New build hotels boosting the UK hotel sector

The proportion of new build hotels increased by 37% last year accounting for 66% of all new rooms and boosting the UK hotel sector.

The UK saw the opening of 15,200 new hotel rooms in 2017, a 2.4% growth in hotel supply, according to research by property adviser Knight Frank. The pace of development continues into 2018 with 21,000 new rooms forecast to open, representing a 3.3% growth.

Knight Frank's annual UK Hotel Development Opportunities 2018 report found the budget hotel sector continues to dominate the market, representing 69% of all new build hotel stock and 65% of all hotel extensions, with around 8,300 new branded budget hotel rooms planned to open in 2018.

London has seen a dramatic 70% increase in new build hotel openings, with more than 4,100 new build rooms opening, fuelled by budget hotels, which account for 67% of all new build bedroom stock. In 2017, total new bedroom supply in London increased by 4% and this growth is set to continue, with a rise of more than 5% forecast.

Development is also on the rise across the UK, with regional markets offering an attractive alternative route for both domestic and overseas investors. The regions are set to contribute approximately 13,000 new rooms in 2018, representing 62% of the total UK new bedroom stock for this year.

The Knight Frank UK Hotel Development Index has named Inverness, Brighton, Edinburgh, Cardiff and Liverpool as the UK's top five most attractive cities. Meanwhile, London and Manchester have both fallen out of the top 10 of this year's index.

Charles Fletcher, partner, specialist property investment at Knight Frank, said: "The robust demand for fixed lease hotel investments, combined with a lack of built stock available and suitable to lease, has led many investors to explore the development route via forward funding or forward commitment structures. In the branded budget hotel sector, we have seen a marked increase in the number of developers taking the opportunity to de-risk developments at an early stage in the development process as a result."

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