Hotels

What has been driving the UK hotel sector growth in recent years?

2017 was a brighter year for the hotel sector. A combination of world events and a global downturn had a significant impact in terms of flattening the activity in the hospitality sector as a whole over the past decade and hotels suffered too. However, the past 12 months have seen positive growth for the hotels sector, regionally and in London, which has been continuing now for several years. RevPAR (revenue per available room) growth was at 9% in London and in double figures in the regions. The big question is whether this will be ongoing. And, to answer that, it’s crucial to look at what has been driving hotel sector growth and whether that influence is likely to continue.

Brexit

Brexit itself hasn’t had a particularly positive influence on the hotels sector – it still remains to be seen what will happen when the UK actually departs the EU next year. However, the knock on effects of Brexit – most significantly the drop in the value of the pound – have contributed significantly to the growth in the UK hotels sector over the past 12 months. The lower value of the pound has proven to be a big incentive to visitors from overseas looking for a better deal on their travel and holiday costs. However, it’s also worth bearing in mind that, although this has meant hotels have enjoyed strong top line growth it has also pushed up labour costs and the expense of any imported goods.

The growth of the global economy

Recovery has been a significant factor in generating an upward growth trend in the UK hotel sector. Globally, and particularly in continental Europe, there has been a notable recovery and this has improved the flow of travelers and holidaymakers. This, combined with Brexit, which meant Sterling fell to its lowest value against the dollar for 30 years, has triggered a surge in North American visitors who have made a significant contribution to the boost the UK hotels sector has received.

Diversification of the sector

The range of hotels that now make up the industry in the UK – in particular in London – has broadened out significantly in recent times. The rise in the volume and variety of budget hotels has had a big role to play in keeping occupancy growth rates on the up (around 1-2% in the provinces and 2.6% in London) and ensuring that the sector has been able to attract consumers even when times have been tight. The trend for “staycations” has also had an impact on helping to boost the popularity of UK holidays, both in the capital and locations such as Cornwall and Devon.

New hotel openings

Around 8,500 new hotel rooms opened their doors across London in 2017, representing 5.6% growth in new openings. With small – but not negative – growth predicted for the regions it’s likely that new developments will continue to support modest increases in the number of properties available, which is great news for the hotels industry, as well as the construction sector. This is particularly so given upcoming events such as the European Sports Championships in Glasgow in August. Events and accolades also helped to boost figures last year – the 2017 UK City of Culture Hull, for example, saw a 13% occupancy lift in Q1 2017.

At RG Group we have a finger on the pulse of what’s happening in the UK hotels sector – contact us to find out more about what we do and to discuss opportunities.

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