Advice Zone
The UK hotel property market - and why it pays to be independent
Although average room rates and room occupancy fell significantly between 2000 and 2003, hotel property prices continued to increase, according to property firms Colliers Robert Barry and Colliers CRE in their first joint UK hotels review.
Demand consistently outstripped supply over the period, with the historically low interest rates encouraging many hoteliers to carry on operating, leading to a shortage of hotels on the market - especially quality properties - and bolstering values yet further.
According to the research, the second half of 2003 saw a recovery in business performance, which encouraged an increase in average turnover per bedroom. The recovery was helped by continuing low interest rates, low unemployment, low inflation and rising residential figures. These factors, combined with high demand for property brought about by the poor performance of equities, ensured increasing values.
"In our experience, the independent hotel operators, particularly outside London, have been enjoying excellent trading conditions for some time," said John Sheppard, director of Colliers Robert Barry. "The independents benefit from a range of factors, not least their ability to respond very quickly to any downturn in trading conditions. This has resulted in many leaner, more efficient operations, which are now well placed to benefit from the improved trading environment."
Sheppard said he anticipated that hotel property values would continue to grow, with strong demand, low supply and relatively low interest rates for the foreseeable future. He predicted a sustained recovery for the hotels sector with revenue per available room rises through 2005-06.
"Admittedly there are grounds for caution and challenges ahead, but current trends and the continuing buoyancy of the market suggest that the industry is well positioned to continue to enjoy this period of sustained recovery," he added.
