London hoteliers are preparing to open their highest number of luxury rooms in more than a decade this year, fueling concerns about oversupply and price cuts in a 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 open a new hotel in the former Whiteleys department store in Bayswater.
Around the same time, luxury operator Auberge Resorts Collection will open the 102-room Cambridge House at the former In and Out naval and military club in Mayfair, with other launches across the city.
The surge comes after 2024 openings such as the 50-room Mandarin Oriental Mayfair and Park Hyatt London River Thames, as well as refurbishment projects for The Savoy and London Hilton on Park Lane.
The opening will result in 757 new luxury hotel rooms in 2025 in Greater Londonthe biggest annual increase since 2014, according to an analysis of figures from data provider AM:PM Hotels by property 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 is [in the city] is increasing. So it’s a perfect storm,” said Gianluca Muzzi, one of the chief executives of the Maybourne Hotel Group, which owns Claridge’s, where the average daily rate is £1,800.
Maybourne co-chief executive Marc Socker said “a number of things could have stopped people from coming to London” last year, citing the Paris Olympics and the UK government’s refusal to reintroduce duty-free shopping.
Franck Arnold, managing director of the Savoy, said the five-star hotel was forced to drop its daily rate below £1,000 in 2024 after suffering a 5 percentage point drop in occupancy in the first quarter.
Supply in London continued to grow at an “unprecedented rate”, risking a “slight reduction in demand”, he added.
Luxury hotels around the world have particularly benefited from the post-pandemic travel boom, and London is 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 revealed that the sub-sector has 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 hotels in Europe at CBRE, said Paris and Milan — which offer VAT-free shopping to international visitors — had similar increases in daily rates, “London is by far the most visited city in Europe, and I would feel very well in the luxury sector in London”.
He added that demand has been fueled by the rise of “high-net-worth individuals” – with net assets valued at more than $1 million – around the world.
“Those luxury hotels that stand the test of time will hold 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 that “‘fear’ of oversupply is the wrong word. . . . I was aware of what was happening [and] which you have to change because you know it’s coming”.
Owned by Sir Rocco Forte, the five-star flagship, which was built in 1832, has undergone a number of recent renovations, including the unveiling of a new suite by British fashion designer Paul Smith, whose furnishings can be purchased by guests. A new spa and renovated fitness area will open in the next 18 months.
Cooke said the changes were aimed at “elevating the experience to attract guests” but that “if there’s too much supply and too little demand… you’re going to see prices change for sure,” referring to returns without VAT, abolished in 2021.
The UK Treasury, which said before scrapping the scheme that tax-free shopping was an expensive system, told the Financial Times in a statement that it had “no plans” to introduce the 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 apartments, which had been limited in London compared to rival cities such as Paris.
“We don’t think so [the openings] will have a detrimental effect [on the market]because it just raises the average daily rate,” with higher-end products, she said.
But in the short term, hoteliers are dealing with increased market pressures, especially as room rates begin to normalize after last year’s jump. Industry figures say promotions such as four nights for the price of three are 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.
The Savoy Hotel’s Arnold said the renovation of rooms, with the first rollout expected in the summer of 2025, meant there were fewer rooms available, which helped “to contain the rate decline [and] optimize remaining inventory at a higher rate”.
“There will be a slight decline in the next two to three years, to absorb [the new supply] but gradually things will get better,” he added.
Other hotel groups are more bullish on the near-term prospects 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 the Hilton, said people are “still on a high post-Covid when it comes to travel. London has enough unique attributes to continue to thrive as a luxury destination, and they are here to stay for a while.”
