Weaker pound encourages growth for UK capital cities helping a strong H1 2017 performance

Latest figures from the AlixPartners, STR, AM:PM and HVS Q2 2017 Hotel Bulletin explores the impact on demand of the recent terrorist attacks in London and Manchester.

LONDON—The impact following the terrorist attacks in London and Manchester on the UK hotel industry was less significant than initially feared, according to the latest figures from the Q2 2017 Hotel Bulletin from AlixPartners, STR, AM:PM and HVS. Both cities recorded RevPAR growth in the weeks following the attacks and experienced only minimal cancelations in forward flight bookings. This data demonstrates the robust nature of demand in these markets. 

All four of UK’s capital cities recorded a strong performance in Q2 2017, attracting international tourists with the combination of high profile events and a weaker pound. Edinburgh registered the strongest performance of the four with 23% RevPAR growth, capitalising both on its standing as the UK’s most popular conference destination outside of London and the 12 festivals it hosts each year, which collectively attract four million visitors. This quarter, the city hosted the Edinburgh International Science Festival and Melrose Sevens Rugby tournament. 

Belfast witnessed its fourth consecutive quarter of double digit RevPAR growth, 22% in Q2 2017, thanks, in part, to an increase in visitors from the Republic of Ireland benefiting from the weaker pound. Meanwhile, the relatively small hotel market in Cardiff, and the limited supply growth in recent years, allowed its existing hoteliers to benefit from increased demand which was bolstered by the city hosting the 2017 UEFA Champions League Final.

Leeds saw its RevPAR decline for the first time since 2012, with only eight new hotel rooms being opened in four years. Although 3% more rooms have been sold in Q2 2017, these 1 Source for all data is STR unless otherwise specified^© 2015 AlixPartners, LLP www.alixpartners.com have largely been new hotels taking the market share with RevPAR declining by 4%. Aberdeen continued its decline for the tenth consecutive quarter with an 11% decrease, however the city’s development pipeline remains strong accounting for 12% of current supply.

Development and supply continued to experience strong growth, with over 7,500 rooms opening in the first half of 2017 – the highest H1 figure since 2012 and 40% higher than the same period in 2016. Premier Inn maintained its robust expansion during the quarter, with the opening of two new Premier Inn hotels (613 bedrooms) and its fifth hub by Premier Inn hotel in London at King’s Cross. Other high-profile developments in London include Soho House opening of the five-star independent hotel The Ned (252 bedrooms) and plans submitted for a four-star 214 bedroom Hoxton Hotel in Shepherd’s Bush. 

Transaction values for the quarter totalled of £1.2 billion, of which £0.7 billion related to portfolio transactions. While this is significantly higher than the £0.5 billion of transactions seen in Q1 of this year, the extent to which this is an ongoing trend is still unclear and should be treated with caution as a number of delayed transactions from previous quarters bolstered these numbers. Notable transactions included the Aprirose Investments’ acquisition of the 26 hotel Q hotels portfolio from Bain Capital Credit and Canyon Capital for £520m, Queensgate Investments’ completed acquisition of Generator Hostels from Patron Capital for €450m, and CLD Hospitality’s acquisition of the Lowry Hotel in Manchester from Westmont Hospitality for £53m. 

Graeme Smith, Managing Director at AlixPartners commented, “After the Paris and Brussels attacks in recent years, their respective hotel industries experienced a noticeable drop in RevPAR in the wake of each attack, decreasing by 20% in December 2015 for Paris and by 26% in April 2016 for Brussels. Data indicates that the London and Manchester hotel markets recovered quickly following the recent attacks. The depreciated value of Sterling will have helped maintain demand levels but it also demonstrates the robust nature of these two markets.”

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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.

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