Tag: hotel trends

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2019 UK Hotel Development Opportunities

More than £1.1b was invested in UK hotel development projects in 2018, driven by increased investor confidence and an appetite for long term secure income.

That’s according to Knight Frank’s annual UK Hotel Development Opportunities 2019 report, which said that London attracted 60% of investment volumes. Supply is set to increase by 4.2% in 2019, constituting 38% of the total UK pipeline.

The UK hotel sector opened 15,500 new hotel rooms in 2018, marking a 2.4% increase in supply. The growth trend is expected to continue in 2019 with a further 19,300 rooms forecast to open this year, up 2.9%.

The reported also revealed a shift in the composition of new room supply. New build hotel room development made up the bulk of new supply in 2018.

But hotel conversion – which accounted for 34% of new bedroom stock – increased by 42% year-on-year as developers capitalised on increased vacancy rates from other asset classes considered suitable for hotel conversion.

For the full year 2019, the proportion of hotel of conversions is expected to be around 20% of new supply, while asset management programmes – such as hotel extensions and refurbishments – will constitute a further 17% of new supply.

The majority of construction projects are expected to continue focusing on new build hotel rooms, making up 63% of the new supply.

Budget hotels continue to dominate the market, with 7,500 new rooms expected to open by the end of 2019, up 5% year-on-year. But market share remains on a downward trend as the growing trend for lifestyle hotels continues to drive both branded and independent mid- and up-scale hotels.

The report forecasts that the budget sector’s market share of new hotel room supply will be 39% for the full year forecast 2019, down from 49% in 2016.

Shaun Roy, head of hotels at Knight Frank, said: “The hotel sector is undergoing robust levels of development activity, despite the continued uncertainty that Brexit brings. This is occurring both in London and the UK more generally and is particularly evident in those markets which have a diverse business mix, with a thriving leisure market such as Edinburgh, Birmingham and Brighton.

“There are clear opportunities for investors in the hotel sector nationwide at the development stage, which presents a long-term strategy providing a guaranteed stream of secure income.”

The Knight Frank UK Hotel Development Index named Edinburgh, London, Brighton, York and Birmingham as the UK’s top five most attractive cities for hotel investment and development.

The full report can be found here.

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Guests value ratings over brand value, study finds

Guest ratings and price are more influential than brand reputation when travellers book hotels, according to a new report – ‘The Big Decision: How travellers choose where to stay’ from Expedia Group and Unabashed Research.

The study’s 903 participants were asked to select two destinations; a familiar domestic city and an aspirational international location that was unfamiliar. The result? The report stated that ‘Price was by far the most important factor when picking a hotel, across both well-known and unknown brands.’ And ‘Interestingly, hotel brand carried a marginal advantage over the other attributes.’

“Our results revealed that guest ratings have a strong influence on traveler selection. Travelers are willing to pay more for hotels with higher guest ratings, and considerably more so than for premium branding.” according to the white paper by Expedia Group’s Abhijit Pal, head of research, lodging partner services.

“This shows that guest ratings have essentially leveled the playing field for independent hotels, as more potential guests seek out third-party endorsements for hotel properties they are considering,”

“Today’s brands succeed by filling up their hotels with business and group travellers, and for many second-tier business destinations, it may feel impossible to be an independent hotelier. Online marketplaces can help convince leisure travellers, as well as road warriors and their employers, to choose independent properties.”

So one of the study’s main takeaways is it “shows that a non-branded independent has opportunity to compete against an established brand player for traveler preference by focusing on the guest experience.”

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‘Unprecedented’ growth boosts UK hotel investment to £7.4b

Investment in the UK hotels industry hit £7.4b in 2018, a £1.7b increase year-on-year, a rise of 29% and 102% above the 12-year average.

That is according to the latest research by global property adviser Knight Frank. The “unprecedented” growth in 2018 was due to a 50% increase in international investment, with overseas buyers responsible for £4.9b invested into the UK hotel market. There was a 50-50 split of the capital invested between London and the UK regions.

UK investors were responsible for a third of the investment (£2.5b), European investors 27% (£2b) with £1.6b from France. Inbound capital from the US increased by 77% to £1.5b (21%), due to significant institutional interest.

London continues to remain an attractive target with total investment climbing to £3.3b. The acquisition of hotel sites and the forward funding of hotel projects equated to 21% of the total investment. The interest from international investment was the leading driver of the capital’s hotel market, accounting for £2.4b of total investment.

Outside of London, Edinburgh was ranked the most attractive regional UK city for hotel investment, accounting for transactions totalling around £525m with a 13% share of the UK regional investment market.

A new trend that emerged in 2018 was the increase in activity from local authorities, capitalising on low-interest central government loans to purchase commercial property. In 2018, local councils invested a record £93m in the hotel sector, an increase of 182% on 2017 (£33m).

Shaun Roy, head of hotels at Knight Frank, said: “With rising interest rates and prolonged Brexit negotiations, there is a strong demand for secure, long-term fixed income assets which has led to an increase in investment in hotels.

“The capital continues to remain an attractive destination for global and domestic investors, with opportunistic hotel investors stimulated by the attractive levels of growth prospects in London over the long-term.

“Furthermore, the proportion of capital allocated to specialist property is evident from the growing trend for the inclusion of hotel real estate in institutional funds. There is now a much greater understanding of the fundamentals of hotels as a specialist sector, which has led to over £1.1b invested in hotel development and forward funding for future hotel projects.

“We envisage further inbound investment, should sterling weaken further following the UK’s exit from the EU. Overseas capital flows and institutional investment is expected to remain buoyant as greater strategic importance is placed on investing in alternative specialist sector businesses

“Thus far, the pace of investment in 2019 has been strong, with London in the alluring position of being the world’s most liquid and transparent real estate market, cementing its reputation as a safe haven for international capital.”