Conference Market Proves Bright Spot in UK Hotel Slowdown

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. August 14, 2015

LONDON, EN. August 14, 2015 - Following several years of strong growth in the UK hotels market there are now signs of a slowdown in the sector prompted largely by the weakening of the Euro, a downturn in long haul visitors and strong competition from other European cities.

According to the latest Hotel Bulletin Q2 2015, published this week by HVS, AlixPartners and AM:PM, trading across the UK's hotel market is still seeing growth, albeit at a slower rate than previously.

In Q3 2014 the UK hotel sector enjoyed an average regional RevPAR increase of 21% [Rooms Revenue Per Available Room is the standard industry measure of performance]. This growth decreased to 5% in Q2 2015, with evidence of occupancy levelling, or even falling, in a number of cities.

Ten of the 12 UK cities reviewed in the survey experienced a rise in RevPAR, but across the board the average growth of 4% was the lowest recorded since Q1 2013.

London saw RevPAR up just 3%, attributable to high comparable figures in 2012/13 as well as the weakening of the Euro and the fact that with occupancy flat, or decreasing, hoteliers have been unable to increase rates to compensate.

"While we have seen a significant rise in the market since the downturn, we are now seeing a return to more normal growth and hoteliers are having to work rates to achieve RevPAR increases," commented HVS chairman Russell Kett.

However, the resurgence of the hotel conference market has helped boost RevPAR across the UK, although hoteliers report that booking times are now shorter than they were before the downturn.

Top performer in Q2 2015 was Glasgow, which saw a 14% rise in RevPAR, boosted by £75m-worth of new conference business this year.

Aberdeen is the only regional city to see a RevPAR decline, a direct result in the drop in oil price and the scaling back of investment plans in the city. Occupancy across hotels in the city fell by 13% in Q2.

While transaction activity amongst hotel property has been low in Q2, the sector is likely to start seeing US funds now looking to exit the UK hotels market.

"In recent years we have seen significant investment from US-based private equity capital and a typical exit strategy of three to five years means that time is approaching for them to seek to divest," he said.

"East Asian and Middle Eastern investors could represent potential purchasers as evidenced by the Frasers acquisition of Malmaison and Hotel du Vin, but it's also possible that we may see a return of hotel company flotations following in the wake of the Irish-based Dalata Hotel Group, which executed a successful flotation last year."

About HVS

HVS is the world's leading consulting and services organization focused on the hotel, mixed-use, shared ownership, gaming, and leisure industries. Established in 1980, the company performs 4500+ assignments each year for hotel and real estate owners, operators, and developers worldwide. HVS principals are regarded as the leading experts in their respective regions of the globe. Through a network of more than 35 offices and 450 professionals, HVS provides an unparalleled range of complementary services for the hospitality industry. HVS.com Superior results through unrivalled hospitality intelligence. Everywhere

Contact:
Russell Kett, Chairman
[email protected]
+44 (0) 20 7878 7701