While much of the wider sector continues to navigate cost pressures, rate sensitivity and uneven demand, London’s luxury hotel market is delivering strong outperformance. According to Savills, luxury hotel RevPAR in London finished 2025 more than 28 per cent ahead of pre-pandemic levels. And notably, luxury was the only segment to grow last year even as new supply entered the market.
Amongst recent and upcoming openings across the capital are Raffles London at The OWO, The Peninsula London, Mandarin Oriental Mayfair and The Chancery Rosewood, all ultra-prime, globally competitive product entering an already mature market. And yet, performance has held.
Joshua O’Rourke, director of hotel capital markets at Savills, points to this as one of the clearest indicators of strength.
“Despite supply, London has still managed to absorb the stock. It just looks incredibly resilient.”
Why?
At its core, London’s luxury outperformance is being driven by the expansion of global wealth as high -net-worth travel continues to deepen supported by increasing liquidity among global buyers as well as a generational shift that has refocused spending habits to prioritise experiences.
“There’s been a shift away from spending money on things to spending money on experiences. The global traveller today is far more willing to spend on experiential hotel stay,” O’Rourke says.
This is where London has a distinct advantage. Unlike resort-led luxury markets, the city offers a layered experience, blending culture, retail, dining and history in a way that allows hotels to position themselves not just as accommodation but also as gateways to the destination.
Furthermore, luxury hotels operate with a level of rate flexibility that the rest of the market simply cannot match.
“If you move the price by £100, it doesn’t impact the people at the top end. But in the midscale or economy segments, even a £50 increase has a meaningful effect” O’Rourke notes.
That pricing elasticity is critical as it allows operators to protect margins despite rising costs, drive ADR growth without suppressing demand and maintain positioning even in volatile conditions.
How?
However, it is important to note that luxury is not a rising tide lifting all boats and it is becoming increasingly selective. The assets outperforming today share a strong design identity, prime functional micro-location and experiential positioning and increasingly, credible ESG credentials.
This is where smaller, design-led assets such as the recently-marketed Bertrand’s Townhouse in Bloomsbury show up. While the 43-bedroom boutique luxury hotel developed from three Grade II-listed Georgian townhouses is not competing with the likes of Raffles, Rosewood or Ritz’s, it on the curated, experience-led front.
That distinction is important as investor appetite across London bifurcates. At one end of the spectrum sit the large-scale assets which tend to attract institutional capital seeking platform growth, operational upside and the ability to drive efficiencies at scale. These are the assets where investors can pull multiple levers from repositioning and branding to operational optimisation.
At the other end are smaller, boutique hotels where demand is increasingly being driven by private capital and owner-operators drawn to stable, income-led investments with a strong sense of identity and immediate trading potential. Rather than chasing transformation, these buyers are often looking to acquire fully realised assets and plug into existing performance. Boutique assets tend to trade at significantly higher per-key values. Bertrand’s, for example, is being marketed at around £800,000 per key but with a more selective buyer pool.
What’s notable is that both ends of the spectrum are seeing demand, just from different types of capital.
Micro-location also carries a lot of importance, with investors increasingly underwriting both depth/diversity of demand as well as ability to sustain rate, all of which London – particularly at the top end - has no problem fulfilling. For smaller design-led boutique hotels, competition with global luxury brands hinges on delivering authentic, hyper-local experiences.
Belle of the ball
Perhaps the strongest vote of confidence comes from the breadth of capital targeting London as global capital continues to see London and the wider Europe region as a safe haven. O’Rourke points to sustained interest from Singaporean investors, Middle Eastern capital, Turkey and other European players amongst others. And in periods of geopolitical uncertainty such as in current times, that appeal often strengthens.
“London and Europe have always, historically been seen as somewhat of a safe haven from a travel perspective, and therefore we could see an influx of tourists,” O’Rourke notes as travellers potentially redirect from more volatile regions.
But this volatility can be a double-edged sword.
“Global travel is key to driving London luxury performance so any kind of ongoing conflict and significant impact on cost of air travel which affects global travel will have a knock-on effect on top line performance,” O’Rourke says.
At the same time, supply continues to build. If demand were to soften meaningfully, the combination of rising room stock, high operating costs and premium positioning could begin to test performance. For now, however, the balance remains in favour.