Those tiny flats are bought by people who need to be in London a couple of nights a week.
A hotel room is going to be about £150 a night, and for £1200 a month/£300 a week, you can get a mortgage on that, and own something about the same size as a hotel room, but where you can store a few suits.
You don't get room service but you get to sell it on when you don't need it
Wouldn't be something I would ever do, but I can see why others might. ExH had a colleague who commutes from the Isle of Wight to London every week, stating in a little flat Monday-Thursday. Bonkers.