London hoteliers are preparing to open the largest number of luxury rooms in more than a decade this year, raising fears of oversupply and price cuts in a highly competitive market.
The 146-room Chancery Rosewood Hotel 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 department store in Bayswater.
Around the same time, luxury brand Auberge Resorts Collection will open the 102-room Cambridge House hotel in what was formerly the In and Out of the Naval and Military Club in Mayfair, with other launches across the city.
The wave follows openings in 2024 such as 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 create 757 new luxury hotel rooms in 2025 in the greater area 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 reach 19,535 rooms.
“Overall demand is weaker in London but supply (in the city) is increasing,” he said. “It's a perfect storm,” said Gianluca Mozzi, co-chief executive of Maybourne Hotel Group, which owns the Claridge's Hotel, where the average daily rate is £1,800.
Maybourne co-chief executive Mark Sucker said “various things may have prevented people from coming to London” last year, citing the Paris Olympics and the UK government’s refusal to bring back duty-free shopping.
Frank Arnold, managing director at the Savoy, said the five-star hotel had to cut its daily rate to less than £1,000 in 2024 after suffering a 5 percentage point drop in occupancy in the first quarter.
He added that supply in London continues to increase “at a rate never seen before”, which threatens to “slightly dampen demand”.
Luxury hotels around the world have particularly benefited from the post-pandemic travel boom, with London no exception.
Luxury hotels in the UK capital make up about 16 percent of the total of more than 110,000 hotel rooms, according to AM:PM. 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 in the same period.
The estate agency found 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 that while Paris and Milan – which offer VAT-free shopping for international visitors – enjoyed similar increases in daily rates, “London is by far the most visited city in Europe, and I would feel “I am satisfied with the luxury sector in London.”
He added that demand was supported by the increase in the number of “high net worth individuals” – those with a net asset value of more than $1 million – around the world.
“Those luxury hotels that stand the test of time will maintain their room rates, accept a little lower occupancy,” and performance will ultimately pick up, Hatton said.
Richard Cook, general manager of Brown's Hotel in Mayfair, London's oldest hotel, said “fear” of oversupply is the wrong word. . . You knew what was happening (and) what you had to change because you knew it was coming.
Owned by Sir Rocco Forte, the flagship five-star hotel, built in 1832, has undergone a series of recent renovations, including the unveiling of a new wing by British fashion designer Paul Smith, whose furniture can be purchased by guests. A new spa and renovated fitness space will open within the next 18 months.
Cook said the changes were aimed at “elevating the experience to engage guests” but “if there is an oversupply and a lack of demand… you will definitely see prices change.” He also called for the restoration of VAT-free shopping, which was abolished in 2021.
The UK Treasury, which before scrapping the scheme said tax-free shopping was an expensive scheme, told the Financial Times in a statement that it had “no plans” to introduce a new framework in Great Britain.
Mary Hickey, director of trade research at Savills, said that while luxury hotel openings had increased over the past few years, providers were focusing on suites, which were limited in London compared to competing cities such as Paris.
“We don't think (the openings) will have a detrimental impact (on the market), because it just drives up the average daily price” with high-end products, she said.
But in the short term, hoteliers are weathering increasing market pressures, especially as room rates begin to return to normal 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 the Claridge Hotel – opened the Emory Hotel last year, where every room is a suite.
Room renovations, the first of which are expected to be unveiled in summer 2025, have meant there are fewer rooms available, which has helped “contain rate erosion (and) optimize remaining inventory at a higher rate,” Arnold said at the Savoy.
He added: “There will be a slight decline over the next two or three years in order to absorb (the new supplies), but things will gradually improve.”
Other hotel groups are more confident in the near-term outlook for the upscale London market, with US hospitality company Hilton planning to open the capital's first Waldorf Astoria hotel at Admiralty Arch in 2026.
Simon Vincent, Hilton's president for EMEA, said people “are still at a post-Covid high when it comes to travel. London has enough unique attributes to continue to thrive as a luxury destination, and it's here to stay for a while.”
