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  • Writer's pictureZiggurat Realestatecorp

The rise of the £1,000-a-night hotel room

Five-star stays with four-figure bills are the new normal — so what does that mean for all but the super-rich holidaymaker?

For most of us the idea of staying at a grand hotel conjures up images of somewhere palatial, with marble-clad public spaces, silk-swagged bedrooms and hot and cold running butler service. These days, however, “grand” is just as likely to refer to cost, given that the £1,000 room rate has well and truly arrived.

Brits have been shocked to discover that London’s latest five-star openings come with four-figure lead-in rates. Raffles at the OWO, the six-year conversion of the Old War Office near Downing Street into a 120-room, nine-restaurant hotel, charges from £1,100 a night for room-only doubles. Over in Belgravia, the cheapest room-only stay at the Peninsula London, a £1.1 billion new-build on Hyde Park Corner, is £1,300. The full English is another £40.

Such exorbitant sums aren’t deterring the 0.1 per cent. The OWO has a 9.6 out of 10 rating on, with one reviewer claiming that it was “great value for money”.

And TripAdvisor users rank the Peninsula as “excellent”, with one declaring: “The breakfast was unmatched, perfectly cooked and tasted amazing.”

The trend for this kind of “grand” hotel is not confined to new entrants. The Dorchester, one of the capital’s most celebrated properties, has recently emerged from a money-no-object refurbishment and is matching the rookies’ rates, with doubles from £1,030, although that does include breakfast. The general manager, Luca Virgilio, explains: “Our rates reflect the level of service and quality of product. It’s important to consider that the cost of doing business has increased significantly too.”

The past few years have indeed proved challenging for the hospitality industry. Brexit sparked a recruitment crisis, forcing companies to increase wages to attract and retain staff. These shortages have been exacerbated as, post-Covid, employees have been reluctant to return to shift work. Brexit has also resulted in higher costs for food and drink, maintenance and other goods, while the war in Ukraine has led to substantially bigger energy bills.

If anything, though, London is a little late to this party. Two years ago the A-listers’ favorite hotel brand, Aman, burst on to the New York scene at about £3,000 a night. Aman’s chief commercial officer, Anna Nash, says: “Aman New York set an entirely new benchmark in the city. As a result it established a new perspective on rate ceilings.”

Is this Covid’s fault? Aman says not, but other hotel groups, keen to recoup the catastrophic losses from lockdowns, gambled on cash-rich guests emerging from lockdown with a “whatever-it-costs” attitude to travel.

They were right, but what they probably didn’t anticipate was that the public appetite for such inflated rates would continue. But it has, with the rate for a night at the neoclassical grande dame Hotel de Russie in Rome rocketing from £635 in 2019 to £1,699 this year — a rise of 168 per cent — while the entry-level price of a night at the Four Seasons George V in Paris has spiraled from £1,025 in 2021 to £2,146 in 2024, up 109 per cent.

Off the record, some luxury hotels admit that this strategy has led to dramatic drops in occupancy, with some running at about 30 per cent, half the usual figure for this time of year. But rather than being a cause for concern, this can work in a property’s favor. It’s easier to maintain standards in the face of enduring staffing shortages by welcoming fewer guests who are paying, effectively, double or more to stay.

Didier Le Calvez, the CEO of Ré Management, which builds and manages hotels for international brands, is a former general manager at the George V. “After the pandemic there was a golden period when it seemed that money was no object,” he says. “Surprisingly the trend has kept going. Rates are through the roof. My instinct is this cannot last. Common sense will prevail.”

Some commentators believe that American and Middle Eastern travelers, who generally enjoy more favorable exchange rates than their British counterparts, are keeping the market buoyant. But Belles says that Brits are still travelling to high-end places. “Our UK advisers haven’t seen demand slow down,” she says. “More than 60 per cent anticipate a rise in spend and bookings this year. Our sales reflect this, with a 33 per cent uptick in 2023 versus 2019. Paris, Dubai, New York and Florence are the top cities for luxury UK travelers.”

Flur Roberts, Euromonitor’s global head of luxury goods, agrees with Belles: “This is a redefinition of indulgence, where the entry level is £1,000 a night,” she says. “It’s a new benchmark for luxury, and middle-income groups simply won’t be able to afford to stay in these hotels.”

Le Calvez also laments the exclusion of all but ultra-high-net-worth individuals from the world’s landmark hotels. However, because this gold rush isn’t exclusive to the luxury sector, the beleaguered middle-income groups won’t find much comfort from trading down either.

A room at the four-star Moxy Downtown in New York, for example, was £180 in 2019 and is now £365. And the Hotel Pitrizza on Sardinia’s Costa Smeralda has hiked nightly starting prices by a stonking 204 per cent, from £290 in 2019 to £882. “It could be to the detriment of the major cities and resorts,” Le Calvez warns. “It’s an opportunity for secondary destinations” — such as Porto instead of Rome and Croatia instead of Mallorca — “which are going to come across as very good value for money.”

Jules Maury, head of the invitation-only tour operator Scott Dunn Private, is already noticing a shift away from Europe’s honeypots. “Rooms on the Amalfi coast that used to be £650 are now £2,500,” she says. “It’s the same in the south of France and parts of Spain, where you might have to pay £2,000 for two nights in a room the size of a cupboard. I am horrified by prices in Puglia. A good hotel there that used to be about £700 a night is now double that.”

The arrival of new air routes can also influence room rates. Since Qatar Airways launched a direct flight from Doha to Mykonos in 2018, the Cyclades have become far more appealing to Middle Eastern travelers. Their arrival has had a ripple effect throughout the archipelago, with guests having to pay two and three times more to stay on the smaller, surrounding islands. Flights resume in June for the peak summer season.

Portugal and Croatia are benefitting from the search for value. Although average daily hotel rates in Portugal have increased by 32.4 per cent since 2019, the country still remains good value, with an average rate of £129 a night in a Lisbon hotel and rooms in the Alentejo at £84.

James Treacy, communications manager at the luxury tour operator Abercrombie & Kent, says: “The Yeatman, which is one of the higher-end hotels in Porto, is about £150 a night cheaper than the equivalent in Rome. Guides and transport costs in Portugal are also more reasonable.” He also highlights Maslina, a luxury, adults-only hideaway on the Croatian island of Hvar, as a value option, coming in at about £150 a night cheaper than a similar property in Tuscany.

A surprise luxury winner in the present environment is Colombia. “The Four Seasons Casa Medina in Bogota [from £446 a night] is about a fifth of the cost of the Four Seasons Papagayo in Costa Rica,” says Treacy, while the Caribbean is also proving a cheaper alternative to the Med for July and August.

Holidaymakers seem willing to balance the risk of a hurricane against the fact that an all-inclusive week in a luxury resort such as Hermitage Bay on Antigua costs about £10,000 per room — or roughly the same as a B&B deal in a top-end property on the Amalfi coast.

“All-inclusive resorts are becoming more attractive even for very wealthy clients because they have the security of knowing exactly what the final bill will be,” Maury says.

Japan and South Africa are other long-haul destinations where Brits are willing to take the hit of expensive air fares, knowing this outlay will be mitigated by good value on the ground. Like many east Asian destinations, hotel prices in Japan have increased, but only by an average of 6.5 per cent, according to the data expert Costar.

Meanwhile, Cape Town and the winelands continue to be enticing, with restaurants offering Michelin-worthy three-course dinners with wine for less than £40 a head. If you fancy it, don’t dither: Maury warns that demand for these destinations is such that availability of flights, hotels and guides is already limited for 2025.

Families who prefer to stay in Europe are weighing up the convenience of hotels against the cost savings of a villa, where they won’t be paying £15 for a glass of wine or be charged for every coffee at breakfast.

Maury believes there could be a recalibration if geopolitical events, such as this year’s US presidential election, play a pivotal role in curbing international travel, thus prompting a price reset. However, she says that “hoteliers are saying to us that they will keep charging these rates until they don’t have the demand. And right now they still do.

”*all prices are based on a stay in an entry-level room on April 20 unless otherwise stated

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