This quarterly report provides a snapshot of trends in the UK hotel industry. All data is drawn from our partners HVS and STR, with analysis from our team of experts at AlixPartners.
London recorded RevPAR growth of 0.9% for the final quarter of the decade. Whilst this is encouraging, hoteliers will be keeping a close eye on softening occupancy, especially given active pipeline levels above 10%. Regional RevPAR declined 2.7% in Q4. The regions posted a decline of 1.9% for the full year 2019, marking the first annual decline since 2015.
Transaction volumes were 19% down in 2019, as increased portfolio activity was more than offset by a steep decline in single asset sales. However, with transactions up in Q4 2019 and greater political certainty, investors are likely to be cautiously optimistic about a resurgence in activity heading into 2020.
London recorded another strong quarter in Q3 2019, as events and a historically-low Sterling fueled rate-driven RevPAR growth. Regional RevPAR performance declined for a third consecutive quarter. The pressure on profitability continues to intensify in the regions, especially given low EBITDA margins and high active pipeline levels.
London recorded continued strong growth in Q2 2019, as hoteliers pushed rates for visitors travelling to watch the ICC Cricket World Cup. In contrast, regional RevPAR decreased for the second consecutive quarter, even with numerous matches being hosted outside of the capital. The combination of top line retraction, costs pressures, and unrelenting new supply is putting significant pressure on regional hotel margins.
In Q1 2019, there was polarisation in performance between London and the regions (RevPAR increase of 4% and decrease of 3% respectively). With more hotels due to open and further cost increases on the horizon, hoteliers will be keeping a close eye on the bottom line, particularly in the regions.
London enjoyed an incredibly positive end to 2018, with RevPAR growing by 10% in Q4 due to a number of successful events. In contrast, the regions continued the trend of plateauing growth, with hoteliers' attempts to bolster occupancy by not increasing rates failing to have any material change. Despite a surge in London, operators throughout the UK are keeping a close eye on rising costs, particularly in light of pipeline additions in excess of historical demand growth. The total 2018 transaction value dropped by over £1 billion in comparison to the previous year. Buyers are being more cautious and sellers are also waiting for a solution to Brexit, as they don't want to undersell.
Q3 2018 was a strong quarter for London. This was underpinned by several successful events (e.g. London Pride) as well as record-breaking weather. On a last twelve month (LTM) basis, however, growth in London and the regions remains broadly flat. With active pipeline at 8% and 5% in London and the regions respectively, potential demand growth is unlikely to convert into additional occupancy for existing hoteliers.