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London: new jewels for the crown

London’s luxury hotel segment is in fine fettle. Its results were boosted by the economic growth of the City and increased leisure tourism.And the regeneration of East London offers new development perspectives for upmarket brands. This is good news in light of the Olympic Games in 2012.

“When the City is well, all is well,” rejoice London’s up market hotel directors. There, perhaps more than anywhere else, the hotel industry is very closely related to the economic activity of the world’s finance, banking and insurance capital. “Growth is steady. Foreign investment– mostly American – has been very high,” observes Christoph Mares, general manager of Mandarin Oriental Hyde Park. Companies listed on the London Stock Exchange are making high profits and are less hesitant about spending in the British capital’s grand hotels. Business meetings follow one after the other to the same rhythm as mergers and acquisitions. “We are doing very well. In 2005, we reached an occupancy rate of 77% with an average daily rate of 400 pounds Editor’s note: 600 euros). And this year we should do even better with 82%,” confirms François Delahaye, COO of the Dorchester Group, which took the name of the eponymous luxury hotel.The effect of the Olympic Games 2012, whose plan is an integral part of this regeneration of East London, could do a great deal for the popularity of the area. So will the next decades shine for London’s up-market hotels? Jamie Tamage would like to believe it: “Even if London is already a mature market, the development of tourism and the exposure it will receive from the Olympic Games are a good omen. The population should grow by 100,000 over the next twenty years. All this will support the dynamics of the economy, which will absorb the new openings”.Even the terrorist attacks on July 7, 2005 did not manage to cast a shadow over London. And, to top it all off, London’s hotels still cannot sit down to rest over a well-earned cup of tea. “The forecast for the years to come shows that this trend will continue,” explains Jamie Tamage, analyst at VisitLondon. Particularly since leisure tourism is also on the rise. “London’s reputation as a Leisure destination is growing thanks to attractions such as the London Eye and cultural jewels such as the Tate Modern”. The Leisure segment is strong for luxury hotels, and professionals are working hard on it as François Delahaye explains: “we offer special weekend packages and we are working with specialised tour-operators to organise them”.Americans clients, British, Europeans, people from the Middle East, Hong Kong and wellto- do Indians: all these clients are able to pay the price for London’s best hotels. And even more for the crème de la crème. Suites are particularly sought after: “It is very important for boosting our average daily rates. A significant share of reservations for our suites comes from clientele from the Middle East and emerging markets,” remarks Christoph Mares.In London, luxury hotels are concentrated in the posh neighbourhoods of Mayfair and Knightsbridge, near the celebrated Hyde Park, with the noteworthy exception of the Savoy in the West End, between the theatres and the Thames. “The neighbourhood has changed and is no longer as elegant as it once was,” observes François Delahaye. History and location play an important role for tradition-bound clientele including English nobility and rich international clients alike. And luxury hotels remain a high place of society life. Evening gowns and tuxedos are frequently donned for grand family and professional events. Like Paris’s “palaces”, six prestigious properties stand out on London’s market place: the Dorchester; the Lanesborough (a St Regis – Starwood hotel); the Mandarin Oriental Hyde Park; the Ritz (partner of Marriott’s Ritz-Carlton); Claridge’s (Maybourne Hotel Group – ex Savoy Group) and the ex-flagship of the group, the Savoy, recently sold to the Fairmont Group.These six properties are on the top steps of the podium in terms of performance and regularly generate average daily rates of around 600 euros. But they are not alone. London’s hotel industry is particularly well supplied with renowned properties. The 5* category represents 13% of the city’s supply– versus 46% for 4* - for nearly 8,000 of the capital’s 78,400 rooms: all potential competition for the historic leaders. The two Four Seasons, the Berkeley and the Connaught – other jewels in the Maybourne Group - are positioned on the same segment as the Dorchester and consorts. Like the Brown’s, opened in 1837 and recently taken over by Sir Rocco Forte who fully renovated it for 30 million euros. Stuart Johnson, its director, stands behind it loud and strong: “the Brown’s is one of the oldest hotels and, in this regard, it is recognized as one of the jewels of London’s hotel supply”. Moreover, upscale chains are practically all present in the British capital: such as InterContinental, Marriott, Hilton, Kempinski, Hyatt, Sofitel, Baglioni... Not to mention groups from further abroad, such as the Taj Hotel with its “51 Buckingham Gate” or the Jumeirah Group of Hotels with the Jumeirah Carlton Tower and the Jumeirah Lowndes Hotel.“London is a must in one’s group portfolio,” explains Jamie Tamage, “the city enjoys a very good and broad mix of clientele". The hotelscape is very diversified there, even more than in Paris. With a few particularities. In the first place, the clubs, which are typically British and direct competitors with the most prestigious hotels: "there are thirty or so in the city that are exclusive but luxurious. If you come from New York or Hong Kong, there is nothing more chic than to say: ‘I’m staying at a club’,” tells François Delahaye.Other no less important actors are contemporary hotels. “These rely not on Corporate clientele, but on individual travellers who are tired of hotel chains, even luxury ones,” remarks Jamie Tamage to explain the success of these properties. The masters in this field have elected residence in London such as Anoushka Hempel with The Hempel, Ian Schrager with the Sanderson and St Martins Lane built by Philippe Starck. Located in Soho and Covent Garden, the latter two have succeeded in finding a place in the sun despite their less “aristocratic” location.In the Covent Garden neighbourhood – and on the same “hype” niche, One Aldwych has achieved convincing results, posting rates that are nearly as high as its glorious competitors. "This hotel works on the ego, personalising service with an excellent director," comments the Dorchester group’s COO. His trademark: he wears no tie. "Considering its location, this hotel has a clientele that is more ‘funky’, particularly that hailing from the media. But it does not have as much ability to attract. It seems to draw less Leisure clientele," observes the director of the Mandarin Oriental.And nonetheless, London is one of the most dynamic hotels in Europe and, for wealthy, young clientele, contemporary hotels have a strong appeal. This competition goads properties established nearly a century ago. François Delahaye has set an important long-term goal: "seduce our clients’ children". His strategy: reproduce a winning formula, tested in Paris at the bar of the Plaza Athénée, one of the most sought after in the City of Light. A trendy bar just opened at the Dorchester at the beginning of July. Idem for the kitchen where the Meurice and the Plaza have placed two renowned chefs at their helms, Yannick Alleno and Alain Ducasse. "We are planning to have a great chef," reveals the director. At the same time, rooms received a makeover last year.Even before it was bought out by the Irish investor Quinlan Private, the ex Savoy Group had taken this same turn. The three properties were each redecorated so they wouldn’t miss its ride on the Internet wave. Today, the Blue Bar at the Berkeley is a meeting place for the "young & beautiful people" of the British capital. And the tables are attractive for local clientele: Claridge’s is home to three-star chef Gordon Ramsay while his protégée Angela Hartnett officiates at the Connaught. The new crew at the Maybourne Group is currently preparing for a new development plan: 37 new rooms will be added at the Connaught, in a much more modern style and 44 will open at the Berkeley under the leadership of architect Lord Rogers of Riverside.This renovation is quite welcome at a time when the competition will only grow more intense in the years to come. By 2009, 5,000 rooms will enter the upmarket segment, nearly half of which will be in the 5* category. The reopening of the InterContinental after being closed down for works and the current restoration of the Grosvenor House, exmember of the Le Méridien family which will move under the flag of JW Marriott, will take place in 2007. And new operators are preparing to hoist their flags in the English capital. The Spanish group Silken, famous for opening its futurist Puerta America in Madrid (see portrait p. 62), will establish itself in 2007 near One Aldwych.The most significant arrival is certainly that of the Shangri-La. In 2009, the Asian brand will overlook London from the heights of the ambitious architectural project of the London Bridge Tower standing 300 metres. This opening is emblematic of the new wave of development taking place in London. “Several tall towers are in the works, half of which depend on a hotel brand,” explains Jamie Tamage. “We are in a transition phase, with an Eastward movement,” explains the analyst of VisitLondon. The regeneration of East London offers hotel developers a new playing field. Hilton will thus open to new properties near Canary Wharf and the Tower of London. Four Seasons has already ventured into this neighbourhood to open its second London property.This rush Eastward is a godsend for luxury brands that still want to set up operations in London. As there is very limited space available in the centre the entry barrier is set very high. “Locations are already taken,” confirms Jamie Tamage. The price of real estate and regulations concerning tall towers also limits possibilities. In East London, a luxury room costs between 800,000 and 1 million euros. This cost may be compared to the sum allocated by Fairmont to buy the Savoy: 1.3 million per room.One question remains: what will the reaction of luxury clientele be? François Delahaye doubts the East London properties will be able to attract the Leisure segment as easily as hotels overlooking Hyde Park. Near the City, backed by strong brands, these properties are not likely to have any difficulty filling up on weekdays with mostly Business clientele. But what will happen on weekends? Christoph Mares defines with extreme precision the expectations of the clientele of the Mandarin Oriental: “our clients want to be in the centre of town, near the Meccas of culture, shopping and gastronomy and in a part of the city that reflects its history”.The renovated neighbourhoods will obviously not be able to boast the same heritage. But they do reflect the dynamism and the modernity of the British capital. Jamie Tamage is not pessimistic: “the clientele will follow. Particularly thanks to improvement in transportation and the Crossrail that will cut travel time from East to West”.The effect of the Olympic Games 2012, whose plan is an integral part of this regeneration of East London, could do a great deal for the popularity of the area. So will the next decades shine for London’s up-market hotels? Jamie Tamage would like to believe it: “Even if London is already a mature market, the development of tourism and the exposure it will receive from the Olympic Games are a good omen. The population should grow by 100,000 over the next twenty years. All this will support the dynamics of the economy, which will absorb the new openings”.

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