Hotel market commentary
The London Hotel Market
Introduction
One of the great world cities, London benefits from a vibrant hotel market commensurate with the city's international image. It is Europe's business hub and is the most visited city in the world attracting 26 million visitors each year. It appeals to high spending business and leisure visitors as a result of the city's desirability as a cultural and commercial destination.
Hotel Market - Supply
According to their 2009 accommodation census the London
Development Agency estimate that the city offers overnight visitors
a choice of 140,472 bedrooms across 2,020 accommodation
establishments to suit all budgets, as summarised below:
All London Accommodation Stock 2009
| Type | No. of | % of total | Rooms | % of total |
|---|---|---|---|---|
| Hotels | 603 | 29.85% | 86,681 | 61.71% |
| B&B / Guesthouse |
921 | 45.59% | 18,567 | 13.22% |
| Serviced Apartments | 159 | 7.87% | 4,994 | 3.56% |
| Subtotal Serviced Accommodation | 1,683 | 83.35% | 110,242 | 78.49% |
| Other (includes campus, hostel & self catering) | 337 | 16.65% | 30,230 | 21.51% |
| Total | 2,020 | 100% | 140,472 | 100% |
Source: London Development Agency
Supply Growth
The City underwent a period of rapid supply growth on the back of the
industry performance levels achieved in the mid 1990's. In the run up
to the Millennium there were around 12,000 new hotel rooms added
in the City (1995-2000), and 15,000 further rooms came on stream
between 2001 and 2007, 1,991 of them in 2007.
London remains an enduring and desirable destination and will host
the Olympic Games in 2012.
We have researched the development pipeline for hotels that are either
under construction, or have planning permission in the City of London,
Southbank and Waterloo areas. At present there are 3,700 rooms
planned split across brand quality, as follows:
- Budget - 1,100 rooms
- Core Brands - 1,200 rooms
- Luxury - 1,400 rooms
Of those either under construction or that have been committed, the schemes of note are as follows:
- Shangri-la at The Shard, SE1 - 202 rooms
- Hilton, Bear Lane, SE1 - 280 rooms
- Novotel/Ibis, Blackfriars Road - 477 rooms
Hotel Market – Demand
The London hotel market outperformed the rest of the UK and Europe
in 2010 and the City consolidated its position as the top performing
hotel market in Europe. The City's hotel performance is underpinned
by London's position as a global hub for business with demand from a
wide range of business segments and nationalities. This helps to
mitigate seasonal troughs and overcome the impact of events in
specific countries or regions.
London hotels showed a double-digit increase in profits, according to
the 2010 figures in the latest HotStats survey from TRI Hospitality
Consulting (HotStats.com):
| YTD '10 | YTD '09 | VAR bw | |
|---|---|---|---|
| Occ% | 82.2 | 80.3 | 2.0% |
| ARR | 124.2 | 114.0 | 8.9% |
| RevPar | 102.1 | 91.5 | 11.6% |
| TrevPar | 142.8 | 131.3 | 8.8% |
| Payroll | 24.3 | 25.2 | 0.9% |
| GOP PAR | 68.3 | 60.0 | 13.9% |
Hotel Market – Prospects
London has proved extremely resilient to the market downturn and it is
not expected that the additional supply over the next two years will
dampen the City's hotel performance. The Royal Wedding is likely to
create demand for London hotels during Q2 2011, as well as raising
the profile of London as a destination throughout the year. The
Olympic Games are projected to lift occupancy in 2012 above the
historic peak.
One Blackfriars offers an excellent opportunity to develop a luxury
hotel. The site is centrally located with easy access to both The City
and West End and benefits from attractive views across to St Paul's,
The City and Central London. A luxury hotel in this location should be
able to successfully position itself firmly within the London hotel market.