New London hotels are set to have negative impact on trading performance

12 February 2013 by
New London hotels are set to have negative impact on trading performance

The opening of 31 new hotels in London this year is likely to lead to a flattening or decline in revenue per available room (revpar), according to real estate company Jones Lang LaSalle's latest London Hotel Developments report.

While the hotel market has shown resilience in recent years despite significant development, with occupancy holding up at around 80%, it is expected hotel demand will slow this year with the absence of major events such as the Olympics and sluggish economies in the UK and Europe.

Development has taken place across all hotel sectors with the majority of activity (71%) taking place in the budget and four-star segments.

Graham Craggs, managing director hotels and hospitality at Jones Lang LaSalle, said: "We had found no clear evidence that a strong supply increase in the city has had a materially negative impact on the trading performance of existing hotels. This was even the case in the City of London and Southwark where supply growth has been the highest."

However, this may change with a further 31 hotels with 4,600 bedrooms scheduled to open in 2013, and 26 hotels (4,200 bedrooms) due to be launched next year, reflecting a supply growth of 4% this year and 3% in 2014.

"With room night demand growth likely to be limited over the next year we believe that this further growth in hotel supply could result in more challenging market conditions for hoteliers in the short term," explained Craggs.

The majority of new development over the next two years is again expected to occur in the budget and four star sector, accounting for 50% and 31% respectively of bedrooms set to open. While Premier Inn and Travelodge account for the majority of development in the budget market, growth in four-star sector will come from both independent operators and international hotel groups such as InterContinental, Carlson Rezidor and Morgans Hotel Group.

By Janet Harmer

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