27% spike in luxury hotel room supply in London

A 27 per cent increase
in luxury rooms in London by 2012 is forecast in a new PwC hotel
research analysis. The report says 2,400 rooms in 18 hotels in the capital are
under construction or planned.

The advice from PwC is
that if hoteliers have a good business case for refurbishing, building or
operating in London they should consider showcasing their
hotel to the world during the Olympic and Paralympic Games.

A higher suite-to-room
ratio is emerging in
some properties. The Four Seasons on
Lane recently re-opened with an increased suite to
room ratio of around 31 per cent (around 192 bedrooms including 45 suites).

PwC said barriers to
entry are high in the London market with trading strong and high
quality assets relatively scarce.

London is
a key gateway city and a ‘must be-in’ destination for many operators, although
some have yet to get a foothold.

Investors are attracted
by the potential returns to be had as well as by the prestige of owning
some trophy assets, according to PwC,
whose Head of Hotel Research Liz Hall, said: “While absorbing the
new rooms may not be too much of an issue in central London post Olympics, it
may be more difficult for sites further out of the central tourist core and
business districts. Luxury
are often the most volatile and cyclical of all hotel segments and the first to take a dive when
times are bad due to a high cost base
and high service levels. It’s difficult to reduce the cost base without
devaluing the brand and status. On the other hand, they are susceptible to a
very rapid recovery when times are
good, as we have seen in the past and are starting to see now in London.”

Many operators,
however, did not expect to see a significant negative impact on revenues as a
result of the new supply opening, the PwC report noted.

This supply includes
the refurbished Savoy, the Shangri-La, Bulgari, the Corinthia,
the Rennaissance and W.

“Hotels will have to be
pro-active with their marketing,” said Hall who noted London’s luxury room rates
averaged £254 in 2010, compared to £228 in the same period in 2009. This compared to an average of
£127 for all London hotels.

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Paul Colston


Paul Colston

Managing Editor, Conference News & Conference & Meetings World.

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