Press Release

Transactions in UK hotel industry nearly double in value in 2017

February 2018

Latest figures from the AlixPartners, STR, AM:PM and HVS Q4 2017 Hotel Bulletin assess whether the UK hotel industry is approaching the top of the market as demand weakens despite strong transaction values

LONDON – The combined value of transactions in the hotel industry for 2017 was nearly double that of 2016 at £4.6 billion, according to AlixPartners, STR, AM:PM and HVS for the Q4 2017 Hotel Bulletin. On a quarterly basis transaction values were also high at £1.3 billion for Q4 2017, the highest since Q4 2015.

The impact of the EU referendum in 2016 can be seen clearly in the value of transactions which dropped from £5.3 billion in 2015 to £2.4 billion after the vote as some investors cleared out their UK hotel positions before Brexit is enacted. Current levels of transactions are now similar to those of 2014 (£4.4 billion) and 2015 (£5.3 billion), although there is uncertainty as to whether they will remain at these levels in 2018 or drop back to that of 2016 (£2.4 billion).

However, there was a different picture in terms of demand over the quarter with revenue per available room (RevPAR) growth remaining slow across the UK in Q4 2017, only Belfast reached double-digit growth and London recorded its first decline after four consecutive quarters of growth.

This was Belfast’s sixth consecutive quarter of RevPAR growth, in contrast to four of the twelve UK cities examined which declined in Q4 2017. Data from Q4 2017 shows that half of the other cities examined saw a decline in occupancy levels although, for cities like Bath and Birmingham, this follows strong comparators in the previous year.

Despite nearly six million annual average visitors to Bath, RevPAR in the city has declined for the second quarter by 4%. This comes amidst plans to introduce a tourist tax, the impact of which will presumably have to be considered thoroughly to avoid being too detrimental.

More positive results were seen in Edinburgh where RevPAR growth reached 7% in Q4 2017 and averaged at 12% over 2017, making the city a consistent top performer. However, the high number of visitors has raised concerns over infrastructure capacity and how well public transport can cope during peak times with the growing tourist numbers.

Interestingly, after four consecutive quarters of growth in RevPAR, London recorded a 1% decline in Q4. With its numerous tourist hotspots this decline is likely to be partially attributable to the returned strength of the pound which means that overseas visitors are no longer getting the bargain exchange rates enjoyed previously in London and across the UK.

Graeme Smith, Managing Director at AlixPartners commented:

“In 2017, hotel performance in the UK was bolstered by the depreciation of sterling. Building top-line growth off strong comparators is likely to be challenging, particularly given the returning strength of the pound. Given this, and escalating cost pressures, 2018 is likely to be a softer year for profitability; experienced investors appear to be calling the top of the market due to the barrage of exits in the second half of the year.”

About the AlixPartners, AM:PM and HVS Quarterly Hotel Bulletin

The Hotel Bulletin analyses demand, supply, pipeline and transactions in the hotel market in 12 cities across the UK. The information contained in this Press Release sets out a summary of the information contained in the Hotel Bulletin and should be read with and is subject to the terms, limitations and assumptions contained in the Hotel Bulletin.

About AlixPartners

In today’s fast paced global market timing is everything. You want to protect, grow or transform your business. To meet these challenges, we offer clients small teams of highly qualified experts with profound sector and operational insight. Our clients include corporate boards and management, law firms, investment banks, investors and others who appreciate the candor, dedication, and transformative expertise of our teams. We will ensure insight drives action at that exact moment that is critical for success. When it really matters. alixpartners.com

ABOUT AM:PM

AM:PM is the most advanced system for staying on top of hotel supply development. Currently available for the UK and Ireland, AM:PM was acquired by STR in 2016, and is currently being integrated for several markets around the world. With AM:PM, you can stay informed on new hotel openings, pipeline construction and development, closures, rebrands and transactions and access intuitive reports. Beyond the updates, you can visualize this data with our fully functional map tool.

ABOUT HVS

HVS is the world’s leading consulting and services organization focused of the hotel, mixed-use, shared ownership, gaming and leisure industries. Established in 1980, the company performs 4,500+ assignments each year for hotel and real estate owners, investors, lenders, 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 40 offices and 350 professionals, HVS provides an unparalleled range of complementary services for the hospitality industry. Superior results through unrivalled hospitality intelligence. Everywhere.

ABOUT STR

STR is the source for premium global data benchmarking, analytics and marketplace insights. Our data is confidential, reliable, accurate and actionable. Our comprehensive solutions, analytics and unrivalled marketplace insights are built to fuel growth and help our clients make better business decisions. For further information, visit www.str.com.

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