UK Hotel Sector: Latest Trends

July 10, 2017

 

While London may be seeing a slowdown in its prime residential market one market sector that is moving along quite well is the hotel industry. In 2016 the UK had 2.7% increase in hotel supply to almost 16,000 new hotel rooms come on the market. This represents a 20% increase of new hotel rooms year-on-year according to a hotel sector review by Knight Frank.

 

The construction of new hotels brought a total of 46% of the new hotel supply. Additional numbers show that hotel conversions were at 29% and extensions to existing hotels were at 21.5% and re-openings at 3.5%.

 

For the first quarter of 2017 the UK hotel sector has added 3,700 rooms with an increase in new build production or 63% of new bedroom stock.

 

For 2016 UK construction for new hotel units and conversions 80% were by national and international or global brands with new builds at 46%. The report states that new builds are the most preferred and least expensive when brands want a market presence.

 

Two regions that have experienced above average growth for new hotel rooms are The North East and West Midlands. Cities seeing the largest increases at 3.5 % above the national average include Birmingham, Newcastle, Gateshead, Liverpool, Manchester, Cambridge and Edinburgh.

 

London

 

As London remains popular for business and tourism the hotel sector continues to grow especially for the four star accommodations which saw a 61% increase of rooms in 41% of new construction despite the scarcity, sites and cost of properties for construction. The budget sector saw an increase of 25% of new rooms locally.

 

 

 

The London hotel market not surprisingly has had 32,500 new rooms added since 2010 or a growth rate at  3.7% per year. Overall, the report states: ‘London’s share of the UK hotel supply has increased from 21.5% in 2010 to over 23% in Q1 2017.’

 

For 2016 the report states: ‘... the average size of a new build property in central London was 110 rooms for a budget hotel and over 350 rooms for a four- star development. For Central London hotels, in order to compensate for the higher land and build costs, the size of a property together with maximising the revenue per available room is critical to making an investment viable.’

 

Budget Accommodations and Conversions

 

For all of the new hotel rooms to hit the market in the UK in 2016 over half or 8,000 units were in the budget sector. This now comprises 25% of the total UK hotel room supply. An increase of 26% is expected by the end of 2017 for the branded budget sector with a total of 165,000 rooms.

 

Along with new build properties the sector of conversion properties has been increasing by brands who see the opportunity for growth on a better economic scale. This is more attractive as the investment in new build hotels brings a much higher cost in land, planning and construction. Favourite locations for conversions are near airports, business parks and unused office space in city centres. 

 

The report says of this particular sector: ‘Examples of newly converted hotels include hostels, pod hotels and lifestyle hotels, where atypical, unique or unusual buildings can be converted into adaptable concepts, with flexible branding. As such, conversions offer hotel developers the opportunity to secure sites in prime locations, in primary and secondary markets, at a time of heightened competition for space from both residential and commercial real estate uses.’

 

London hotel conversions are 39% of the new hotel room supply while the rest of the UK is at 24%. Nearly 37% of all new converted properties can be found in the budget sector with 55% in outer London.

 

Also gaining in the building process is the modular build industry where much of the construction can be done off-site: ‘...and modular off-site construction offers a positive approach to value engineering and design solutions, particularly for new hotel conversions in city-centre locations where site constraints and developing in a live, congested environment is common. Contractors increasingly acknowledge that a modular build can halve the construction time, with a 200- room hotel delivered in nine months.’

 

Conversion: Cambridge House?

 

Bought by Reuben Brothers in 2011 for around £100million Cambridge House or as its better known as The In and Out Club at 94 Piccadilly was being regenerated to be one of London’s most exclusive residential properties. The conversion plans drafted by Paul Davis and Partners called for the 5,630sq meter home to include a ballroom, library, underground gym, pool, spa, and a wine cellar. The conversion of the Palladian-style property was expected to take three years and increase the price to almost £250million. 

 

 

 

On 5 May 2017 the owners of Cambridge House filed for a new planning permit with the City of Westminster to re-purpose the property into a 101 room hotel with four private residences. 

 

In the Evening Standard George Nicholas, global head of hotels at property agent Savills, who sees the local hotel sector as great investment opportunity said: “Since mid-last year’s devaluation of sterling, the UK, and in particular London, has seen a marked increase in demand for hotel  rooms across the spectrum of hotel categories.” 

 

 

 

 

 

 

Share on Facebook
Share on Twitter
Please reload

Featured Posts

London Property 2019

Recent Posts

November 19, 2019

Please reload

Archive
Please reload

   ©2004-2019.Kevin Murphy. All Rights Reserved.

For enquiries please contact: km@kevinmurphy.london

     kevinmurphy.london

12090 North Thornydale Road

       Suite 110 #530

  Marana, Arizona 85658 USA