Press & News

What is next for UK’s £20bn Hotel Industry?

25 05 2019

The British hotel industry has never been stronger, and the forecast remains positive. Data from the Office of National Statistics shows that the hospitality industry turnover has increased by £12bn since 2015 and the hotel industry, in particular, is playing a major part in this success.

The hotel industry is currently worth more than £20bn and the weak pound continues to attract overseas tourists, but Brexit is giving potential investors cause for concern. Is there genuine reason to be worried, or should we continue to view investment into the hotel industry in a positive light?

Hotel Lobby

Capital City Investment

Looking at PwC’s Hotels Forecast, we can see that the outlook for London remains strong with hotel occupancy levels expected to remain at record highs of 76%.

Furthermore, the average daily rate (ADR) in London is expected to grow 1.4% over the next two years. In turn, this is expected to increase revenue per available room (RevPAR) by 1.7% in 2019 and a further 1.4% in 2020.

Major Investment Projects

While the impact of slower economic growth is having a slight effect, there is far more positive growth going on and plenty of new developments taking shape. The London hotel market is a highly liquid one that remains consistently popular with domestic and international investors. The weaker pound has only served to further encouraged overseas hotel operators who still consider the capital as a prime investment destination.

Investments and new development opportunities are being made towards developments that cater to the evolving demands of the modern traveller to create an even more competitive hotel market. Among the most major investment projects, Holiday Inn Express London – Park Royal has been transformed with a six-figure investment as part of a wider programme, Holiday Inn Express’ Generation 4 standard.

This refurbishment has included a full renovation of all 108 rooms throughout the five-star establishment in a bid to cater to smart modern travellers. It is both a major standalone investment project and a positive indicator for the already-booming £20bn hotel industry as it shows that they continue to move with the times and adjust to cater to the evolving demands of hotel guests.

As part of the £435,000 investment, updates included 43” SMART TVs, allowing guests to stream their own media from personal devices or log into apps like Netflix without leaving their beds. The newly refurbished rooms also include flexible work and rest corners with moveable tables instead of traditional desks to cater to business travellers.

London vs. Wider European

When we take a look at the London hotel industry through a wider lens, things continue to look more and more positive. The 2018 London Hotel Development Monitor Report states that the capital is set to add 11,600 rooms to its world-class hotel market by 2020.

This shows that the industry continues to respond to steady demand from business and leisure travellers, and it also reveals how Brexit uncertainty can actually have a positive effect on inbound tourism. The weaker pound means that London remains affordable especially in comparison to other European cities, and the report also shows that the capital’s hotel market growth is predicted to overtake a number of major European cities by next year, including competitors such as Paris, Berlin and Milan.

As more and more hotel rooms spring up across the city and investments continue to be made, this provides both business and leisure travellers with an even greater choice of accommodation for a predicted and continued positive impact on the supply-demand balance.

The Northern Powerhouse

As we look out towards the regional cities and towns, the market looks strong. The findings from PwC forecast a 1.2% uplift in 2019 for Revenue per available room (RevPAR) in regional locations with demand driven by inbound tourism, domestic holidays and events.

Indeed, there are a number of key events taking place across the UK that are expected to drive tourism and uplift for hotels, including the ICC Cricket World Cup, the Netball World Cup in Liverpool, the Manchester International Festival and UEFA Euro 2020 football championships. With the HS2 project slowly coming to fruition, this further opens up the UK hotel market for additional scope across previously difficult-to-access locations.

Cities and towns in the northern regions, and around the Northern Powerhouse, in particular, are areas where great investments continue to be made into hotels, flying in the face of Brexit uncertainty. Despite thousands of hotel rooms being added, demand is predicted to stay steady with budget rooms playing a significant role in the supply-demand forecast.

This will give travellers further choice across a range of price points and with regional cities enjoying high levels of new supply, brands and products, the UK-wide hotel industry remains competitive.

Breaking New Ground

Back in the capital and there are a number of exciting new hotel brands opening in the London market this autumn and winter. Among the most highly anticipated new openings is Page8 – the first UK outpost for the exclusive Page hotels – as well as how London in Shoreditch and Great Scotland Yard Hotel, which will be the first UK hotel to join Hyatt’s ‘Unbound’ collection. A range of luxury openings also shows that investors remain confident in expanding their interests in the UK market.

Statistics from 2018 and early 2019 show that Brexit uncertainty has not deterred international travel and that the hotel industry remained resilient in the face of the weak pound. While some reports suggest a “wait and see” attitude from potential travellers to the UK, especially those coming from Europe, the overall forecast remains positive.

There was a greater level of hotel deals during 2018 with a 36% year-on-year increase on total deal volume making it the second highest ever after 2015. Experts believe that there will be continued inward investment from Europe and the Far East encouraged by the weaker pound and that total deal volume will exceed original estimates to reach an anticipated £6 billion.

For more information on investment into the UK hotel market, contact Alesco today.

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