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Zolfo Cooper, AM:PM, HVS Hotel Bulletin: Q3 2014 Focus on: hotel closures Hotel bedroom openings and closures per 1,000 population

1880s average GDP growth 8%

(0.5) 0.0 0.5 1.0 1.5 2.0

Over 3,500 rooms lost to direct damage

GDP peaks at 5% 10% average unemployment

Unemployment falls to 6%

Disposable income falls by 8% in 2009

Industrialisation 1850 to 1890


WW2 1935 to 1955 2 Openings per 1,000 population

Recovery 1960s to 1970s 3

Contraction 1980s

4 Closures per 1,000 population

This quarter AM:PM launched a database of over 6,000 hotel closures in the UK and Ireland from 1800 to today. As demonstrated in the graph above, there is a general link between macroeconomic trends and net supply changes. These broader movements mask seismic social and industrial shifts in the UK which have materially impacted the shape of the UK hotel market. We examine some of these below.

The highs and lows of the British seaside resort

Industrialisation in the nineteenth century provided workers with more time and money to spend on leisure. Railways, originally built to serve industry, were highly profitable as passenger transport as ‘railwaymania’ swept Victorian England. The first main passenger line opened in 1837 and within 30 years there were over 10,400 miles of track. The rail network opened up the possibilities for holiday makers and a large number of hotels opened in seaside locations to accommodate. For example, Blackpool, built on textile worker holiday makers, gained a railway line in the 1860s, built its piers in 1863 and 1868, finished its tower in 1894 and opened a significant number of hotels, including the Imperial, Norbeck Hydro and Queens around this time.

The boom in seaside locations was to subside in the 1960s and 1970s with the arrival of the package holiday. Rather than staying in the UK, travellers flocked to the continent in search of sun. As a consequence there was a sustained loss of hotel bedrooms in traditional seaside towns that had previously flourished. Bournemouth, Brighton, Blackpool and Margate closed a substantial amount of hotel bedrooms in this period.

For further information please contact: AM:PM

Zolfo Cooper Graeme Smith e: t: +44 (0) 20 7332 5115

HVS Tim Smith e: t: +44 (0) 20 7878 7729

Alan Gordon

e: t: +44 (0) 188 782 0006

Boom 1990s to 2000s 5

Bust 2010s

6 Net change per 1,000 population Government intervention

In the late 1960s and early 1970s, the Government acted to stimulate growth in the UK hotel and tourism industry. The launch of the Development of Tourism Act in 1969 committed grants of up to £1,000 per new hotel bedroom. Despite seaside closures, this legislation resulted in the highest rate of hotel bedroom openings of any time up to this period. In addition, developers took further advantage of this subsidy by building larger hotels. On average, closures in this period had approximately 40 bedrooms whereas new openings had over 100 rooms.

Despite initiatives to stimulate the sector, the Government responded in the 1970s to a number of fires in hotels. The Fire Precautions Act was first applied to hotels in 1971 and resulted in hoteliers having to comply with numerous new regulations, including installing fire doors and maintaining fire fighting equipment. Adapting hotels to comply proved too expensive for certain hotels, particularly older ones, and as a result a large number of hotels were demolished or sold for alternative use.

Today, regulation of alternative accommodation providers, such as AirBnB, is often less onerous than for hoteliers in the UK. It remains to be seen whether these providers will be able to offer such competitive rates as legislation is introduced to bring certain standards in line with mainstream hotels.

The rise of the brands

Financial services deregulation in October 1986 established London as a global centre for international finance. The event brought an influx of large international corporations to London and triggered expansion of the services sector across the UK. As a result, there was a rapid increase in the demand for corporate hotels. Before the ‘Big Bang’ there were chains in the UK, such as Forte Posthouse and Queens Moat Houses, however the concept of global brands was still its infancy. Businesses increasingly value consistent standards and frequent user benefits and, as such, currently the five largest hotel brands (Premier Inn, Travelodge, IHG, Accor and Hilton) account for over 30% of hotel bedrooms in the UK.

Zolfo Cooper 10 Fleet Place London EC4M 7RB

t:+44 (0) 20 7332 5000 f:+44 (0) 20 7332 5001

Follow our Twitter feed: @ZolfoCooperLLP This publication does not constitute professional advice. Whilst every care has been taken in its preparation please note that it is intended as general guidance only. Before acting upon any information provided within this publication you should consult with a suitably qualified professional advisor.

Zolfo Cooper accepts no liability for any loss sustained by any person who chooses to rely on this publication.

Copyright © Zolfo Cooper 2014. All rights reserved.

HotStats is a leading company providing profit and loss data to the hospitality industry in the EMEA. We go beyond RevPAR to focus on total revenues and profits conversion. For further information, please visit, email or call +44 (0) 20 7892 22 22.

Source: AM:PM, HotStats Note:

Supply data only includes hotel bedrooms with a known opening/closing date.

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