Zolfo Cooper, AM:PM and HVS have published the Q3 2014 Hotel Bulletin which analyses demand, supply, pipeline and transactions in the hotel market in 12 cities across the UK. This quarter the bulletin also looks at the impact that key events have had on the hotel industry during the last 150 years.
RevPAR growth
This quarter’s figures show average increases in RevPAR of 20% across the UK, with all 12 cities reviewed recording growth in Q3 for the fourth consecutive quarter. Glasgow, Liverpool and Leeds were among the top performers with RevPAR growth of 48%, 33% and 26% respectively. All of these cities held major international sporting events which boosted visitor numbers. In addition Cardiff, which hosted the 2014 NATO summit, saw an increase of 27%. Aberdeen saw the lowest increase at only 3%.
RevPAR growth this quarter has been driven predominantly by rates which have increased an average of 19%. Occupancy rates of 83% were the highest on a quarterly basis since the downturn, although occupancy now seems to be levelling out.
Graeme Smith, Partner at Zolfo Cooper, comments: “The continued growth is positive news for the UK hotel industry, particularly as it’s across all the cities we review. Hoteliers have taken advantage of high occupancy levels to increase room rates and boost profitability.”
Supply and active pipeline
Analysis of current supply against active pipeline in the UK shows that ‘budget’ hotels continue to dominate in both current supply (33%) and the active pipeline (50%). The average active pipeline across the cities is 10%, however Aberdeen has an active pipeline of 16%. Aberdeen has also seen occupancy levels dip by 7% in the quarter, suggesting that there is a risk that recent increases in supply and the future pipeline could lead to oversupply.
Transactions
Transaction activity in the hotel sector has increased significantly, with £1.4 billion worth of transactions completed this quarter. With one quarter still remaining, transaction values have already exceeded 2013 levels. The highest valued acquisition this quarter was for 144 Travelodge hotels purchased by a consortium of investors for an estimated £520 million.
“We have seen several high value transactions this quarter. With transaction values having surpassed that of 2013 and with one quarter remaining we may even see total values comparable to those before the downturn, demonstrating the confidence of investors in the hotel market,” said Smith.
Special Focus: Hotel closures
AM:PM recently launched a database of more than 6,000 hotel closures in the UK and Ireland dating from 1800 to today, using the data to analyse the impact that key events during this period have had on the hotel industry, and to consider social and economic factors which may influence the market in the future.
Click here for a copy of the bulletin or visit www.zolfocooper.com.
About Zolfo Cooper
Zolfo Cooper LLP is a leading independent provider of advisory and restructuring services. Headquartered in London, with offices throughout the UK and affiliations in North America, the Caribbean, Continental Europe, Asia and Australasia, we have extensive experience of assisting companies and their stakeholders across a wide range of situations from complex cross-border cases through to mid-market engagements.
Notes about the Hotel Bulletin
The analysis reviewed 12 cities, Aberdeen, Bath, Belfast, Birmingham, Cardiff, Edinburgh, Glasgow Leeds, London, Liverpool, Manchester and Newcastle, using data from HotStatsTM, HVS and AM:PM.
Active pipeline includes all hotel rooms with a scheduled opening date in the next three years.