London’s Old War Office has a rich history. It was formerly home to the Secret Service, Winston Churchill’s office, and has featured in numerous Bond films.
The latest incarnation? A luxury hotel.
Originally built in 1906 at a cost of £1.2 million (just over £120 million in today’s figures), the building has undergone a £1.4 billion renovation and reopened last autumn as the new Raffles at the OWO.
A night’s stay at the 120-room hotel starts at £1,100. There are nine restaurants, a fleet of livery Range Rovers, and in the Spy Bar downstairs there’s half an Aston Martin DB5 crashing through the wall for effect.
The reinvention of the Old War Office is emblematic of a new trend: a seemingly unstoppable boom in ultra-luxury hotels in London.
The city’s first five-star hotel, Peninsula Hotel, opened in the same month as the Raffles, a short walk from Hyde Park on the edge of Belgravia. It cost £1 billion to build, excluding the cost of the site, and the restaurant is overseen by Claude Bosi, of the two-Michelin star Bibendum.
It is so expensive that “bankers don’t even want to have breakfast there,” according to a financier of the city. Rooms start from £1,300.
According to Lodging Econometrics, London has more luxury hotels under construction than any other European city. Last year, London had 11 luxury hotel projects in the pipeline – a joint record since at least 2007. This was almost triple the number under construction in Liverpool, the British city with the second highest total.
Not only are luxury hotels flying over London, they are also becoming increasingly expensive. £1,000 per night is now the norm. Ten years ago, even London’s most luxurious hotels would have had room rates starting from half that, says Cristina Balekjian, head of hospitality analytics at Costar.
According to Costar, the cost of a typical room in a luxury hotel in London has increased by 111% since 2009, far more than the national average of 61%. One night in the cheapest room on the peninsula costs eleven times the average price of a British hotel room.
A new wave of blockbuster openings is in the pipeline. Mandarin Oriental has two locations and Claridge’s will open a sister hotel in April. International brands Waldorf Astoria, Rosewood, St Regis and Six Senses all have hotels in the pipeline.
Are there really enough rich people to fill all these rooms?
“Absolutely yes,” says Shaun Roy, head of hotel at Knight Frank.
London’s luxury boom is less a story about the capital’s economy and more about the world’s super-rich. Even as growth slows and the masses struggle with inflation, the super-rich are “getting richer and richer,” Roy says.
According to UBS, the number of so-called “ultra-high net worth” people with assets of $50 million (£39.5 million) or more is expected to reach 372,000 by 2027, almost ten times as many as in 2000. There are now more than 2,500 billionaires in the world, who together own $12 trillion.
“So far so good,” said Philippe Laboeuf, director of Raffles at OWO, when asked about business since launch. “We had a prediction and we met expectations. The events are doing extremely well.”
Most of the OWO guests come from the US, followed by Great Britain, then Saudi Arabia, France and Australia. Recently, a leader from the UAE stayed. Leboeuf sometimes changes the names of suites for certain CEOs.
Visitors can easily spend £800 on a meal in the restaurants. “It depends on what wine you order, and whether you order caviar,” says Laboeuf.
He adds: “People don’t mind spending more, but expectations are also very different. To put it politely: a bed and a minibar and a restaurant downstairs are not enough. People almost expect a luxury resort in the city. The service culture is extremely important.”
The abundance of luxury is forcing the old guard to up their game. The Dorchester is completing a renovation which will see room rates start from £1,200.
At The Lanesborough, which is next to the new peninsula but has been open since 1991, revenues rose 12% and reached a record high in 2023.
“Our guests are not increasing enormously in terms of volume, but people are spending a lot more,” says general manager Stuart Geddes. “They stay in more luxurious suites and stay longer.
“Travel and dining out were the two biggest things pulled back during the pandemic. So now people want to travel and spend more.”
Each room at The Lanesborough is assigned a butler, who can often be seen wearing tails and walking around Hyde Park with guests’ dogs.
The glitz is in stark contrast to the wider British economy, which has suffered badly from the cost of living and is likely to enter a recession in the second half of the year.
“London just operates in a different stratosphere to the rest of Britain,” says Roy. “Extrapolating from London to, for example, Birmingham or Leeds, they are simply not comparable.”
The city’s economy has long been separated from the rest of the country. According to the latest official figures, average GDP per capita in London is 77 percent higher than the British average.
A booming property market increases prosperity, while the clustering of high-value sectors in London, such as financial services, also means higher productivity, says Dame Diane Coyle, professor of public policy at the University of Cambridge. London is the most productive region in Great Britain, with output per hour worked that is a third higher than the rest of the United Kingdom.
Yet the boom in ultra-luxury hotels means that the fanciest neighborhoods can often feel separated from the rest of the city itself.
London is in a class of its own when it comes to tourism. Roy says: “If you are a wealthy Saudi family, you don’t really want to go and stay anywhere else except London.
“Sometimes people say: ‘I want to go to London and I want to go to Manchester.’ They want to go watch the football. So they go to Manchester, or maybe to Liverpool, but very often they don’t stay, or they only go for one night.”
Laboeuf adds: “There are so many times in London, during the Chelsea Flower Show, or in July, or during Fashion Week, and there is no way to find a room in London.”
It is a good city for the super-rich, who are more comfortable with rich people than other European capitals, he adds.
“If you have a nice Bentley and you park on the street in London, that’s no problem. In Paris you might find it the next day with many scratches.’
Costar’s Balekjian says: “Some people book themselves into a suite at The Dorchester, for example, for two months and then go to Paris to do some shopping.”
For the world’s ultra-rich, London is just another European capital to romp in – hardly part of Britain.