The luxury end of the London hotel market has always been something of a rarefied space, set apart from the world of mere mortals.

But such has been its growth in the postpandemic period of high inflation and growing wealth inequality, the sector just below the very top end can achieve prices that might once have seemed out of reach.

That is attracting new investors and opening up new opportunities, like converting historic office buildings to top-tier hotels.

London hotels just below a £1K average daily room rate are in an interesting sweet spot, KSL Capital Partners partner Tina Yu told the audience at Bisnow’s UK Hotel Real Estate Forum 2025, held at the Waldorf Hilton in London.

“You can draft off of the luxury segment in terms of rate, but you don't have their operating costs,” she said.

Average room rates for luxury hotels in London grew 31% between 2019 and mid-2024, Savills reported, but those levels slipped back in 2025, partly due to several new openings.

But that growth means hotels just below that top level can position themselves as good value while achieving rates that they wouldn’t have underwritten a few years ago.

“I think what we're trying to do is be the £500-a-night product in the £1,500-a-night market,” Orka Investments CEO and founder Raoul Malhotra said.

Later this year, Orka will complete the development of The Shepherd, a luxury lifestyle hotel in Mayfair delivered in a joint venture with Bain Capital.

“When we started, it was a £1K-a-night market. So I'm very happy to keep seeing rates moving the way they're moving,” Malhotra said.

There is some element of indigestion in the market as a result of new high-end openings, he said. But at the same time, on the investment side, there is a growing amount of long-term ownership coming into the asset class, which can underpin room pricing.

“London is going the way Paris has gone, where everything there is owned by a sovereign wealth fund who, I don't want to say don't have to care about profitability, but can afford to wait and can afford to not have to drop their rates,” Malhotra said.

Accor kead of luxury development for Northern Europe Maria Ashton said the launch of collection brands, a softer, more flexible version of a luxury brand, is expanding the possibilities of what amenities operators put in a luxury hotel and opens up options for things like room size — 300 SF is no longer the be-all and end-all.

More and more of Accor’s luxury hotels are conversions of existing hotels or even office buildings rather than new builds, she added. That reduces the amount of embodied carbon created by a scheme, making them more sustainable.

Historic buildings in particular make excellent candidates for luxury conversion, panellists said.

“They're leaving behind lots of big assets with huge floor-to-ceiling heights and amazing decoration,” Elliott Wood Director and hospitality sector lead Mark Goodbrand said.

Examples he cited were the Old War office on Pall Mall; the former offices of TfL at 55 Broadway near St James’s Park; The Ned in the City, a former Midland Bank office and branch; The Nomad, a former police station; and a new project in the City that will be housed in a former HM Revenue & Customs office.

“In the luxury sector, it gives your brand stories and history and helps you to tell tales which people want to understand — they want to stay in Winston Churchill's office,” he said.