Venice: Palaces fit for kings, artists... and hotel guests too

Maria Teresa Sirit has no time to pause for breath. "Now comes Palazzo Grassi, which was owned by the Italian carmaker Gianni Agnelli of Fiat. The building is one of the last done on the canal, in the 1800s … This Gothic building, Ca' Foscari and Ca' Giustinian, is the university. At the top is a hall designed by Carlo Scarpa … That small brown building is the Fondazioni Masieri. The Masieri were good friends of Frank Lloyd Wright. They asked him to design a building on the Grand Canal but the Venetians said 'no thanks, we don't want anything that is modern' …"

Maria Teresa is my guide to the changing face of the palazzos of Venice and has been chosen to lead this tour by IC Bellagio, a company that arranges experiences which enhance travellers' journeys around Italy. Originally from Venezuela, Maria Teresa has been guiding in Venice for 30 years and her knowledge is formidable. As we glide along the Grand Canal in a water taxi, following the S-shaped traffic-choked thoroughfare as it cuts through the heart of Venice's central islands, she rattles off information about each and every building – names, origins and styles, politics and intrigue. I can barely keep up.

Yet, while the detail proves devilish to remember, I get the message that the 100 palazzos on the banks of this fluid artery aren't just beautiful relics but continue to play a key role in the city's fortunes. Most from the Gothic era, many in the Renaissance style, these shrines to the wealth and power of the patriarchs who built and embellished them during the 1,000-year rule of the doges (the dukes of Venice) are still coveted for the status they afford.

The latest wave of buyers – with enough money in this era of austerity to pay for these palaces and also meet the costs of the never-ending restoration works – are, Maria Teresa informs me, the big fashion brands. She points out Ca' Corner della Regina. The palazzo is now in the hands of Miuccia Prada, home of the Fondazione Prada, an institute dedicated to contemporary art and culture. "In the past few years, all these big brands have realised that Venice is very visible. To be really visible, more than in Milan, buy a building along the Grand Canal. So they're all meeting here – Venice becomes local but global," she says.

Another clothing business, Benetton, paid €53m (£45.4m) in 2008 for the 500-year-old Fondaco dei Tedeschi, once the warehouse of the German merchants and famously captured in oil paintings by Canaletto. It may seem suitable that, like the men who built these waterside structures, the new owners are in the business of buying and selling. However, Benetton has angered conservationists by asking the Dutch architect Rem Koolhaas to remodel the old warehouse so that much of its 10,000 square metres will become retail space. Permission was finally granted by the local authorities in March – the change of use will earn the city a handy fee of about €6m (£5.1m). "They are calling Venice 'Benettown' these days," says Maria Teresa with a weak laugh.

Turning a profit from the latest trend is a skill that the palazzo owners have perfected down the years. For few among even the richest can afford to call these buildings home. As well as changing hands for vast sums, they are available to hire and are in particular demand during the Venice Biennale (1 June to 24 November in 2013), one of the world's top art fairs. "It's so hard to maintain a palazzo. One of the ways to make money is to hire out the main floor every two years for the artists," explains Maria Teresa.

The piani nobili, the huge rooms with high ceilings and big windows on the first and second floors which were once home to the owner's chambers and reception rooms, command considerable rents for the duration. Maria Teresa points to the Palazzo Papadopoli, until recently owned by Bianca Arrivabene, the granddaughter of the last king of Italy. "Two years ago, a Ukrainian billionaire, Victor Pinchuk – he gives the Future Generation Art Prize to youngsters – took the floor here," she tells me.

Carnival is another moneyspinner for the palazzos. The 15th-century Palazzo Pisani Moretta, with its Gothic mullioned windows and Baroque interiors decorated by a checklist of fine Venetian painters – Tiepolo, Guarana, Diziani and Angeli – is the venue for the Mascheranda Masked Ball, one of the big celebrations of the annual February shindig. "See how many chandeliers there are. The lighting is all by candles," says Maria Teresa. I baulk at the riskiness of so many naked flames in such a fragile place, but she dismisses my caution. "Yes, it's risky, but it's also beautiful." The Venetian moneymaking spirit is alive and well.

Venice's palazzos are also enjoying a resurgence of interest from the hotel industry. The city in the lagoon has been receiving tourists for centuries, since the days when the heady mix of sex, gambling, opera and Carnival lured visitors to the playground of Europe in the 17th and 18th centuries, the days of Casanova. And the palazzos have provided sublime lodgings down the years, by private invitation, private rental and later through their conversion to hotels.

However, in the past five years, hoteliers have sought to open new properties and refurbish established ones in a way that maximises the potential of the palazzo as never before. They're responding not just to the need for more volume in these charming buildings, as increasing numbers of visitors descend on the city, especially from Japan and India, but also to the demands of the sophisticated 21st-century guest, who wants more than just an attractive and comfortable place to stay.

One radical reinterpretation of this traditional space is the Palazzina G in the Palazzo Grassi on the Grand Canal. Here, Philippe Starck has imposed a very modern vision, adopting his signature whiteout interiors for the 26 rooms and adding glamorous flashes of glass and mirror. At the 12-room Ca' Maria Adele, opposite the cathedral of Santa Maria della Salute, the interior designers have invoked the decadent spirit of Venice's heyday with copious flock wallpaper and damask fabrics, but also mixed in modern materials such as polished concrete.

The Singapore-based Amanresorts group will open its first hotel in the city next weekend, inside the Palazzo Papadopoli. Aman Canal Grande Venice will have 24 suites, where the interior designers have been tasked with ensuring original frescos and reliefs are complemented by Aman's familiar contemporary styling with a touch of Asia.

Established hotels that have been raising their game include the Hotel Danieli, in the Palazzo Dandolo on the Riva degli Schiavoni, a member of the elite A Luxury Hotel Collection, part of the portfolio of one of the world's largest hospitality groups, Starwood. Last summer it unveiled a lavish reworking of four premium rooms, the Dandolo Palace Suites, by the interior designer Pierre-Yves Rochon. In February, its sister hotel the Gritti Palace, also on the Grand Canal, reopened following a more extensive refurbishment by local architects, craftsmen and cultural institutions which took 15 months and €35m (£30m) to complete.

The 15th-century palazzo has served as a hotel on and off since the turn of the 20th century. This project has sought to preserve its future with new equipment to protect the hotel from the rising waters – one of the greatest challenges currently facing the Venetians and a job that took the whole of the first three months of the works. But it has also future-proofed the interiors. Furnishings have been restored and commissioned. Barely an inch of the place is without some precious adornment – a Rococo couch, a Girandole mirror, a Murano glass chandelier, a slab of Italian marble – and many of the fabrics have been supplied by the venerable Venetian textiles company Rubelli.

The hotel has also recognised the need to break out of the Venetian vernacular and offer something strikingly contemporary. General manager Paolo Lorenzoni is keen to show me the new roof terrace of the two-storey Redentore Terrazza Suite. We take the lift to the top floor and step out on to the 250sq m split-level space. "There is plenty of room to invite people," he suggests, waving a hand at the acreage. "We want guests to feel this is a home from home." I'm left to wonder at the opulence of the houses these people live in.

The style is minimalism. A gazebo dominates the lower level, its slender struts supporting a wisp of sailcloth that provides shelter for a huge sofa. The higher level focuses on a rectangle of water, sharply framed by decking and set with various lounging options. The style may be ubiquitous, but the view isn't – I look across the terracotta rooftops to Palladio's cathedral, after which the suite is named. These palazzos are destined to be in a perpetual state of change if they are to meet the needs of every future generation drawn to the city in the lagoon.

Travel essentials

Getting there

Kate Simon travelled to Venice as a guest of British Airways (0844 493 0758; ba.com/venice) and The Gritti Palace, A Luxury Collection Hotel (00 39 041 794611; thegrittipalace.com). A two-night break with BA costs £579 per person, based on two sharing, including return flights from Gatwick and B&B at The Gritti Palace.

Flights to Venice's Marco Polo airport from the UK are offered by the following airlines: Monarch (0871 940 5040; flymonarch.com) from Birmingham, Gatwick and Manchester; Jet2 (0871 226 1737; jet2.com) from Edinburgh, Leeds/Bradford, Manchester and Newcastle; BA (as above) from London City, Gatwick and Heathrow; easyJet (0843 104 5000; easyjet.com) from Gatwick, Manchester and Southend.

Getting around

IC Bellagio (00 39 031 952059; www.icbellagio.com) offers a two-hour tour of the city from €675 (£579) for two people, including English-speaking guide for three hours, private water taxi hire for two hours and admission fees.

More information

The Venice Biennale art exhibition and fair runs from 1 June to 24 November (labiennale.org).

The next Venice Carnival takes place from 15 February to 4 March, 2014 (venice-carnival-italy.com).

Italian State Tourist Board (020-7408 1254; italia.it).