LONDON AND PARIS LUXURY HOTELS - Knight Frank

HOTEL MARKET REPORT 2014HOTEL MARKET REPORT 2014LUXURY HOTEL MARKET IN LONDONKnightsbridge andMayfair supremacyand esteem and over the centuries haveremained one of the most exclusive hoteladdresses in the world.The history of luxury hotels inLondon starts somewhere inthe late 19th century coincidingwith the start of social scenechange, the popularity oftrans-Atlantic travel (oceanliners) and the spate of newluxury shopping experiences.Remarkable examples of luxury hotelsoutside of these clusters include the Ritzin Piccadilly, and the Savoy on the Strand.KEY TO SHOPSToday, Knightsbridge and Mayfair continueto dominate the luxury scene in Londonwhere famous hotels are surrounded byhigh-end retail and super prime residential.Traditionally, the British elite would spendseveral months of the year in the capitalto socialise and to engage in politics. Afterthe First World War, however, landowningaristocratic families started to replacetheir London mansions with luxury rentedaccommodation during the London socialseason. Social gatherings in exclusive publicvenues started to outclass those held atthe mansions of leading members of thearistocracy. One of the largest privatelyowned mansions in London during that timewas the Duke of Westminster’s GrosvenorHouse (now the Grosvenor House Hotel)and the Holford family’s Dorchester House(converted in 1931 to The Dorchester Hotel).172839410511612Bond StreetMarble rownsGreen Park45 Park ge5TheLanesborough642 3The opening of Harrods in 1905 andSelfridges in 1907 gave the city additionalappeal. London flourished with thedevelopment of luxury hotels. Park Lane,a fashionable residential address, wasquickly joined by Knightsbridge and MayfairHarrodsLondonVictoriaSouth Kensingtonin becoming synonymous for prestige1The Bulgari Hotel, LondonSloane SquareDID YOU KNOW?Establishment of luxury hotels in London19051907HARRODS1812CLARIDGE’S1815THE CONNAUGHT18001837BROWN’S HOTELSELFRIDGES1906THE RITZ1900MARKET REPORT1928GROSVENOR HOUSEHOTELLONDON & PARIS LUXURY HOTELS1931DORCHESTER HOTEL190518761972Alexander Graham Bell stayed atthe hotel to demonstrate his newinvention – the telephone – the firstsuccessful telephone call in GreatBritain was made from Brown’s.THE BERKELEYAmerican millionaire George A. Kesslerhosted a “Gondola Party” where thecentral courtyard was flooded torecreate Venice and guests dined in anenormous gondola.The Savoy was also the first luxuryhotel in Britain to introduce electriclights throughout the building, electriclifts and en-suite bathrooms.20007MARKET REPORT1905The hotel first opened in 1815 as thePrince of Saxe Coburg Hotel.In 1917, during World War I, thedecision was made to change thename to the less-German “Connaught”.The name originates from the titleof Queen Victoria’s third son, PrinceArthur, the first Duke of Connaught.LONDON & PARIS LUXURY HOTELS1945At the request of Winston Churchill,suite 212 was declared Yugoslavianterritory so that Crown PrinceAlexander II could be born on his owncountry’s soil.8

HOTEL MARKET REPORT 2014HOTEL MARKET REPORT 2014LONDONTHE CONNAUGHTHélene DarrozePARISSHANGRI-LA HOTELPhilippe LabbéMANDARIN ORIENTALHeston Blumental45 PARK LANEWolfgang PuckLE MEURICEAlain DucasseMANDARIN ORIENTALThierry Marx45 Park Lane, LondonLUXURY FEATURESAlthough there is no internationally accepted definition for a luxury hotel, it is an ultra-luxury hotel’sfeatures, facilities and service level that set it apart from the mainstream five-star market segment.Bedrooms and SuitesAmongst the distinctive characteristics ofbedroom sizes and high suite ratios. Althoughroom sizes in hotels included in our study areoften dictated and somewhat constrainedby the historic character of the building,most guest rooms measure between 30 and40 sq m. Junior suites are typically 45 sq m.Signature suites are of between 200 sq m and300 sq m and typically, can be booked byappointment only. Notable examples includethe 220 sq m suite located on the seventhRoyal Suite in The Mandarin Oriental Londonlength of the entire suite, giving ultimateviews of Hyde Park.restaurants. Amongst these, there is Alainaccommodation is also reflected in thequality of design. Unique examples includePark Hyatt Paris VendômeHôtel Le BristolBlumenthal at Mandarin Oriental and ÉricFour Seasons Hôtel George V ParisFrechon’s Epicure at Le Bristol in Paris.SpaDiane von Furstenberg’s (also known as theA high quality spa is now, more than ever, a“Queen of prints”) suites at Claridge’s.prerequisite for a luxury hotel. ExceptionalLondon and Paris are both world renownedLondon, which is one of the largest and mostspecial endeavours to attract guests to dineat the hotel’s restaurant. When GordonRamsey won the Claridge’s contract in 2001it was a huge breakthrough for the youngthe Corinthia Hotel and the Bulgari’s spa inexclusive urban retreats in the city centre.The Aman Spa at the Connaught is the firstthe company’s own hotels. Health Club at thethe World in 2013.Hotel Le Bristol and Raffles Hotel Royaland relatively unknown chef. As Ramsey’sMany of these properties are destinationMonceau have the highest suite ratiopopularity and recognition grew so did thehotels and are considered by the superamongst all hotels included in our analysis.trend for alliances between luxury hotels andwealthy as the places to be and to be seen.900 sq m SpaSur Mesure par Thierry MarxTreatmentroomsValmontThe restaurant re-opened in June 2013 under thechef Alain Ducasse after the three-star Michelinchef Yannick Alléno left the hotel to head therestaurant at Cheval Blanc in Courchevel.250 sq m SpaPayotLe Pur’ Jean-François RouquetteSpaLa PrairieEpicure, Éric Frechon740 sq m SpaSodashiLe Cinq, Eric BriffardShangri-La Hotel Paris1,000 sq m SpaCARITAL’Abeille, Philippe Labbé; Shang Palace, Frank XuSpaESPADinner by Heston Blumenthal2,000 sq m SpaESPAIl Ristorante, Robbie Pepin800 sq m SpaVaishaly, ESPA OrganicPharmacy, OmoroviczaAmaranto RestaurantTreatmentroomsValmont, Carol JoyLa PraineAlain Ducasse at The Dorchester3,300 sq m SpaAMANHélène Darroze at The ConnaughtBrown’s HotelTreatmentroomsNuBo, Carita ParisAromatherapyAssociates, SpieziaHIX MayfairClaridge’s HotelTreatmentroomsSisley45 Park Lane Dorchester CollectionThe Dorchester London HotelDorchester CollectionShangri-La Hotel in Paris made the CondéNast Traveller list of The 35 Best New Spas inFLAGSHIP RESTAURANTClarinsThe Connaught HotelAman Resorts-branded facility built outsideMICHELIN STAR1,500 sq m SpaFour Seasons Hotel London atPark LaneFour Seasons on Park Lane, ESPA Life atPRODUCTSGuerlain and MO’ssignature product lineRaffles Hôtel Royal MonceauBulgari Hotel & Residences LondonFood & BeverageFACILITIESLa Cuisine, Hans ZahnerIl Carpaccio, Roberto RispoliMandarin Oriental Hyde ParkLondonexamples include the roof top spa at theThis highly competitive environment requiresHôtel Le Meurice DorchesterCollectionDucasse at The Dorchester, Dinner by HestonChanel herself, in the Ritz Hotel in Paris andthe Coco Chanel suite, designed by Coco64 restaurants in London and 82 in Paris.100 sq m terrace facing the Eiffel Tower. Theis 242 sq m and has a balcony that runs thecelebrity chefs to create signature destinationsuite proportion.dining scenes. The Michelin Guide 2014 listsfloor of the Shangri-La hotel in Paris with aMandarin Oriental ParisLondon hotels have, in general, a lowerThe distinctiveness of the lettingtop class hotels are larger than averageAMENITIESHOTELCUT at 45 Park Lane, Wolfgang PuckClaridge’s has recently announced that the British chef Simon Rogan, whois the holder of two Michelin stars at his restaurant L’Enclume in Cartmel,Cumbria is to take the helm at the restaurant that was previously run bychef Gordon Ramsey for 12 years. The Restaurant will open in Spring 2014.Hôtel Plaza Athénée ParisUnder refurbishmentHôtel De CrillonUnder refurbishmentThe Lanesborough, a St. Regis HotelUnder refurbishmentSource: Knight FrankMARKET REPORTLONDON & PARIS LUXURY HOTELS9MARKET REPORTLONDON & PARIS LUXURY HOTELS10

HOTEL MARKET REPORT 2014HOTEL MARKET REPORT 2014NEW SUPPLY/UPGRADESOPERATORS’ PERSPECTIVEParisV embarked on a programme to renovateThe most recent luxury hotel opening inIn recent years Paris has seen an influx ofits guestrooms over a period of threeLondon is The Wellesley. This hotel is locatedyears at a cost of 200 million. The Ritzin Knightsbridge, in the former Hyde ParkCorner underground station that waspermanently closed in 1930. The hotel has36 bedrooms, the UK’s largest humidor, arestaurant, bar and cigar terrace.new luxury hotels. This included the re-closed in August 2012 for some 27 monthsopening of Le Royal Monceau – Rafflesof renovation under the designer eye ofin 2010 under the management of theThierry W. Despont. Meanwhile, HotelSingapore-based Raffles Group, thePlaza Athénée, which recently celebratedarrival of Shangri-La Hotel, Paris and theits centenary, closed in October 2013 withMandarin Oriental, all recognised luxurya planned reopening by May 2014. Lastly,Far-Eastern brands.The Hôtel de Crillon closed in February2013 for a 100 million refit which willMost recently, in June 2013, and following ainclude the installation of an indoortwo-year restoration, the legendary Princede Galles on the prestigious Avenue GeorgeV reopened its doors under The LuxuryLondonCollection Hotels & Resorts brand which ispart of Starwood Hotels & ResortsAccording to AM:PM Hotels, approximatelyWorldwide. Still to arrive this year (August3,250 new luxury bedrooms have become2014) is The Peninsula, Paris which is toavailable in London since 2009. Recent newbe located on Avenue Kléber near the Arcsupply includes the refurbished Savoy, Thede Triomphe. The hotel will mark the firstEuropean opening of this Hong Kong-basedgroup, who have also announced plans toBulgari Hotel, Corinthia and 45 Park Lane.The owner of the Lanesborough Hotel, theAbu Dhabi Investment Authority (ADIA),open a hotel in London overlooking Hydeannounced that the hotel will close forPark Corner. 2016 will mark the opening ofthe LVMH’s Cheval Blanc Hotel (72 bedroomsand suites) which is planned to be developedin La Samaritaine, a department store next tothe Louvre.swimming pool.an extensive renovation project on 20December 2013, reopening in the fourthquarter of 2014. All furnishings, artefactsand decorations, with more than 3,000lots were put to auction. The renovatedIn addition, a number of high-endLanesborough will feature new designsluxury hotels in Paris are currently beingby world-renowned interior designer,upgraded. The Four Seasons Hotel GeorgeAlberto Pinto.Still awaiting its arrival to the capital isThe Peninsula, which has recently secureda development site at 1-5 Grosvenor Placein Belgravia after a lengthy hunt for a suitablelocation. Scarcity of development sites insuper prime locations have already inducedShangri-La to have selected the landmarkbuilding, The Shard, for its new Londonaddress. Launched in May 2014, Shangri-LaLondon marked the first opening of a hotelof this class south of the River Thames.The market is also awaiting two speculativehigh-end hotel developments. AdmiraltyArch, the Grade I listed arch located on TheMall, which leads from Trafalgar Square toBuckingham Palace, is to be converted into aluxury hotel, serviced apartments, a spa andmembers club. The owners are currently indiscussions with a short-list of luxury operatorsand the hotel is due to open in 2016/17. 10Trinity Square, the former HQ of the Port ofLondon Authority situated close to the Towerof London, is to be converted into 41 luxuryserviced residences and a 120-bedroom hotel.The scheme is being developed by the Beijingbased Reignwood Group.We have interviewed key managers in top London hotels who have also had experience in running andoperating luxury hotels in Paris. We asked them about their views and experiences in both markets,below is a summary of their thoughts.LuxuryGuest demandDiningw Luxury is a concept that changes over time.A little tongue in cheek, but 25 years ago aluxury hotel was one where you had an en-suitebathroom and was, effectively, somewhere moreluxurious than your own home.w Paris is the city of romance and fashion.Paris will always dominate the fashionmarket, not least, as it is the home ofChanel and LVMH – LVMH includes Dior,Louis Vuitton, Givenchy, Fendi, Kenzo,Céline, Donna Karan, Emilio Pucci andMarc Jacobs.w For some, the concept of fine dining isarguably now a little passé. This is notimmediately obvious when one considersthat there are nearly 150 Michelin starredrestaurants in Paris and London (82 inParis vs. 64 in London) however the offerin both cities is a little different.w Paris trade is much more leisure focusedthan London and, as a result its ARR ishigher, although this is in part a functionof a historically superior bedroomproduct, albeit the gap is narrowing withLondon’s offer having been boosted bynew openings.w In Paris it doesn’t matter if it is a Bistroor a Michelin-starred restaurant, themost important aspect is the quality ofthe food.w With the marked increase in residentialspecification it is now harder to offer qualityand comfort that is better than at home,thus, it is more about offering an exceptionalservice. It is no longer about getting a goodnight’s sleep, it is about creating memories thatwill make guests want to come back.w As the global distribution of wealth evolves, sodoes the concept of luxury. In the 80’s and 90’sluxury was associated with owning – the best car,the most expensive watch, the most extravagantjewellery. Nowadays people want to go to themoon and have George Michael sing at theirbirthday party. Luxury is now associated with‘experiencing’ rather than ‘owning’.w One General Manager we interviewed hasdefined selling luxury as selling dreams. Thedown side of this is that dreams are expensiveto fulfil. Only a few operators understand howto realise them. You can reduce your costs by30% and will still be able to operate a hotel butyou will no longer be able to sell the dream.w London is the financial capital of Europeand, as a consequence, enjoys higheroccupancy than Paris with higher midweek corporate demand.w Paris has a higher ARR, however, the lowerARO goes some way to narrowing theRevPAR gap between the two capitals.w The benefit of the higher ARR inParis is also offset to some extent byhigher payroll costs and related Frenchemployment laws, that significantly reduceprofitability in Paris compared to London.w Mark Sargeant, former General Managerof the restaurant at Claridge’s made thefollowing remarks in an article publishedin The Times on 13 January 2014:“I don’t really knowwhat the phrase ‘fine dining’means now. You can finedine in a burger joint .People have woken up tothe fact that you can’t affordto make customers wait toget a table, and when youget there you can’t even talkbecause you’re not allowedto speak above a whisper andthen have to spend half theevening with a sommelier youcan’t understand because he’smumbling about the wine High end restaurants are nowschooling their staff to adaptto the world of ‘fine diningin trainers’.“Shangri-La Hotel, ParisMARKET REPORTw In London, it is equally important thatthe restaurant has a ‘buzzy’ and ‘hip’atmosphere. The food quality is a given,rather it is the promise of a remarkableexperience that differentiates and,in the instance of hotels, can drawexternal guests.LONDON & PARIS LUXURY HOTELS11MARKET REPORTLONDON & PARIS LUXURY HOTELS12

HOTEL MARKET REPORT 2014HOTEL MARKET REPORT 2014FIGURE 3London key performance indicatorsARR 650ARRAROARO90% 60085% 550 50080% 45075% 400 3502007 2008 2009 2010 2011 2012 201370%Source: STR Global / Knight FrankFIGURE 4Paris key performance indicatorsARR 1,000ARRARO 900ARO80%75% 80070% 70065% 600The Dorchester, London 5002007 2008 2009 2010 2011 2012 201360%Source: STR Global / Knight Frank1 GBP 1.1684 EURFIGURE 5RevPAR comparison in London andParis 2007-2013ARR 700PARISLONDON 650 600 550 500 450 400 3502007 2008 2009 2010 2011 2012 2013Source: STR Global / Knight FrankConversion Rates as at 31 December each yearMARKET REPORTOPERATIONAL PERFORMANCEWe have reviewed the trading performance of a definedset of luxury hotels in Paris and London over the lastseven years.In our London set, we have included top-end hotels including The MandarinOriental Hyde Park, Bulgari Hotel and The Lanesborough in Knightsbridge,45 Park Lane, Four Seasons Hotel and The Dorchester on Park Lane as well asThe Connaught, Claridge’s and Brown’s in Mayfair.In the Paris set, we have included The Mandarin Oriental Paris, Four SeasonsHotel George V, and the hotels that form the Dorchester Collection – HôtelPlaza Athénée and Le Meurice. We have also selected Le Bristol, The Hôtelde Crillon, Le Royal Monceau – Raffles, Shangri-La Hotel, as well as ParkHyatt Paris – Vendôme which has recently been awarded ‘Palace’ status. Thesample excludes the Ritz which closed its doors in August 2012 for majorrenovation. Also, it should be noted that Hôtel Plaza Athénée closed its doorsin October 2013 for redevelopment works and The Hôtel de Crillon is in theprocess of being completely refurbished and no trading data is available fromFebruary 2013.LONDON & PARIS LUXURY HOTELS13With 10,534 bedrooms within 62 hotels,the provision of luxury hotels in Londonis greater than Paris. The French capitalhas approximately 2,288 bedrooms within16 hotels which makes the Paris marketapproximately a quarter of that in London.consecutive year of RevPAR growth ofARO resulted in an overall 115.2% increase inabove 10%. Overall, Paris hoteliers sawRevPAR from 266.98 in 2012 to 574.48 inan impressive 26.1% growth in RevPAR2013. The months of September and Octoberbetween 2011 and 2013 which, in2012 also saw significant improvement innominal terms, represented an increaseheadline performance, with RevPAR growth ofof approximately 138.50.15.7% and 18.3% respectively.ParisLondonOur luxury set’s ARO stood at 77.7% in 2013,Our Paris luxury hotels have experiencedsignificant growth in ARR since 2009 andreported a historic high of 963.51 in 2013,10.1% up on the previous year. This followedthree years of consecutive ARR growthbetween 2009 and 2012. Equally, AverageRoom Occ

Source: Source: The World Luxury Index Hotels Growth in guest demand for luxury hotels in 2012 The World Luxury Index Hotels published in June 2013 *The pink circle represents the source of global market demand and the figure in the bracket refers to the change in the market share between 2011 and 2012. two weeks, most people go out and enjoy