Business Travel Show Europe Kick Off, 23 February,
Global Travel Risk Summit Europe, May 2023,
3rd Annual Sustainable Business Travel Summit
TIMING IS EVERYTHING IN BUSINESS, so January's reopening of the luxury Four Seasons hotel on London's Park Lane after a £125 million refit could not have happened at a better moment. The 192-room property was fortuitously shut-down just days after the Lehman Brothers collapse in the autumn of 2008, for a planned refurb to bring the 41-year-old hotel overlooking Hyde Park back up to the standards expected by its well-heeled clientele. But now, with impeccable timing, it has reopened its doors - and added a new floor of suites - amid a boom in demand for luxury hotel rooms in the capital that is driving up rates and occupancy to pre-recession levels and beyond.
While the rest of the country's hotels largely continue to struggle in the wake of the wobbly economic recovery, London's luxury hoteliers are toasting the return of the good old days of pre-recession demand from bankers and international business travellers ready and willing to pay top prices for the right suite in the best locations.
And they are unlikely to be disappointed. The return of the Four Seasons - which follows closely on the heels of the revamped Savoy - will be joined by the opening, over the next 21 months, of an estimated £1 billion-worth of new luxury hotel rooms in the capital as more upscale properties come on-stream.
These range from the Dorchester Collection's 45 Park Lane - a 50-room property housed in the former London Playboy Club, opening this summer - to the gothic splendour of the renovated St Pancras Renaissance London Hotel opening this March at the rail station that houses the Eurostar terminal.
Other upmarket newcomers to the capital include the Corinthia Hotel London, due in April, the £300m flagship for the Maltese-based Corinthia Hotels Group housed in the renovated former Metropole Hotel in Whitehall, as well as the 137-room, £60m London Syon Park, A Waldorf Astoria Hotel, in the grounds of the Duke of Northumberland's Syon House estate in west London, convenient for both Heathrow and central London.
Both these last-named newcomers recognise that attracting and charging the sort of room rates that justify their multi-million pound investments needs something special. The Corinthia, for example, claims to be home to the biggest royal suite among London hotels (at 470sq m), while the Hilton-owned Waldorf Astoria has a butterfly house in its lobby. This is not just a designer's affectation: it is a replacement for the rather larger butterfly house at Syon Park that was dismantled to make way for the hotel.
John Stauss, regional vice president and general manager of the Four Seasons Park Lane, admits that the radical refurbishment of his hotel reflected the need to meet the demands of the hotel's core base of senior business travellers and wealthy individuals. "Over the years a number of regular guests asked us to redo the hotel with a more modern edge, so we effectively built a new Four Seasons out of the old," he says. "When guests check-in and walk through, they will not know it is the old hotel because it's completely different in configuration, design and layout."
Such is the wide appeal of London's 'trophy' hotels that international investors - often wealthy individuals and funding groups from the Middle East, India and Asia - are clamouring to buy into the boom. Earlier this year, for example, the Grosvenor House hotel in Park Lane, previously controlled by Royal Bank of Scotland, was sold to Indian conglomerate Sahara India Pariwar, run by Indian billionaire Subrata Roy, for £470m. Marriott, however, continues to manage the property under its JW Marriott upscale brand.
Yet it has been billionaires closer to home that have been trying to shake up ownership of London's luxury hotels already this year. The secretive Barclay brothers, Sir David and Sir Frederick, moved quickly to try and take control of three of London's top hotels - Claridge's, The Connaught and The Berkeley - when owners, the Maybourne Hotel Group, fell foul of the Irish banking and property crisis.
The brothers, who already count The Telegraph Group of newspapers and magazines as well as London's Ritz hotel among their assets, have long been keen on the hotel sector: they held a 10 per cent stake in InterContinental Hotels Group for some years before selling up last year.
But the prize of uniting the Ritz with the Maybourne trio of properties looked too good to miss, although their bid was still in the balance as Buying Business Travel went to press.
Owning a top hotel in London is something of a no-brainer: apart from the trophy status it brings to the buyer, the capital value of the property can be guaranteed to increase significantly over time. The Savoy, Claridge's, Connaught and The Berkeley were sold collectively for about £500m to US investors in 1998; today the latter three hotels now being run by Maybourne (the Savoy was sold separately to Prince Al-Waleed Bin Talal for £200m in 2005 and is managed by Fairmont Hotels and Resorts) are worth nearer to £1bn, according to property experts. Their value, of course, partly reflects their exclusivity. Property consultants Knight Frank says in a new report that the supply of luxury hotels in London has been held back over the past decade by the "scarcity of viable development and conversion opportunities".
This is echoed by Russell Kett, managing director of hotel consultants HVS London. "London has been under-bedded in terms of hotels for many years but, far from creating an oversupply, these new luxury openings are long overdue," he says.
Yet at the same time as the supply of upscale hotels in London has been limited, the demand for luxury hotel accommodation, says Knight Frank, has "been growing strongly, commensurate with the rapid increase in global wealth".
Jonathan Langston, managing director of TRI Hospitality Consulting, agrees. "London hotels have performed above expectations over the past year and the luxury segment is no exception," he says. The result has been profits "in the double digits" for London hotels, especially those at the top end of the market.
Yet what has proved a surprise to London hoteliers over the past 18 months or so has been the resilience of demand from senior executive travellers. "After Lehman there was a shortterm collapse in demand from our top business guests," recalls one Park Lane general manager.
"But it quickly became clear that the top players - bankers especially - were not going to trade down like their more junior colleagues. It was still the top suites for the top guys."
London has also benefited from the effective 20 per cent or so sterling devaluation of the past two years, which has given inbound travellers the opportunity to trade up to the top-price accommodation while actually spending what they previously would have done on less grand accommodation.
But the global resources boom - which has seen the price of oil and metals surge - has also led to an influx of business travellers from resource-rich countries, such as Russia and the Middle East. And this is likely to continue: several Russian resource companies are planning to float on the London Stock Exchange in the coming months to raise up to £13bn in new funds.
Not surprisingly, many of these types of business travellers are not interested in the price of a room, so much as its prestige. This is especially true of Asian corporate travellers who traditionally demand the best suites as a sign of their status. Anecdotal evidence from travel management companies suggests that at the top end of the market, the real pressure is to get the preferred suites for clients. As the Four Seasons' GM and VP John Stauss points out: "The demand for suites is such that when we rebuilt the hotel we actually reduced the room count to accommodate more suites."
Yet this level of demand is really only applicable to the super-elite luxury hotels - such as The Dorchester or Claridge's - who eschew anything as common as a star rating. "If you start to worry about stars, then it isn't really what we call luxury," says the general manager of one leading establishment.
Those hotels which are considered 'only' five-star have also suffered slightly because they are typically larger with more rooms to fill - the Hilton on Park Lane, for example, has 450 rooms and suites to fill every night, nearly twice that of the neighbouring Dorchester. Being larger means that top-level four-star and five-star properties are more reliant on the conference market.
"The main piece of business that has yet to really come back is conferences and meetings," pointed out Ian Carter, Hilton Worldwide's president of global operations, recently. "Luxury hotels tend not to have big conference and meetings spaces, which makes them more resilient."
Yet the elephant in the room for London's elite hoteliers is whether the recovery in occupancy and rates can continue if the UK or global economic recovery stalls. "Because occupancy is already almost at capacity and there will be a boost in the near-term from the royal wedding and in the run-up to the Olympics, the immediate prospects are strong and we are forecasting revenue-per-available- room growth this year of 3.4 per cent in London," says TRI's Langston. "But the strengthening of sterling is likely to start applying something of a brake."
And the opening of so many new hotels in such a relatively short space of time may give travel buyers a slight edge in negotiating deals with upscale hotels. But London's luxury properties have proved their resilience to most knocks in the past - even the unprecedented economic crisis of 2008 did not curb the appetite of bankers for staying in the best accommodation for long.
Perhaps it is not surprising, therefore, that following on from its revamped Park Lane property, Four Seasons earlier this year secured planning permission for a 190-room hotel to be built in the heart of the City at the Heron Plaza development, close to Liverpool Street station.
Hoteliers, like bankers, are good at following the money.
WHEN FORMER IRISH TAX INSPECTOR Derek Quinlan took control of a clutch of London's luxury hotels in the spring of 2004 - beating off Saudi Prince Al-Waleed Bin Talal in the process - he hoisted the Irish tricolour over the Savoy Hotel, one of the four hotels the investment syndicate he fronted, Quinlan Private, acquired for £750 million from US private equity owners. The others were Claridge's, The Connaught and The Berkeley - arguably among the finest properties in the capital.
Quinlan, along with other Irish investors, took advantage of the booming Irish economy and willingness of the country's banks to finance speculative property deals to accumulate an impressive portfolio of assets in London and elsewhere. But the pick of the bunch were the London 'trophy' hotels.
But when the credit crunch hit and property prices plummeted, Quinlan's proverbial 'luck of the Irish' deserted him as his property empire started to unravel. He decamped from Dublin to Switzerland to try and orchestrate an orderly exit from the mounting debts he and his investors had built up, although most were taken over by the National Asset Management Agency (NAMA), the state-owned vehicle set up to handle bad loans made primarily by the troubled Anglo Irish Bank.
This was not the first time Quinlan had apparently over-reached himself. In 2005, a year after he had acquired the Savoy, he sold it on to Prince Al-Waleed Bin Talal for £200m to help pay off debts, while Claridge's, The Connaught and The Berkeley were collectively brought under the umbrella of the Maybourne Hotel Group (where Quinlan is the controlling shareholder).
Quinlan has spent much of the last year trying to sell Maybourne to take advantage of the buoyancy of London's luxury hotels market. But Maybourne's complex ownership has made a deal difficult to negotiate. In January this year, Sir David and Sir Frederick Barclay, who already own London's Ritz Hotel, acquired a 25 per cent stake in Maybourne (for an unspecified sum) from one of Quinlan's associate investors and had an outline agreement to take over Quinlan's 35 per cent holding (subject to NAMA's approval). They also believed they were on their way to taking full control with a deal for the remaining share stake although, as Buying Business Travel went to press, this remained unresolved.
But Quinlan is not the only owner of luxury hotels to fall foul of the credit crunch. Sir Rocco Forte - who, ironically, sold his majority stake in the Savoy in 1995 - has also struggled with debts taken on to finance expansion of his 13-strong luxury hotels collection, including Brown's Hotel in London.
Forte had largely been financed by Bank of Scotland, part of HBOS, whose corporate finance chief Peter Cummings lent the bank's money with abandon (some £109 billion of it) to finance property deals around the world. When the crunch came HBOS had to be rescued by Lloyds Banking Group.
As part of the bank's refinancing of Forte's loans last year, Sir Rocco agreed to sell some assets. Just before Christmas 2010, therefore, he announced the sale of Le Richemond in Geneva for an undisclosed amount, although continues to manage the hotel.