Key takeaways
Rooms may be hard to find in 2016: demand remains strong with forecast occupancy levels of 84 per cent in London this year, the highest for a decade, while outside the capital it is set to be the ‘highest ever’ at 77 per cent.
But there will be more rooms open: around 16,500 net new hotel rooms will become available this year, with 7,000 in London (up nearly 5 per cent on 2015) and 9,500 in the provinces (2 per cent ahead).
Hub by Premier Inn
available room (Revpar), surged 68.2 per cent year-on-year in the month, according to the Hotstats chain hotels marketing review. But, it noted, “demand from the corporate segment wisely avoided the Welsh capital in October, resulting in a year-on-year reduction in demand for this sector.” But the financial recovery for provincial hotels has lagged behind. While Revpar is ahead of pre-recession levels on a monetary basis, it continues to be behind in real terms (after inflation) by about 12 per cent. But PWC believes this gap could fall to just 5 per cent below pre-recession peaks this year. The importance of a financial as well as an occupancy recovery for provincial hotels is that it is key to encouraging future investment. But there is some good news: property agency Christie and Co says that while London retains its traditional strong attraction for hotel investment, the “significant growth” in the volume of hotel transaction deals last year was driven by the regional market as a result of increased investor confidence. This year it expects “regional [hotel] transactions to dominate the volume”. One reason for the regional recovery – as well as London’s continuing strength – has been the rapid growth in supply of branded budget hotels in many towns and cities. About half of all hotel rooms due to open this year in the UK will be in the branded budget sector, forecasts PWC. It is not surprising, therefore, that leading budget chains Premier Inn and Travelodge are also the UK’s two biggest domestic hotel groups. At the other end of the UK market, hotel analysts report a continuing strong demand for five-star luxury from senior
82 BBT MARCH/APRIL 2016
Small hoteliers are slowly but surely being replaced by the chains
business and high-end leisure travellers. Upscale country house hotels are also back in demand, particularly for top corporate meetings and events. But it is the crowded mid-market sector which appears to be most under pressure from this structural pincer-movement from below and above, creating what PWC describes as the “squeezed middle”.
INDEPENDENT HOTELIERS Yet the real losers in this middle market are not the branded hotels but the large numbers of independent hoteliers who still comprise the bulk of the fragmented UK hospitality sector. It is these small hoteliers who are slowly but surely being replaced by the chains. The combination of investor-owned hotels (now the standard business model for the big brands) having the finance to keep their properties fresh and up-to-date, combined with the marketing strength of the chains, makes it hard for smaller owner- operated hotels who lack the resources of the global brands to compete effectively. Chain hotel operators can offer system- wide corporate deals across a range of brands, which appeals to many corporate
And there will be even more in the future: the UK has the strongest pipeline of new hotels and rooms under construction in Europe, while investment in the sector reached a nine-year high last year.
Best city for bargains: Aberdeen saw the average cost of a room fall by nearly a fifth last year to just over £72 a night, a result of the slump in oil prices.
Look out for mid-market deals: branded chains in the three-star market face being squeezed by the boom in budgets (50 per cent of all new rooms open this year will be low-cost) and the strength of top-end hotels.
travel buyers. Marriott, for example, oper- ates nine out of its 19 global brands in the UK – the most of any leading chain. The challenge facing travel buyers,
however, remains getting best value in a market where demand remains strong, even if not at the same level as in recent years. Data from hotel booking platform HRS shows that over the past four years, from 2011 to 2015, room rates across the UK increased by 26 per cent on average. There was also significant growth across the regions over the period: rates in Leeds hotels were up 41 per cent and, in Man- chester, by 30 per cent. “In the first quarter of the year we are expecting UK hotel prices to hold strong with a slight increase in rates as demand should remain high,” says HRS director Keith Watson.
BUYINGBUSINESSTRAVEL.COM
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