Italy has historically been an exclusive holiday destination for the international aristocracy and the jet set. The trend started in the 18^th century with the wealthy European aristocracy attracted to the main art cities of Rome, Florence, and Venice. Italy continued to attract a flow of affluent travelers during the years of La Dolce Vita when Rome was described as “Hollywood on the Tiber” river and the reputation as one of the most exclusive holiday destinations was reinforced by the rise in popularity of the Amalfi coast, Capri and the Costa Smeralda.

Although average rates achieved by a sample of ultra-luxury hotels in Italy during 2022 rose 45% compared to pre-Covid levels, in the next few years we expect to see further jumps in average rates as many of the country’s top luxury hotels are undergoing repositionings to remain aligned with the demand of their exclusive guests. Renovation plans have recently been announced for leading assets in Venice, Portofino, and Costa Smeralda, where the iconic Pitrizza and Romazzino hotels will be rebranded as Cheval Blanc and Belmond respectively. In Rome, which has seen a significant volume of luxury hotels traded in the last four years as well as investment totaling more than €1.3bn, more than 1,000 new ultra-luxury hotel rooms have or will open between 2023 and 2025, with brands such as Four Seasons, Mandarin Oriental and Rosewood making their debut in a city that has historically lacked luxury brands.

Whilst Italy is gearing up to an influx of new luxury hotels and brands, in another key stop on the European tour, luxury supply could finally be stabilising after a period of profound disruption.

Appetite for ultra-luxury assets in London remains strong, with traditional overseas and domestic investors keen to secure a piece of luxury in one of Europe’s most robust cities. Several ultra-luxury hotels are currently undergoing extensive renovations and developments including iconic hotels such as Claridge’s and The Dorchester. In the last two years alone, our research shows almost £4 billion has been invested into ultra-luxury hotels in the capital. But how has this segment of the market evolved and what does this mean for today’s traveler?

Rewind to 2006, the ultra-luxury hotel segment in London consisted of just over 1,000 rooms and close to 400 suites, representing c. 12% of the total luxury market in London.  Many of these historic hotels were built prior to the advent of en-suite bathrooms, making it necessary to shoehorn en-suite bathrooms into the already small room sizes. Over the next 16 years, the market welcomed new entrants including the Corinthia and Bvlgari, while room configuration changes were made to existing hotels through refurbishments and extensions, leading to an overall uplift in ultra-luxury room supply of 26%. The average size of ultra-luxury hotel bedrooms grew by a third, driven by an increase in standard room sizes, particularly in the new hotels, but also within existing hotels, which combined smaller rooms to eliminate the most challenged room stock.

What impact has all this investment had on the ultra-luxury hotel market in London? Performance amongst the top hotels has soared in the last 10 years. Average rates for a set of stable hotels – not undergoing refurbishment, extension, or renovation – have grown by 94%. However, the transformation of hotels that have undertaken works has been even more significant, up almost 150% compared to 2011. The London market as a whole saw significant uplift in 2022, with the impact of pent-up demand following the pandemic, as well as a reduced volume of lower rated corporate and group business. Despite this, looking at growth between 2011 and 2019, average rates amongst the refurbished hotels were still some 65% higher compared to the stable hotels at 40%.

The ultra-luxury segment in London will welcome some new entrants in the coming years, including the much anticipated 189-room The Peninsula London overlooking Hyde Park Corner and Wellington Arch, the 50-room The Mandarin Oriental Mayfair on Hanover Square and the 139-room Rosewood Chancery on Grosvenor Square whilst Raffles Hotels & Resorts will open its first UK hotel this year, the Raffles London at The OWO. With all these new products entering the market, luxury travelers coming to London will be spoilt for choice, and each new opening will no doubt continue to push the bar even higher, offering state of the art spa facilities, roof top terraces and palatial suites. We suspect the next question might be for how long can rates be maintained at the levels they are today? Or will it be a case of “if we build it, they will come”?

Global Luxury report