Tag: UK hotel development

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Investors remain optimistic as more than 200 hotels under development in London

There are 210 new hotels in the development pipeline for London as investors remain optimistic about the capital’s market potential for growth post-Brexit.

That’s according to a new study by private wealth law firm Boodle Hatfield. Almost a quarter (48) of the hotels with planning permission or already under construction in London are located in Westminster, adding more than 6,800 new bedrooms. Luxury and boutique hotels account for 74% of the planned new hotels in Westminster.

These include: the former US Embassy in Mayfair, which is being developed into a 137-room, £1b Rosewood hotel; a Nobu hotel is being built in Marylebone that is part funded by Hollywood actor Robert De Niro; and the Londoner on Leicester Square, which will have 350 rooms and two cinemas.

A further 12 hotels are planned for the Heathrow area.

The UK’s hotel market is one of the few sectors of the UK economy to have benefited from the Brexit-related slump in sterling, the law firm said, because the decrease in value of the pound has made it cheaper for international tourists to visit the UK and has also encouraged more “staycations”.

Rajeev Joshi, partner at Boodle Hatfield, said: “Investor appetite in the London hotel market is holding up. But investors will want to know that this new supply of hotels can be soaked up by increasing demand.

“For tourism to continue to grow, the UK needs to ensure that post-Brexit, we do not start to be seen as a less convenient destination for tourists from the EU or from further afield. Greater investment in infrastructure will be a key part of this. Accelerating the delivery of projects such as the third runway at Heathrow and the Crossrail would help.”

Top 10 areas for hotels currently in development across London:

BoroughHotels with planning
permission		Hotels startedTotal
Westminster272148
Hillingdon
(Heathrow Airport)		8412
Brent4711
Tower Hamlets5510
Kensington &
Chelsea		549
Hammersmith &
Fulham		549
Hounslow549
Redbridge729
Camden639
Hackney718
Total7955134
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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.