Author: Suzi Johnson

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Local councils spend record number on hotels

Local councils in Britain have spent record amounts on buying hotels, spending £93m in 2018, an increase of 182% on 2017’s £33m.

This demonstrates the increasing appetite for local authorities to capitalise on low-interest central government loans to purchase commercial property to fund major projects or stimulate regeneration, according to the latest research by global property adviser Knight Frank.

Examples include the acquisition of the 212-bedroom Croydon Park hotel (pictured) in London by the London Borough of Croydon for £29.8m last year; and Scarborough Borough Council snapped up the 140-bedroom Travelodge St Nicholas in Scarborough in October 2018 for £14m.

Shaun Roy, head of hotels at Knight Frank, said: “With the growing acceptance that councils need to seek new means of funding to cover budget shortfalls, we have seen many local authorities make the intelligent move of investing in hotels.

“Significant opportunity exists for councils to invest in hotels and we expect this trend to continue until 2021 when this method of borrowing will end due to new government legislation.”

Knight Frank’s research reveals over £600m of investment is already planned up until 2023 through private-public partnership schemes, where hotels form the primary focus in a development project and which have either outline or detailed planning permission granted.

Where hotels form part of a larger mixed-use scheme and are secondary to other larger publicly residential or commercial elements, the value of projects with detailed plans either granted or submitted rises to £1.8b.

Examples include the City of Liverpool, which has brought to market a number of mixed-use development schemes including the development of the Titanic hotel in 2014, the opening of a new exhibition centre and four-star Pullman hotel in 2016 and the 2018 opening of the 101-bedroom, Premier Inn in central Liverpool as part of a £39m mixed-use regeneration project.

Similarly, Dundee City Council recently opened the 120-bedroom Sleeperz hotel under a lease agreement, which forms part of a £28.5m redevelopment of Dundee Railway Station. A second development in the city, subject to planning, is expected to deliver a proposed 150-bedroom AC Hotel by Marriott, where Dundee City Council is understood to retain full ownership upon the hotel’s completion.

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PwC Hotels Forecast update

According to PwC’s latest UK Hotels Forecast Update, the outlook for hotel deals in the UK this year remains flat as a surge in room supply, slowing global and UK economic growth and ongoing uncertainty relating to Brexit is expected to provide a challenging environment for performance growth.

Hotels in London are expected to maintain high occupancy levels, but supply growth is poised to  limit occupancy growth this year to a “marginal” 0.3 percent.

PwC expects average daily rate (ADR) to keep growing with an uplift of 1.4 percent in London for the next two years, taking ADR up £2 to £151 in 2019 and £153 in 2020. Gains in ADR will drive revenue per available room (RevPAR) growth by 1.7 percent in 2019, taking RevPAR to £126. In 2020, growth is anticipated to see a further  1.4 percent rise, taking RevPAR to £128.

“London saw stronger-than-expected demand in the last three months of 2018 which transformed the year for the capital,” said David Trunkfield, head of hospitality and leisure at PwC. “Early signs in 2019 are that January has continued to see some good growth, with record occupancy levels and ADR gains driving RevPAR growth to over 5 percent. Weekend demand remains strong  and the weak pound continues to support tourism and hotels; however, there are worries tourists, especially from the EU, may adapt a ‘wait-and-see’ attitude toward visiting the UK in 2019.”

New supply grew by 2 percent in 2018, and Trunkfield expected new supply to increase by a further 4 percent in London this year. “With uncertain demand, weaker corporate travel trends and no blockbuster events scheduled this year, this could dampen hotel performance,” he said.

Outlook for the regions

January data from STR indicates the regions already are seeing softer demand and it expects this to continue this year, as high supply additions in many cities continue to affect hotel trading.

PwC’s latest forecast predicts a marginal decline in occupancy of -0.1 percent. As supply squeezes occupancy,  ADR is expected to see only around 0.5 percent growth, taking regional ADR to £73.

PwC expects RevPAR to edge up 0.4 percent to £55.1. In 2020, RevPAR will follow a similar pattern as weak occupancy (-0.1 percent) and ADR growth of 0.8 percent lifts ADR to £73 and buoys RevPAR by 0.8 percent, taking it  to £55.5, according to PwC.

“The regions have enjoyed solid RevPAR growth in recent years but 2019 is looking more difficult as domestic economic growth slows and high levels of new supply dampen hotel trading,” said Trunkfield. “While demand should be supported by festivals, exhibitions and events around the country, such as the ICC Cricket World Cup, the increase in new rooms remains a concern in many cities. A 3 percent increase in supply is expected in the UK as a whole this year. Edinburgh has seen around 3,000 new rooms open over the past five years and is expected to see a further 2,000 rooms open over the next two years. If trading weakens as we expect it will become harder to fill all the new rooms around the country.”

Outlook for deals in the hotel sector

Total deal volume for 2018 reached about £6.6 billion, a 36 percent increase on the previous year, making it the second highest ever year in terms of deal volume behind 2015, which saw a high of about £9.3 billion. Looking ahead, PwC forecasts for deal activity to decrease by around 10 percent to £6 billion.

“Deal activity for 2018 was a tale of two halves,” said Sam Ward, UK hotels leader at PwC. “The first half was dominated by portfolio transactions with the second half dominated by single-asset deals. Despite the continued uncertainty in the market caused by Brexit, this did not deter investors and deal volume reached near record highs.

“Investor appetite has remained strong so far this year with some portfolio deals having already taken place; however, the current uncertainty surrounding conclusion of the Brexit deal will likely overshadow the expectation for the same levels of continued inward investment from Europe and the Far East, despite the low value of the pound.”

The full forecast can be viewed online: https://www.pwc.co.uk/industries/hospitality-leisure/insights/uk-hotels-forecast-update-for-2019-and-2020.html

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Hampton by Hilton pipeline ‘largest in brands history’

Hilton has revealed its Hampton by Hilton brand, the largest in the Hilton portfolio, “continues to lead the way in the upper-midscale segment” and has “the largest pipeline in brand history”.

Hampton was also recently recognized at the top of the ‘Hotels and Motels’ category on the Entrepreneur magazine Franchise 500 list for the 10th year in a row.

Shruti Gandhi Buckley, global head, Hampton by Hilton, said: “Building on our record of innovation and performance success, Hampton maintains strong momentum worldwide.

“Our decade-long No. 1 ranking on Entrepreneur magazine’s Franchise 500 Hotels and Motels list underscores the brand’s ability to empower our owners and franchise partners to continue to build and operate successful hotels that meet the evolving needs of travelers.”

Hampton currently has more than 2,430 properties in 25 countries and territories. In the fourth quarter of 2018 alone, the brand opened the doors to 24 new hotels, including 10 in China, and surpassed the milestone of more than 250,000 rooms open worldwide.

With more than 640 hotels in development, Hampton’s pipeline is currently the largest in brand history and the largest within the Hilton enterprise. The brand will continue to expand in key global regions including South America, with four first-in-country locations slated to open in 2019: Chile, Peru, Argentina and Brazil. Hampton will also expand its footprint in China, where it is the fastest-growing international hospitality brand, with 59 open and nearly 200 signed hotels in the country.

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Marriott announces plans to open more than 1,700 hotels by 2021

The hotel group plans to add between 275,000 and 295,000 rooms by 2021, supported by the strength of its record 478,000-room pipeline, including roughly 214,000 rooms already under construction.

The group said its new room openings during this period could contribute $400m (£303m) in fee revenue in 2021.

Arne Sorenson, Marriott International’s president and chief executive officer, said: “Starwood [the hotel group acquired by Marriott in 2016] has made us a more formidable competitor, providing a more valuable loyalty program, brands with strong appeal to loyalty members and owners, talented associates, terrific locations, particularly in the fast-growing Asia Pacific region, significant cost synergies and meaningful scale.”

Leeny Oberg, Marriott International’s executive vice president and chief financial officer, added: “Our new three-year plan, with Starwood fully integrated, demonstrates how our fee-based, asset-light business model generates even stronger and more sustainable cash flows. This allows us to invest profitably in our core business at high rates of return and also return significant amounts of capital to shareholders. Our proven business model combined with opportunities to leverage our significant scale from the Starwood acquisition uniquely position us for additional shareholder value creation.”

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100 new hotels planned for Travelodge

Budget hotel chain Travelodge has said it plans to build 100 new hotels across the UK over the next five years, creating approximately 3,000 new jobs.

Figures released by the hotel chain shows it saw an 8.8% rise in revenue, with income at £693.3m in 2018 ending 31 December. Adjusting earnings increased to £122m, up £9.6m.

Travelodge chief executive Peter Gowers told the BBC that strong growth in London was being offset by declining sales in the rest of the UK. He added: “These are uncertain times and we are not immune from the short-term challenges, but beyond, we remain confident that there are more opportunities ahead.

“We’ve invested in better quality and choice for our guests, while staying true to our budget roots.”

The chain has 575 existing properties across the UK. It has not yet been confirmed if the new hotels will be equipped with conference or meeting facilities.

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Brexit – the good news for London City venues

Nearly 77% of London City venues, according to a recent survey, are expecting an increase in revenue in the next 12 months, in spite of the uncertainty caused by Brexit.

The survey, carried out by London City Selection (LCS) – a consortium of City venues and suppliers – uncovered several other positive findings. Notably, that 70% of respondents are optimistic about the coming year and 70% have seen no movement or an increase in confirmed booking when comparing 2018 to 2019.

The State of the Industry survey was sent to LCS members to explore the affect Brexit has been having on the events industry in 2019. “Brexit is something everyone across every industry in the City is speculating about,” says Sarah McQueen, Venues & Hospitality Manager at the London Museum, “We wanted to go out there and pull together some facts so we could give our members, and the industry, some clarity about what’s really going on.”

Although the results of the survey look as though 2019 is going to be a good year for the events industry in the City, there are a few areas that may cause some concern including customer spend. Nearly 70% of those surveyed said they felt “client budget is becoming an issue in the face of Brexit”.

It also appears that more venues have seen a dip in overseas bookings (15.38%) compared to only 7.9% enjoying an increase and that venues are concerned about recruiting and maintaining staff in the future. “Brexit is definitely playing a role in recruitment and staff retention,” one respondent said. “The recruitment pool seems to be smaller and overall time to fill a position is longer.” Over half (53.85%) of individuals completing the survey were concerned about this area.

Paul Martins, LCS Chair says: “There’s no doubt that the uncertainty of Brexit is going to affect us all but it’s encouraging to see that, certainly in the short term, LCS member venues are generally optimistic about the next 12 months.”

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European hotel profits fall as hotel openings increase competition

Profit per room at hotels in mainland Europe fell by 9 per cent year-on-year in January – the largest margin of decline in this measure since August 2016 – as revenues dropped and costs escalated, according to the latest data from HotStats.

However, conference average room rate in January was up 3.7 per cent year-on-year. Total conference and banqueting revenue exclusive of rooms was up 0.5 per cent in the month.

A glut of new hotel bedrooms throughout Europe seems to have created more competitive pricing.

David Eisen, director of Hotstats hotel intelligence and customer solutions, said: “I’d say that new supply does have an impact on demand, weakening it to some degree. In 2018, more than 53,000 rooms opened throughout Europe, which was reportedly the highest number of new hotel openings ever recorded. This has an impact on occupancy levels.”

January is historically a slow month for hotels in Europe and the dip should not portend gloom for the full year, according to the report. Hotstats says that this is evidenced by mainland Europe’s very successful year of operation in 2018, during which hotels in the region recorded a 9 per cent increase in GOPPAR (total gross operating profit for the period divided by the total available rooms during the period.)

But within the average figures, the story varied throughout Europe with Lisbon, for example, recording a 6.4 per cent decrease in profit per room while Madrid’s total gross operating profit GOPPAR soared by 31 per cent in the month. The growth in profit was led by a 9 per cent increase in average room rate, which hit €151.61 and was a fourth consecutive month of significant growth in rate.

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Meeting Needs delivers clean, fresh water to deaf school in Niger

Clean, fresh water is now available to the Niamey School for the Deaf in Niger, thanks to funding from industry charity Meeting Needs.

This means no more walking miles to collect water and more time for more productive activities, like the school’s new vegetable garden – which is also benefiting from regular irrigation.

The construction of a well and water tower with a solar-powered pump was a project undertaken by charity Remember Niger Coalition and financed with a grant of just £4,905. The completion of the project is the first step in a larger water and garden project, which will provide 164 students, 20 staff and teachers and more than 70 deaf community members with clean water, nutritious meals and gardening skills each year.

After the first water was delivered, Kara VanderKamp, executive director of Remember Niger Coalition, said: “It was awesome to see everything in place and the water coming out of the spigots. The director, teachers, students and deaf community members are so happy. The children were so cute when we turned on the spigots. They would try to sneak turns putting their hands in the water so they could drink it and rub it over their faces and heads.

“They are so thankful to have a consistent source of water for the children, especially during the hot season. Additionally, their garden will have a greater yield because they will be able to expand it and consistently water the crops. The fruit and vegetables help supplement the students daily lunch and provide much needed nutrition.”

Meeting Needs executive committee’s Lene Corgan said: “This is a fantastic project that is a real life-changer for so many people. It is also completely sustainable and exactly the kind of project Meeting Needs is here to support.”

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Marriott, Hilton, IHG and Accor dominating global hotel pipeline

The global pipeline for new hotels is being dominated by four groups, according to a new report by Lodging Econometrics (LE).

At the end of 2018 Marriott, Hilton, IHG and Accor accounted for over half (55 per cent) of all projects, according to the Global Construction Pipeline Trend Report, which compiles the construction pipeline counts for every country and market around the world.

Marriott International had the most pipeline projects with 2,544, followed by Hilton with 2,252, Intercontinental Hotels Group with 1,716, and Accor with 966. In terms of individual brands, IHG’s Holiday Inn Express had the most pipeline projects with 731.

Analysis shows that the total global construction pipeline hit 13,753 projects at the end of last year, up 7 per cent year-on-year.

Over 5,500 of these projects are in the US, with over 2,700 in China. The two countries between them accounted for over 60 per cent of all global projects, while the UK had a total of 266 pipeline projects (38,590 rooms).

The individual city with the most projects was New York with 171, followed by Dubai with 168, Dallas with 163, LA with 147 and Guangzhou with 132.

LE forecasts that a total of 2,844 hotels will open in 2019 (compared to 2,675 in 2018), with this figure growing to 3,088 in 2020.

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Events Industry Board appoints Michael Hirst as chair

Michael Hirst has been appointed as the new chair of the Events Industry Board by tourism minister Michael Ellis, following the resignation of Nick de Bois from the role in July last year.

Hirst has served as deputy chair since the creation of the Events Industry Board in 2016. He is also chair of the Business Visits and Events Partnership (BVEP), the organisation that connects the leading trade and professional organisations, government agencies in the events sector. Hirst also serves on the Tourism Industry Council and is a director of the Tourism Alliance, as well as being a director and consultant to companies in the commercial and hospitality sectors.

Commenting on his appointment, Hirst said: “I am delighted to have been asked to fulfil this role. Events are being recognised across Whitehall departments as a way of stimulating the economy and showcasing our industrial, scientific and educational excellence. I very much look forward to working with industry colleagues and DCMS and DIT officials to develop the role of the board and ensure that events play their full part in growing the economy and the profile of Britain”.

Michael Ellis, minister for arts, heritage and tourism, said: “Michael has a wealth of experience in the business tourism sector, so I am delighted that he has agreed to chair the Events Industry Board. I look forward to the board continuing to providing invaluable advice to government on how we can further support this important industry.”

Nick de Bois stepped down as EIB chair in July last year when he accepted the role of chief of staff to the then newly-appointed Brexit secretary Dominic Raab in the Department for Exiting the European Union (DExEU). He left the role when Raab quit after 129 days in office.

The Events Industry Board’s role is to advise ministers on improving the competitiveness of the UK in order to secure a greater number of high quality international events. Its aims are to deliver growth through the economic impact generated by business events and visitor spend, whilst increasing opportunities for exports and investment for UK businesses. In addition, the use of business events, as part of the Tourism Sector Bid within the industrial strategy, aims to increase year round productivity, enhance regional prosperity and to provide a sense of place for local communities.

The board has created a comprehensive work programme, with a new action plan currently being implemented. It has established working groups on Infrastructure and Talent and there are plans for further industry roundtables with sector interests across the industry.