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. Last Updated: 07/27/2016

Luxury Made Cheap in Berlin Hotel Glut

BERLIN -- Lounging in the sunlit lobby of the Grand Hyatt Berlin, Olaf Wolters says he's lost count of the number of luxury hotels he's stayed at in the German capital.

"You have a lot of art hotels, a lot of options where you can stay," said Wolters, a 34-year-old media lawyer who visits the city every year for the Berlin Film Festival. "It's very cheap."

Berlin's 41 four- and five-star hotels have about 12,500 rooms, according to Jones Lang LaSalle. By next year, three more such hotels will add another 677 rooms, bringing pressure on operators to cut prices that are already less than half the rate in London.

Average prices for four- and five-star hotel rooms in Berlin, whose economy has shrunk in seven of the last 10 years, sank 5.1 percent last year to 126 euros ($149), according to Jones Lang. A similar room in London, which has 190 luxury hotels, costs 259 euros. The price in Berlin is 40 percent less than a room in one of Paris's 150 luxury hotels.

The inability of Berlin hotels to command higher prices underscores the city's failure to regain its onetime position as one of Europe's grand capitals. The collapse of the Berlin Wall in 1989 brought a flood of investment on expectations that the newly minted "Berlin Republic" would take its place at the center of an expanding Europe. The explosive growth never came.

"It's a real problem," said Hans Eilers, manager of the Savoy Hotel in western Berlin and vice president of the city's Hotel and Dining Association.

Berlin is set to get more five-star hotels in 2006. On Bebelplatz, a baroque, neo-classical pocket of Berlin framed by the State Opera and Humboldt University, Rocco Forte Hotels is spending 71 million euros on the 146-room Grand Hotel de Rome.

Sol Melia plans to open a 364-room hotel on the central Friedrichstrasse next September. A Park Plaza hotel will open early next year.

"Given the future outlook over the next three to five years, any five-star development carries a lot of risks," said Christoph Haerle, a Jones Lang analyst.

"There are other projects planned and rumored."

Berlin's smaller hotels are being helped by business from tourists, with visitors descending on the city for remaining chunks of the Berlin Wall and snapping photos in front of Checkpoint Charlie.

The number of overnight stays in the city rose 16 percent last year to 13.3 million, city statistics show.

The tourism boom hasn't helped the luxury accommodation segment because it hasn't brought enough high-end clients, said Jones Lang's Haerle.

"Either the people weren't prepared to pay half-decent rates, or there has been so much new supply that the increase has been sucked up," Haerle said.