London’s Hotel Market Is Hotter Than Ever

The slump in sterling has hit most sectors hard but the UK hotel market is one of the few to have benefited. Both tourists and investors are taking advantage of their money going further so demand for hotel beds has been high and the cost of real estate low when compared with the market peak in 2014. 

The luxury hotel segment is doing particularly well right now due to the divergence between the value of the pound and the dollar meaning high numbers of visitors from the US and the Gulf – typically big spenders. While the figures for this year won’t be released for a few more months, in 2018 tourism from the Gulf to the UK was 20% higher than the previous four years with 675,000 visitors from Kuwait, Qatar, Saudi Arabia and the UAE. In the same period tourism from the US was up 30% with 3.88 million visitors. 

Tourists from the US and the Gulf tend to be the highest spenders so attracting them has always been a priority for the luxury hotels. Visitors from the US reportedly spend more than double the amount per person per trip (averaging £860) than the next highest spenders.

And while the weak pound has attracted tourists, it’s also attracted overseas investors who, despite Brexit uncertainty, still value owning UK property and see owning a luxury London hotel as a valuable investment. UHNW family offices, sovereign wealth funds and property investors are all looking for ‘Brexit bargains’ that will also give good yields beyond Brexit which is why prime London locations are proving so popular.   

In fact, according to a study released this week by the law firm, Boodle Hatfield, there are currently 210 new hotels in the development pipeline for London. 48 of them will open in Westminster, adding 6,800 new guest rooms, and 74% of these will be boutique and luxury hotels to meet demand. In 2020, 7,995 new rooms will come to the market, adding to the existing 158,956 rooms, and marking the largest number of openings London has ever seen in one year.

One of the highly anticipated 2020 hotel openings in Westminster is Edwardian Hotels’ ‘The Londoner’ in Leicester Square. Billed as the world’s first super boutique hotel it will be five-star, have 350 rooms, two luxury cinemas and a ballroom for up to 864 people. It will also be deeper than it is tall with 32 metres below ground and 30 metres above. 

The Londoner, Edwardian Hotels

Another indicator of the health of the London hotel market will come when the iconic Ritz Hotel, recently put on the market by the Barclay brothers, sells. It is expected to sell for around $1 billion and is being offered to only a select list of sovereign wealth funds and UHNW investors from the Middle East, Hong Kong, Singapore and US.

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