London is seeing large amounts of new hotel supply ahead of the Olympics
Monitor publication to ascertain the number of new hotel rooms likely to be opened in 2011 and 2012. We included all hotels that were labelled as under construction, and assumed 75 per cent of those planned to open in the next two years (but not currently under construction) will be built and opened within that time period. The econometric model already accounts for normal supply increases over time, with around 2,200 rooms built in a normal year. We adjusted the growth in supply numbers to be equiv- alent to our econometric model by taking into account the historic growth in number of rooms in the STR Global data on which our model is based. We also accounted for the fact that STR Global covers only around 70 per cent of the London hotels market. These adjustments meant our estimates of excess supply were 1,500 rooms in 2011 and in 3,400 rooms in 2012.
WILL THE NEW LUXURY HOTELS HARM EXISTING OPERATORS? Luxury hoteliers have taken the view that if they have a good business case for building or refurbishing in London they may as well invest and showcase that new investment to the world during the Olympic and Paralympic Games. The capital is seeing several new brands and operators joining the current luxury and upper upscale hotel scene [see feature on p42]. These include the US boutique group Thompson Hotels (The Belgraves), the W London Leicester Square
ISSUE 2 2011 © cybertrek 2011
(Starwood), the restored Gothic St Pancras Renaissance (Marriott), The London Edition (Ian Schrager and Marriott’s new luxury lifestyle brand), ME by Meliá (Sol Meliá), the Corinthia Hotel London and Shangri-La at the Shard. For some, development means a second or – in the case of Four Seasons – a third hotel in London. It’s a whole new generation of luxury hotels too. Many combine style and service, and differentiation through
“Younger hotel guests continue to drive a more informal contemporary luxury product. London’s traditional ‘grand dames’ such as The Savoy are
fi ghting back as well, with no intention of becoming museum pieces”
top-end technology, beds, spas, celeb- rity chefs and service. Notably all offer facilities a step-up from what people experience at home. Younger guests continue to drive a more informal con- temporary luxury product, with some crossover to lifestyle and boutique hotels. London’s traditional ‘grand dames’ such as The Savoy are fi ght- ing back as well, and refurbishing and
renovating for new battles with no intention of becoming museum pieces. Will this trend exert a halo effect for London’s luxury hotels or a trad- ing threat to existing operators? The rules of supply and demand suggest that absorbing the new rooms may not be such an issue during the Olympics or in central London locations. It’s more likely to prove a headache in the immediate pre- and post-Olympic period. The supply is likely to reposi- tion the London market and it may be even more diffi cult for hotels located further out of the central tourist core and business districts. Some of the hotel operators we spoke to during our research didn’t expect to see a signif- icantly negative impact on revenues as a result of the new supply opening, although others admitted that such a large increase in rooms would clearly impact trading. Several believed that the re-opening of iconic hotels such as The Savoy and Four Seasons along with new names on the scene could provide a positive halo effect, ensuring London continues to compete with top end hotels in other major global cities.
ENOUGH ROOMS TO GO ROUND? The key UK hotel development trend in recent years has been the rapid devel- opment of the branded budgets and there should be rooms of all standards to accommodate Olympic visitors. In addition, a particularly interesting and more glamorous niche trend has been the investment in product quality in London’s luxury and upscale hotels. ●
Read Leisure Management online
leisuremanagement.co.uk/digital 47
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