London hoteliers are bracing for the biggest number of luxury room openings in more than a decade this year, sparking concerns about 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 warehouse in Bayswater.
Around the same time, luxury operator Auberge Resorts Collection will open the 102-room Cambridge House in what was once the In and Out naval and military club in Mayfair, with other launches across the city.
The storm follows the 2024 openings of 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 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 by data provider AM:PM Hotels from real estate group Savills. The total number of luxury hotel rooms will increase by 4 percent to 19,535.
“Overall, demand is weaker in London, but supply (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.
Maybourne co-chief executive Marc Socker said “different things may have stopped people coming to London” last year, citing the Paris Olympics and the UK government’s refusal to restore duty-free shopping.
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Franck Arnold, managing director at the Savoy, said the five-star hotel was forced to bring its daily rate below £1,000 in 2024 after suffering a 5 percentage point drop in occupancy in the first quarter.
Supply in London was continuing to grow at “an unprecedented rate”, which risked a “slight dilution of demand”, he added.
High-end hotels around the world have particularly benefited from the post-pandemic travel boom, with London no exception.
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 room rates rose by 42 per cent between 2019 and 2023, according to CBRE, in contrast to a 27 per cent increase for the entire London market over the same period.
The estate agency found that the sub-sector had attracted wealthy travelers from the US and the Middle East, with the coronation of King Charles in May 2023 providing an additional boost.
Kenneth Hatton, head of Europe hotels at CBRE, said that while Paris and Milan – which offer VAT-free shopping for 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 rise of “high net worth individuals” – with net assets estimated at more than $1 million – around the world.
“Those luxury hotels that will stand the test of time will keep their room rate, accept a little lower occupancy” and performance will eventually “go up,” Hatton said.
Richard Cooke, general manager of Brown’s Hotel in Mayfair, London’s oldest hotel, said “fear” of oversupply is the wrong word. . . I was aware of what was going on (and) what you have to change because you know it’s coming.”
The five-star ship owned by Sir Rocco Forte, which was built in 1832, has undergone a series of recent renovations, including the unveiling of a new suite by British fashion designer Paul Smith, whose furnishings can be purchased from the guests. A new spa and renovated fitness space will open in the next 18 months.
Cooke said the changes were meant to “elevate the experience to engage guests” but that “if there is oversupply and under demand . . . prices will change for sure”, as he called for the return of purchases without VAT, abolished in 2021.
The UK Treasury, which said before scrapping the scheme that duty-free shopping was a costly system, told the Financial Times in a statement that it had “no plans” to introduce a new framework in the UK .
Marie Hickey, director of commercial research at Savills, said that while luxury hotel openings had increased in recent years, providers were focusing on suites, which were once limited in London compared to rival cities such as Paris.
“We don’t think (the openings) will have a detrimental impact (on the market) because it’s just increasing the average daily rate,” with higher-end products, she said.
But in the short term, hoteliers are facing increased market pressures, especially as room rates begin to normalize after last year’s jump. Industry figures said promotions such as four nights for the price of three were on the rise.
Maybourne – which Socker said had invested “hundreds of millions of pounds” as part of a seven-year refurbishment of Claridge’s – last year opened the Emory, where every room is a suite.
Arnold at the Savoy said the room renovations, with the first expected to open in summer 2025, meant there were fewer rooms available, which had helped “contain rate erosion (and) optimize remaining inventory with rate higher”.
“There will be a decline within the next two to three years to absorb (the new supply), but gradually things will improve,” he added.
Other hotel groups are more confident about the short-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, president of Emea at Hilton, said people were “still on a high post-Covid as it relates to travel. London has enough unique attributes to continue to thrive as a luxury destination, and they are here to stayed for a period of time.”
