury hotels globally, cited the likes of the Waldorf Astoria development at Admiralty Arch, to explain how luxury hotel groups attaching themselves to cultural locations can build "layer upon layer of storytelling and experiences".
But, as with everything, this comes at a price.
Hotels influencing London's rates
While a number of factors make up an ARR, it is clear the arrival of these hotels is influencing London's rates. Between 2021 and 2023, CoStar reported that 10 luxury hotels with a total of 1,151 rooms opened, with a further 2,462 rooms scheduled to open between 2024 and 2028.
According to CoStar data, from 2019 to this year, ARR in London's luxury hotel sector increased by 33%; in 2019 ARR was £334, while this year to September 2023 it was £444.
Emanuel said such rates are not necessarily surprising: "Luxury rates didn't really suffer during Covid in the same way that the other [hotel] classes did. They maintained throughout this difficult period and are growing well."
But with such a sharp ARR increase in four years, far outstripping inflation – and with eye-boggling daily rates of some entry-level rooms starting at four figures – some have questioned if hotels can justify it?
Bargh, who has the Peninsula on his roster of clients, suggested they can, as their offering far exceeds that of other five-star hotels.
"I find that the branded five-star luxury hotels, such as the Hyatts and the Hiltons, are sometimes quite boring. If you find yourself in a lobby or in one of the bars or restaurants, they all feel the same."
He said their offering can be "somewhat a bit confusing [but] the next-generation luxury [where] revenue per available room is upwards from £600 to £1,000 or £2,000 a night is leading the traditional five-star because it's got this incredible point of difference".
This ‘point of difference' is that they are "delivering that emotional perspective, they're giving you that amazing storytelling, which is so memorable and transformative". He cites such brands' use of the five senses to connect with guests on an emotive level.
Gold added that it is also the level of impeccable service these uber-luxury hotels offer: the 190-bedroom Peninsula employs more than 700 staff, and its guests expect an almost one-to-one, sometimes even two-to-one level of service.
Raising the game
But where does this leave established players at the top of London's luxury hotel market? The clangs of construction reverberating around the hotel landscape should not, suggested Gold, signal the demise of other established brands. He added: "just because you open your doors, you don't necessarily cannibalise the existing market".
The traditional hotels, he said, still attract a very wealthy and very lucrative clientele, but what they must do to keep pace is invest now to secure their longevity, citing the Dorchester's and Claridges' recent refurbishment programmes, which were undertaken "to stay in the market".
"Smart hotels with smart investors will move ahead of the times and not leave themselves looking shabby around the edges when they're going to face this new type of competition," he said.
Bargh agreed that the new arrivals make other hotel brands raise their game and, as Emanuel noted, the recent flurry of openings have been likened to what has been seen in Dubai and Saudia Arabia, where six- and seven-star hotels are becoming the norm.
Bargh said he is keen to steer clear from suggestions that a new star rating might be needed and that stars are "so old-fashioned". Instead, he suggested the market should focus on what these hotels offer: fresh, forward-thinking, memorable experiences for guests that set a new bar for luxury among the London luxury hotel scene.
"There's something about one-upmanship that's really important in London," he added.
What new hotels have come to London?
Confirmed openings between 2024 and 2028
- Mandarin Oriental, Mayfair, February 2024
- Six Senses, Bayswater, February 2024
- Park Hyatt, Nine Elms (two projects), October 2024
- The Chancery Rosewood, Mayfair, March 2025
- Waldorf Astoria, Admiralty Arch, October 2025
- Mandarin Oriental, South Bank, May 2028
A further five undisclosed independent projects are in the works with the following planned opening dates
- July 2024
- November 2024
- January 2025
- May 2025
- December 2028
Source: CoStar
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