The greatest shows on earth: Why spending the night in style is good for the soul

Since 1889, London's Savoy Hotel has been a byword for luxury and sophistication and it's set to reopen following a £220m refit

It's taken only three years and a reputed spend of £220m, but the Savoy Hotel is about to reopen its doors to the discerning punter. On the pleasingly symmetrical date of 10/10/10, the posters and signs currently advertising Legally Blonde at the Savoy Theatre will fall away to reveal, behind a new Lalique crystal sculpture of cascading fish, a spankingly restored hotel.

Its owners have done the old place proud. They've pulled up the damaged marble tiles in the front lobby and replaced them with exact replicas, they've stripped back and replaced the wooden panelling, they've installed a new Savoy Museum with souvenirs of the days when Hollywood stars regularly visited. They've remodelled the River Restaurant, and invited two of Gordon Ramsay's protégés, Stuart Gillies and Andy Cook, to oversee the Savoy Grill. They've signed up Pierre-Yves Rochon, international visionary of "luxury hospitality interior environments", to rethink the interiors without losing their Edwardian and art deco charm. They've installed an exuberantly grand Royal Suite, with its own library, dining room and kitchen (for fussy oligarchs and potentates travelling with their own chefs) and two pilastered, emperor-size bedrooms, each with a walk-in wardrobe and an air-conditioned section for shoes.

The old hotel will be crowned by a bang-up-to-date, glass-enclosed fitness centre and a rooftop swimming pool, whence you can gaze at the Thames curving west to Parliament and east to Canary Wharf. Anyone booking into one of the nine "personality suites" (the Marlene Dietrich, the Claude Monet, and the, er, Richard Harris) will get their own personal butler.

The Thames Foyer – where duchesses, film stars and furtive adulterers have taken tea down the decades – has acquired a "winter-garden gazebo", like a huge parrots' cage. The Beaufort Bar knocks your eyes out with its opulent, black-marbled beauty. A wedge of cash has been invested in this champagne n' cabaret space: the gold-leaf paint alone cost £38,000.

They are also, of course, investing heavily in nostalgia. Starry-eyed visitors from Des Moines can sit in the American Bar, where Errol Flynn, Marilyn Monroe, Marlon Brando and Sophia Loren once perched. Nostalgic lunchers in the Savoy Grill, where Laurence Olivier first clapped eyes on Vivien Leigh, can sample the Pêches Melba pudding that Auguste Escoffier invented in honour of Dame Nellie Melba. Lucky punters who have secured a room (from £350 for a standard double, rising to £800 for a River View suite and into the stratosphere for the Royal) can ride in the Red Lift, the first electric elevator the public had ever seen when the Savoy opened its doors in 1889.

It was a different world then. The hotel was a palace of wonders. That lift was known as "the ascending room" and its attendants would hand out shots of brandy to steady the nerves of those "ascending" for the first time. Escoffier was this country's first sighting of a super-chef: his à la carte menu read like the bible of French cuisine, his personnel of chefs patissiers, rotisseur, saucier, entremetier, garde-manger and poissonier processed complex dishes at amazing speed, while the graceful ambience – with a string quartet providing a screen to private conversation – attracted fashionable women to dine out, often in ladies-only banquets.

Cesar Ritz, impresario of grand hotels had linked up with Richard D'Oyly Carte, the impresario of Gilbert and Sullivan operettas, to produce Britain's first luxury hotel. It was the first to be lit throughout by electricity, the first to feature bathrooms inside the guest rooms, the first to use speaking tubes that connected to maids and valets on the lower floors. It was beyond cool. In Victorian times, it was nothing less than awesome.

So were the crazily sumptuous dinners. Ritz and Escoffier were often given a free hand to organise original parties, and did so with alacrity. For a group of young English bravos who had won a fortune betting on red at Monte Carlo, they designed a dining room representing the south of France, with floodlit palm trees in red pots. The menu cards were red, the tables were sprinkled with red rose petals, and Escoffier began the meal serving casino "chips" as roundels of caviar sandwiched by two small discs of smoked salmon, washed down by Cliquot rosé champagne.

When the Savoy closed in 2007, and the owners sold off thousands of brass fittings, bits of cutlery and items of furniture that were surplus to requirements, the place was looking a little bruised and threadbare. After its expensive refit, it will be welcomed with open arms. Some will legitimately ask: 220 million quid? Who needs that much luxury? Is all this (private) money being spent purely for the cosseting of the Qatari royal family and a lot of rich Manhattanites? And we may ask ourselves a more radical question: do we really like hotels?

Didn't we grow out of them, years ago? Are we still impressed by the overpriced mini bar, the noisily freezing air-conditioning, the otiose "turndown service" in which a bored woman minutely adjusts your bed linen and leaves a chocolate on your pillow, and by the sophistication that so impressed Alan Bennett's mother, of having the end of your lavatory paper folded into a chic arrowhead? Haven't we had our fill of Gideon Bibles, Neal's Yard shampoo, Cowshed moisturiser, the towelling robe, the complimentary sewing kit, the Corby trouser press and complimentary fruit, the miniature cartons containing not quite enough milk for your make-it-yourself coffee?

Of course we have, if we're talking about bog-standard or mid-range hotels. Take away the over-familiar extras and you might as well stay in a Travelodge for £19 a night. A hotel is no more than a home-from-home, after all, a tidy carpeted cell, a machine for sleeping in. Why should we spend our hard-earned cash in them?

The answer, I suspect, is because we carry inside us an atavistic fondness for hotels and what they offer, a fondness that connects us to the heady 1890s. We still want to be astonished by luxury, blitzed by sensation, pampered by professional pamperers. It's hard-wired into our natures to put ourselves in the hands of others and ask them to amaze us. We all have memories of fine hotels, golden moments that go straight to the internal Rolodex of happy experiences. I certainly have.

The best bedroom I've ever woken up in was in the Lake Palace Hotel in Udaipur, India, where the sun's rays through the stained-glass window threw nursery-pastel colours on the far white wall – colours that marched up to the ceiling as the sun rose, until it suddenly hit the lake, bounced off it and came up through a second, green window, transforming the bedroom wall into a verdant, watery shimmer: a lightshow arranged 250 years earlier, by an architect using nothing but sun, lake water and coloured glass.

The best messiah-complex experience I ever enjoyed was on the terrace of the Prince Maurice hotel in Mauritius, where the peninsular seawater coils around the wooden slats to give you the impression you're walking on water. The best back-to-nature evening I spent was in a safari hotel canvas tent on the Masai Mara, reading Henry James by hurricane lamp, waiting for a tribesman with spear and flashlight to guide me to the dinner tent, past the lurking hippo and wild buffalo. The best cocktail hour I ever spent in a hotel was at the Savoy's American Bar, where I took my daughter Sophie on her 18th birthday. The dashing young pianist played her "My Baby Just Cares For Me" on the baby grand, ended with a sizzling glissando, rose from his stool, crossed the bar in three strides, seized her hand, kissed it impetuously and presented his urgent compliments. The best fright I ever experienced in a hotel room (apart from the superannuated cowgirl who banged on my door in Las Vegas at 4.30am) was on the balcony of the Mena House Oberoi in Cairo, where I discovered the shadow of the Great Pyramid of Giza looming like the Grim Reaper.

Moments like these reconnect us with those heady days when the Savoy's first guests gazed in wonder at what the modern world was capable of. As the 20th century progressed, hotels became cheaper, more democratic, more attuned to the quotidian needs of the middle class.

Many pre-war hotels featured rooms which had to share a bathroom down the corridor, until architects discovered that punters valued an "en suite" more than anything else. Instead of banquets, visitors were offered a television in every room. In the late 20th century, hotel management and designers invested in new"services" to impress jaded punters.

In Manhattan, you were offered a choice of pillows, from the softest, 900-tog goosedown to scratchy, orthopaedic bombazine. Fresher flowers, fresher fruit, softer duvets, whiter towels, more generous toiletries, more stuff in your mini-bar... In the 1990s, hotels incorporated designer clothing and jewellery shops. Health spas became de rigueur. Top-name chefs were invited on board. Ethno-chic travel gave us hotels in the North African desert made of local mud and glamorised with local rugs on sunloungers and sunny courtyards stocked with Western liquor. Anything that could give the enervated punter a touch of wonder, an agreeable frisson of shock and awe, was tried.

And now? Two years into a recession that should, in theory, sink the hotel trade or condemn it to a nightmare of cut rates and shrinking staff numbers, how are our hotels faring? Remarkably, they're doing fine.

Price Waterhouse Coopers have just released their UK Hotels Forecast for September 2010. They expect occupancy levels of UK hotels to have risen by 5 per cent, year on year – a "scorching performance" by London, they say, "driven by international demand". It's not that ordinary punters have fallen in love with hotels once more, however – these figures mean that more companies are allowing executives expenses-paid corporate travel.

About "ordinary" punters, PWC has advice for hotel groups: "If you sit in the middle of the road, you get run over." This means that, in a period of austerity, "branded budget" hotels appeal to modern travellers – but, in London anyway, luxury hotels have been trading vigorously too. What's not required is the middle-ground hotel with its free shower gel and potpourri. It's classic business wisdom: customers buy either down to a price or up to a perceived value. And the perceived value of the posh hotel has never gone away.

Richard Branson has chosen this uncertain time to launch himself into the hotel market, starting in North America. On Monday he bluntly announced that he and two associates are looking to buy top-scale hotels in New York, San Francisco, Miami, Los Angeles, Boston and Washington DC, over the next three years. He has a war chest of $500m to invest with suitable property owners and developers. "We are keen," ran his prospectus, "to discover a range of interesting, authentic and high quality 150 to 400-room properties in appealing neighbourhoods that will meet the expectations of travellers in the 'creative class' – a culture and mindset that represent the values of our target guest."

Branson's Virgin empire already owns a handful of hotels. They're extremely five-star, and expensive to an unearthly degree – including the Kasbah Turandot in Marrakesh and the Ulusaba Private Game Reserve in South Africa. Most appealing is Necker Island, a 74-acre paradise in the Virgin islands, which can be rented in its entirety by 28 guests sharing 14 rooms, for a mere $53,000 a night (but, you know, split 28 ways).

What catches the eye in Branson's bid for partners, is the "creative class" of hotel punters. Who are these guys? Is he thinking of artists, writers, musicians and poets – traditionally among the poorest members of society? Or merely talking about "people like us" – chaps who share a Bransonian idea of a de-luxe holiday, and have the cash to pay for it? It seems to be the latter. We could be back in the 1890s, with Richard D'Oyly Carte looking for posh, rich, properly schooled and titled chaps and ladies who can be relied on to express appropriate levels of awe about the working lift, the Savoy Shower, the string quartet in the dining room...

A sense of wonder is what hotels brought us 121 years ago. We may have mislaid it over the intervening years, through familiarity and boredom, but it's never gone away. That's why the newly opulent Savoy will be crammed out for the foreseeable future – and why the modern hotelier needs to remember that a desire for luxury, far more strongly than the love of a bargain, courses through the bloodstream of the travelling Englishman.