What next for the £20bn UK hotel industry?

The UK hotel industry is one of the most important contributors to the British economy. Data from the Office of national statistics shows that the hospitality industry turnover has increased by £12bn since 2015 and the hotel industry plays a major role in this success.

With the weak pound continuing to attract overseas tourists and the UK hotel industry worth more than £20bn, it would appear the industry has never been stronger. But with Brexit on the horizon, potential investors are facing cause for concern. Is there a genuine need to worry? Or can we continue to view investment into the hotel industry in a positive light?

Capital remains strong

The outlook for London remains strong with hotel occupancy levels expected to remain at record highs of 76%, according to PwC’s Hotels Forecast. The average daily rate in London is also expected to grow by 1.4% over the next two years, contributing to an increase in revenue per available room by 1.7% in 2019 and 1.4% in 2020.

Major investment projects

Despite slower economic growth, there is still plenty of developments taking shape. The weaker pound has only encouraged overseas hotel operators to invest into the city, showing the capital is still considered a prime investment destination.

Particularly, exciting developments which cater to the demands of the modern traveller are taking shape. For example, Holiday Inn Express London – Park Royal is among one of the major investments in the UK hotel industry, undergoing a six-figure transformation as part of Holiday Inn Express’ Generation 4 programme.

The £435,000 investment features updates such as 43” SMART TVs which enable mobile streaming and login to popular apps like Netflix. Flexible work and rest corners with moveable tables have also been installed, demonstrating the appeal to business travellers.

Breaking new ground

Statistics from the past year show the Brexit uncertainty hasn’t deterred international travel and the hotel industry appears to have remained resilient in the face of the weak pound.

There are a number of exciting hotel brands opening in London this Autumns and Winter, with one of the most highly anticipated being Page8. This new Page8 development is the first UK outpost for the exclusive brand, whilst Great Scotland Yard Hotel will be the first UK hotel to join Hybatt’s ‘unbound’ collection.

Although it is worth nothing a greater level of hotel deals were made during 2018 when a 36% year on year increase was seen, increasing the total deal volume to be the second highest ever after 2015. Experts believe there will be continued investment from Europe and the Far East encouraged by the weaker pound and that total deal volume will exceed original estimates to reach an anticipated £6 billion.

Regional projects

The UK hotel industry continues to look positive as we look towards the regional cities and towns. The PwC forecasts a 1.2% uplift in 2019 for Revenue per available room, driven by the demand for inbound tourism, domestic holidays and events.

With the ICC Cricket World Cup, the Netball World Cup in Liverpool, the Manchester International Festival and UEFA Euro 2020 football championships, an uplift in tourism is highly anticipated. The HS2 project is slowly coming to fruition as well, further opening up the UK hotel industry for additional scope across previously difficult-to-access locations.

Great hotel investments continue to be made into hotels in the Northern regions, flying in the face of Brexit uncertainty, Despite thousands of hotel rooms being added, demand is expected to remain steady with budget rooms playing a significant role in the supply-demand forecast.

Travellers will have a variety of options, price points and locations in the regional cities, allowing them to enjoy new supply, brands and products in the competitive hotel environment.

London vs. wider Europe

The weaker pound makes London particularly attractive to business and leisure travellers, compared to other European cities.The 2018 London Hotel Development Monitor Report states that the capital’s hotel market growth is predicted to overtake a number of major European cities by next year, including competitors such as Paris, Berlin and Milan.

Over 11,000 rooms are expected to be added to London’s hotel portfolio by 2020, providing business and leisure travellers with an even greater choice of accommodation for a predicted and continued positive impact on the supply-demand balance.

For more hotel news, check out our other blog posts.