Why Luxury Hotel Development Is Making a Comeback

Oil prices might be plummeting, but the appetite for high-end lodging appears to be gushing as developers hunt for projects.

The latest case comes from London, where the Old War Office, the very place that Winston Churchill planned Allied strategies during World War II, has been sold to India-based Hinduja Group in partnership with Spanish group Obrascon Huarte Lain Desarrollos, for a reported £300 million or around $470 million. The group's plan is to then convert the historical building, which has more than 1,000 rooms, into a luxury hotel.

As the Daily Mail reports, the building was sold as part of the Ministry of Defense's cost-cutting program.

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Of the sale, Defense Secretary Michael Fallon said: "The building has played an important part in our country's history and now presents a unique redevelopment opportunity in the heart of Westminster. The purchaser will be granted a new 250-year lease to ensure that the heritage and security of the building is well managed."

When completed, the total redevelopment will reported be valued in excess of $2 billion.

There is precedence. The Corinthia London used to also serve as a government building before it was sold. Also, in 2012, the British government sold the Admiralty Arch, which is to also become a luxury hotel.

Wanda Group Accelerates

Not all the luxury moves are taking place in Europe. There's also China, where, according to reports, the Dalian Wanda Group is accelerating the expansion of its luxury hotel business, "with plans to become the world’s largest five-star hotel owner in 2015," as Travel Daily Asia reports.

The company’s hospitality subsidiary, Wanda Hotels & Resorts, will build new hotels in 100 key Chinese cities and tourism destinations next year. And by the end of 2018, the company plans to own more than 150 luxury hotels in China, Europe, the U.S. and Australia.

Not All Rosy

While luxury hotel growth continues throughout the world, there is one place where there are concerns of over development of luxury: Dubai. So, the logical response by Dubai's government: build more affordable hotels.

As Bloomberg reports, a company owned by Dubai’s government plans to open four hotels in the emirate next year to expand the supply of mid-priced rooms "in a market dominated by luxury accommodation."

Wasl Asset Management’s Hesham Abdullah Al Qassim said the three-star properties will each have 150 to 200 rooms and will be managed by Hilton Worldwide Holdings Inc. (HLT) and Hyatt Hotels Corp. Wasl plans to build 19 hotels before end of 2017, he said.

"We want to fill the gap," Al Qassim told Bloomberg. "If you look at what’s available in the market you’ll find that more than 50 percent are five-star hotels. This isn’t healthy."

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