Why super-luxury hotels are booming in London

There is plenty of gloom in the capital, in the country and in other parts of the world — but not, it seems, where London luxury hotel projects are concerned. In recent years we’ve seen the opening of Raffles and the Peninsula, to name but two spectacular arrivals. There have been several more since and the preponderance of cranes and hoardings indicates they will be joined by others. This, despite moaning, doom and misery —domestically and internationally. It is remarkable and unexpected.

According to research by real estate services firm JLL, hotel investment in London is outpacing other European cities such as Paris (60 per cent ahead) and Madrid (200 per cent). Even the next largest global hotel investment market, Tokyo, is way behind — London is 25 per cent up on the Japanese capital. There are 165 hotel developments either in final planning or under construction in London, with many of them centred on wooing high-end visitors.

The Iran war shock is affecting current bookings. Arab visitors are down. It’s a serious setback but in all likelihood, a temporary one: the long-term trend for the sector remains firmly positive. This is an industry that was hit hard by Covid but in due course, recovered and prospered.

One person who is not surprised by the surge in luxury and indeed, is playing a significant part in the advance, is Richard Faber. He runs Spartan Advisors, which is advising Evolution Investment Fund on two “super prime” hotel acquisitions worth £1.1 billion in Mayfair. Launched last year, Evolution is a Middle Eastern investment fund owned by the Shanshal family in the UAE, with Nadhim Zahawi, the UK politician and businessman, as its chair. The Shanshals have extensive interest in logistics, telecoms, motors and property in the Middle East. Evolution represents a major push into European upmarket hotels.

The aim is to invest in luxury hospitality globally, with London a main objective. “The fund targets iconic locations in major gateway cities, with a strategy focused on long-term value creation, design excellence and operational distinction,” says Spartan.

The fund alighted on the Marriott in Grosvenor Square, which has just been bought on a long lease and is to be fully refurbished. It has also purchased a second site, also in Mayfair, at Grafton Street and Barlow Place, which has council consent for a 157,000 sq ft scheme, including a 94-room hotel and six luxury residences, in a 12-storey tower designed by Foster + Partners.

Sitting with Faber in the bar of the Beaumont hotel, another Spartan deal, it is hard not to concur with his assessment that “London retains its position as the world’s favourite city”. Located off Oxford Street, with Selfridges nearby, the Beaumont is buzzing. The clientele are mostly American and Middle Eastern, with a few Europeans. There is a sprinkling of Brits as well, but here, mid-week in Mayfair, there is a truly international flavour.

These folks from abroad want to come on holiday and to do their business here. That is Faber’s point. “Super-prime London remains a magnet for international strategic investors who chose our city at a time of global competition for capital,” he says.

“At a time when some insist on talking London down, this level of long-term capital commitment is a clear real-world vote of confidence and represents a wider story about the city. Super-prime hotels are a strong barometer of a city’s global appeal and these transactions underline that London still leads the world in attracting strategic, internationally mobile capital.”

Formerly a banker at Chase Manhattan, Faber set up Spartan in 2018. Since then, it has advised on the sale of the Ritz, the purchase and redevelopment of the Beaumont and the sales of Admiralty Arch and Six Senses Hotel at the Whiteley, among others, and now the two Evolution buys. There are more in the pipeline. London, he says, “is going through a revolution like Paris experienced 10 years ago. Old places are being modernised and amenities added, and new ones are being built”.

London’s top hotels are having to raise their game. Typically, that means doubling the size of their bedrooms — where they can. “We’re looking at 50 to 60 square metres, an increase from 25 to 30 square metres,” Faber says.

The customers they are pursuing are seeking size, along with “super-luxury”, as Faber puts it, including “great, lively bars and restaurants”. A state-of-the-art gym and health spa is similarly obligatory.

What they’re looking for, too, is service. “It’s the bit that is the most important, that all customers cite,” he says. “They expect recognition if they’ve stayed before; they expect the room to be prepared for them, exactly how they like it.” If they’re Americans, travelling across on the red eye, they need an earlier-than-normal check-in time, too. They are prepared to pay, with more than £1,000 a night the present average.

All of which is positive news for jobs, against a backdrop of a UK hospitality trade that is seeing nationwide closures galore and heavy redundancies.

The London luxury — or “super-luxury” — aspect of the industry is not immune from the impositions of Rachel Reeves, but it is proving more resilient — even in the face of the impact of conflict in the Middle East and ongoing global financial headwinds.

Fashion and designer goods manufacturers are suffering, but not, it seems, their cousins in London hotels. “Hotels are under pressure like a lot of businesses,” says Faber. “They’re having to overcome the same business rates, taxes, living wage issues, just like the rest of business. But the West End is in a separate cycle, in which its hotels have to be brought up to modern day, global standards.”

Within this rarified segment, one area is far and away in front. “Mayfair-Knightsbridge,” Faber says, firmly. That exalted quarter may have some iconic palatial hotels but nothing like enough. Finding suitable locations in Knightsbridge, close to Harrods and Hyde Park, is not easy as there is a shortage of properties. The two neighbourhoods are markedly different in their appeal. Mayfair tends to attract more Americans; Knightbridge more Arabs. Mayfair, says Faber, has much to offer and is powering on.

“Mayfair has been the great central London district winner over the last 10 to 15 years,” he says. “It’s got everything. Finance is here, the banks, private banks, hedge funds, the art world, they’re all right here.” It would be wrong, though, to say that Mayfair caters only for foreigners. Right now, the voices we’re hearing may predominantly hail from overseas, but on a Saturday or Sunday they could be largely British. “The Brits come in at weekends,” he says. “The UK market is very important.” Even at these prices, it seems, and with our levels of taxation.

Globally, says Faber, “London must stand comparison with Paris, Rome, Milan. That is how we’re judged.” The “traditional European tour” remains a solid benchmark, with visitors coming from the US — with its luxury hotels and opulence — journeying to the UK, principally to London, then on to those major European capitals. We can’t be the blot in the middle of the trip.

It’s about improving what we’ve already got and adding capacity, emphasises Faber, such is the seemingly ceaseless demand.

While it’s true that new supply will heighten the competition, JLL predicts it will be absorbed by raised custom. London is the place to be. For proof, look no further than the world’s high-rollers.