Refurbishments are due to last two years, and will include an extended ballroom, a new summer restaurant with a sliding roof and additional suites. There will also be a thorough technological overhaul.
The 160-room hotel on Place Vendôme has been owned by Egyptian billionaire Mohamed Al-Fayed since 1979 and was was the site of the final meal of Diana Princess of Wales and Dodi Fayed in 1997. The refurbishment will see up to 600 workmen at the hotel during peak periods of renovation.
Established in 1898, the Parisian palace was last renovated in 1979. Increasing competition from newer luxury hotel brands, such as Mandarin Oriental and the Shangri-La in Paris, means more established brands need to get up-to-date with technological advancements, such as in-room WiFi.
The French company that won the bid for the renovations, Bouygues, is experienced in luxury hotel refurbishment, having worked on refittings for Fouquet's Barriere in 2006, and the Royal Monceau and the Shangri-La in 2010, among others.
In a statement made today, Bouygues said: "The luxury hotel is to be totally refitted. This will encompass complete refurbishing of the decoration and renovation of the historic areas, while preserving the spirit of the iconic institution."
The hotel's 450 staff will be laid off during the works, but will receive compensation and have their jobs guaranteed after it reopens.