New Paris hotel joins race to pamper the super rich

After four years of refurbishment work costing 430 million euros ($575.67 million dollars), the Peninsula Paris hotel opens its doors on Friday, promising prince-like treatment to well-heeled visitors to the French capital.

It is part of a battle to attract Asia’s new class of super-rich that not only pits the world’s top hotel groups against each other but also cities such as Paris, New York and London.

For the Peninsula team, it is a long-term investment, piggybacking on Paris’s efforts to woo the Chinese in particular over the past decade – yet it comes as the luxury industry in France is feeling the pinch from a drop in traffic from Russian, Indonesian and Japanese tourists.

Even spending by the Chinese, the world’s No. 1 shoppers, only rose 14 percent in France in the first six months of the year, after rising by more than 20 percent and higher in the past few years, according to VAT-refund company Global Blue.

Such projects are important for the government too. France is seeking to exploit its position as the world’s most visited country to boost the trade balance and stimulate the euro zone’s flatlining second economy by convincing tourists to spend more.

Located in a 1908 building a stone’s throw from the Arc de Triomphe and Champs Elysees, the hotel will offer rooms starting at just over 1,000 euros a night and rising to 25,000 euros for a penthouse suite with its own roof-top garden.

Each of the 200 rooms allows guests to make free phone calls anywhere in the world and is fitted with a printer, coffee machine, a nail polish-dryer and a tablet centralizing all functions from dimming lights to ordering breakfast.

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A fleet of BMWs, Mini Coopers, two Rolls-Royces together with 600 staff, including masseuses and cigar connoisseurs, are on hand to cater to every whim of its guests.

The Peninsula will need to spare no effort to stand out against other newcomers such as the Mandarin Oriental, the Shangri-La and the Royal Monceau operated by the Singapore hotel group Raffles which opened their doors in recent years.

Once the refurbished Ritz and Crillon hotels re-open next year, Paris will have increased by over 50 percent its number of five-star beds to over 2,000 in little over a decade.

“There may be some over-capacity in the short term but for me it is not a problem as it will be absorbed and these new hotels will reinforce Paris’ image as a luxury destination,” said Georges Panayotis of hotel and tourism consultancy MKG.

Indeed, analysts say it will take at least 25 years if not more to get a return on an investment the size of the Peninsula Paris, or an estimated 750 million euros (1 billion dollars), when including the cost of acquiring the building.

LUXURY MARKET

The hotel itself is steeped with history, having housed the Nazi military command when Paris was occupied in World War Two and hosted 1973 peace talks aimed at ending the Vietnam War.

The project is a joint venture, run and 20% owned by the Hong Kong and Shanghai Hotels group behind the Peninsula hotels in cities such as Hong Kong, Shanghai, Beijing, Tokyo, New York, Chicago and Beverly Hills. The rest belongs to Katara Hospitality, part of the Qatar Investment Authority.

“Our name is reassuring for a certain type of clientele,” hotel director Nicolas Beliard said of the Peninsula brand.

Last month, Hong Kong-listed investment firm Kai Yuan Holdings Ltd, which has interests from steel making to real estate, bought the Paris Marriott Hotel Champs-Elysees for 344.5 million euros for which it said it aimed to boost its Chinese clientele.

Ten years ago, the Chinese tourist market barely existed in Paris, the domestic shop-window of luxury products ranging from Louis Vuitton bags to Cartier jewelry and Remy Martin cognac.

Since then, the government and Paris city hall have sought to attract more Chinese visitors by making it easier to obtain visas and by strengthening security, particularly in tourist hotspots, to prevent muggings.

A spate of attacks against Chinese tourists in recent years have blemished the city’s reputation, prompting negative headlines in the local Chinese media.

“For me the battle lines are not between the hotels themselves but between London, Paris and New York as luxury destinations,” said Philippe Leboeuf, head of the rival Mandarin Oriental hotel.

But if the stakes are high, so could be the potential rewards. Revenue per room generated by five-star hotels is about seven times that of the hotel industry average, with annual occupancy rate throughout the year of about 75 percent, according to MKG.

The Peninsula’s prospective clients are at the top end of a tourist sector which brings in 82 million visitors a year and contributes 12 billion euros to France’s balance of payments – still not enough to wipe out an overall trade deficit which stood at 4.9 billion euros in May.

Foreign Minister Laurent Fabius is spearheading efforts to persuade tourists to extend their stays in France, noting that Spain pulls in 30 percent fewer visitors than France but derives 10 percent more revenue from them.

New Paris hotel joins race to pamper the super rich