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Increased polarisation in hotel performance between London and the regions

The performance of UK hotels became increasingly polarised during the third quarter of the year, with strong revenue per available room (revpar) growth in London and a revpar decline in the regions.

 

The capital enjoyed a revpar increase of 5.1% to £145.97, while regional revpar performance declined for a third consecutive quarter, down 1.3% to £63.42, according to the UK Hotel Market Tracker: Q3 2019. Average room rates closely mirrored revpar figures, up by 5.3% to £165.69 in London and down by 0.9% to £77.08 outside London.

 

Events such as Wimbledon and a historically-low sterling in August helped fuel the growth in London rates, while the pressure on profitability in the regions made the 5% active pipeline as percentage of supply to be particularly concerning.

 

Occupancy levels dropped by 0.3% in both London and the regions to 88.1% and 82.3% respectively.

 

Meanwhile, hotel transactions also experienced an increased differential between London and the rest of the country, with a 37% decrease in hotel sales to £2.1b in the regions and a 31% increase in the capital to £1.b. The regional decline was said to be due to the ongoing Brexit uncertainty, while London continued to be a perennially attractive proposition for investors.

 

The most significant UK transaction between July and September was that of the 518-bedroom Sofitel Gatwick to Schroders for £150m, a figure equivalent to £290,000 per room.

 

The UK Hotel Market Tracker: Q3 2019 is produced by AlixPartners, HVS and STR.

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