Aug. 5 (Bloomberg) -- A stone’s throw from the Arc de Triomphe, in a building where George Gershwin composed “An American in Paris” in 1928, the Peninsula opened its doors on Aug. 1, becoming the French capital’s latest five-star hotel.
Qatar’s Katara Hospitality and The Hongkong and Shanghai Hotels spent $1 billion on the project, buying the building from the French Foreign Ministry, which had taken it over after World War II, when it had served as the German army headquarters.
The Peninsula’s opening coincided with the reopening of another luxury hotel in the city, the Plaza Athenee, which had been closed for several months for refurbishment, increasing super-high-end lodging options for the world’s rich. While Paris -- one of the world’s most-visited cities -- has fewer five-star hotels than New York or London, the market’s heating up with several new and renovated hotels set to come on stream by 2016.
“I think the competition in 2016 will be intensely tough,” Nicolas Beliard, the general manager of the Peninsula Paris, said in an interview.
For now, Paris’s hotel market remains attractive as the French capital continues to lure an increasing number of visitors, especially newly wealthy ones from emerging markets. About 30 million tourists visited Paris last year, with 40 percent of them coming from overseas. Although the large majority of clients of luxury hotels are still American, British or Japanese, since a growing number of them are coming from countries such as China, hotel chains are taking note.
“Twenty years ago, all hotels had the same code,” Vanguelis Panayotis, director of development at Paris-based MKG Hospitality, an industry analysis group, said in an interview. “Now, they specialize to appeal to particular clients. The Peninsula is a bit ostentatious compared to what traditional clients seek. Westerners want a more authentic experience.”
At the Peninsula, Chinese lion sculptures greet visitors at the entrance and it has a Cantonese restaurant -- one of the hotel’s six eateries -- a reminder of its Hong Kong connection.
Its other restaurant L’Oiseau Blanc, or the White Bird, has a miniature of the French biplane by the same name that disappeared over the Atlantic in 1927.
The hotel’s Kleber bar is at the site where former U.S. Secretary of State Henry Kissinger negotiated the peace agreement that ended the Vietnam War. The talks took place at the international conference center that emerged from the conversion of the Hotel Majestic, which the Germans had taken over during the war -- like they did several others during their occupation of the capital.
With 200 rooms including suites with rooftop gardens, a spa, and the Peninsula’s signature Rolls-Royce limousine service, the hotel has introductory rates from 695 euros ($933) to 25,000 euros ($33,500) a night for the most expensive suite. It also boasts an in-house developed tablet application to manage the temperature and the lights of each room.
“We’re building an asset that we think will be an important landmark for the 50, for the 100 years to come,” Clement Kwok, the chief executive officer of The Hongkong and Shanghai Hotels, said in an interview. “Peninsula has been successful in competing, even in the most competitive cities in the world.”
Katara owns 80 percent of the hotel, with the Hong Kong group, which will run it, holding the rest.
The Peninsula Paris is not the only Hong-Kong-based chain to find a foothold in Paris. In 2010, Shangri-La Asia Ltd. opened a hotel in Paris, followed by Mandarin Oriental International Ltd. in 2011. In June, Hong Kong-based Kai Yuan Holdings Ltd. agreed to buy the Paris Marriott Hotel Champs-Elysees for 345 million euros.
Faced with competition from Asian chains, older Paris hotels such as the Ritz, owned by Mohamed al-Fayed, and the Crillon, owned by a member of the royal Saudi family, are spending millions on renovations.
Currently, there are 56 five-star hotels in Paris, 12 of which the French tourism office calls “palaces” -- all of them owned by non-French investors. They include the Four Seasons Hotel Georges V, owned by Saudi Prince Alwaleed bin Talal, and the Bristol, owned by German billionaire family Oetker.
“Foreign investors are welcome,” Laurent Fabius said, at the Peninsular opening ceremony.
By 2016, there will be 15 such palaces, including one owned by LVMH Moet Hennessy Louis Vuitton SA, the world’s largest luxury-goods company. The group, controlled by French billionaire Bernard Arnault, is converting La Samaritaine, Paris’s landmark department store on the right bank of the Seine River, into a hotel to be named Cheval Blanc, or the White Horse. The hotel is slated to open in 2016.
“There is still room for five more luxury hotels,” Francois Arpels, managing director of Bryan Garnier’s luxury services, said in an interview.
Although more than 500 rooms will be added this year, Paris hasn’t caught up with London or New York yet, said MKG’s Panayotis.
Still, with the Peninsula and the Plaza Athenee, owned by the Sultan of Brunei, opening this month; the Ritz slated to open later this year; the Crillon next year and the Cheval Blanc in 2016, it may not be long before luxury hotels start fighting over customers.
“In the medium term, the fiercer competition will probably impact prices,” said Panayotis. “Average prices in Paris are currently high. They should decrease and get closer to London’s or New York’s in the future.”
To contact the editors responsible for this story: Simon Thiel at email@example.com Vidya Root, Steve Rhinds