Strong RevPAR growth in all cities says Q4 2014 Hotel Bulletin
Highlights:
- Revenue per available room (RevPAR) increased 19%, driven by rate rises
- RevPAR grows for the 5th consecutive quarter in all 12 cities reviewed, exceeding pre-downturn levels in most cities
- Glasgow RevPAR growth of 32% is the highest across cities reviewed
- UK Hotel transaction values are the highest since the downturn
- The ‘special focus’ this quarter outlines expectations for 2015
Zolfo Cooper, AM:PM and HVS have published the Q4 2014 Hotel Bulletin. The Hotel Bulletin analyses demand, supply, pipeline and transactions in the hotel market in 12 cities across the UK. This quarter the bulletin also looks at the likely developments during 2015.
RevPAR growth
This quarter’s figures show average increases in RevPAR of 19% across the UK, with all 12 cities reviewed recording growth in Q4 for the 5th consecutive quarter.
Glasgow was the top performer with a market leading 32% growth in RevPAR, most likely lined to the large number of major events held in Glasgow over this period including the Liberal Democrat party conference, the MTV Europe Music Awards, and the 2014 Sports Personality of the Year awards. Birmingham and Liverpool also experience high RevPAR growth both hitting 29% this quarter.
Edinburgh was at the bottom of the league with only 5% RevPAR growth and, for the second consecutive month, Aberdeen was among those with the lowest RevPAR growth. The continuing volatility in the price of oil is likely to cause concern among both corporate clients and hotel investors.
Graeme Smith, Partner at Zolfo Cooper, comments: “Current rate trends suggest robust demand, although pipeline has now responded, which could prove testing for existing hoteliers towards the end of 2015.”
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 (34%) and the active pipeline (47%).
Pubs are becoming increasingly active in the UK hotel market with Marstons Inns opening its first new hotel in Q4 2014. The average active pipeline across UK cities is 10% however there are significant differences among the cities surveyed. Bath’s active pipeline as a percentage of current supply is 22%, followed by Aberdeen and Newcastle at 17% each. In contrast, Belfast has an active pipeline of only 1% as a percentage of current supply and Cardiff at 4.3%.
Transactions
Transaction activity in the hotel sector has increased significantly, with £1.1 billion worth of transactions completed in Q4, of which £0.4 billion consisted of single asset sales. This has resulted in 2014 transaction values totalling £4.4bn, which is £1.8bn higher than 2013 and back to pre-downturn levels. Hotel valuations are continuing to increase and a considerable number of portfolio transactions are expected in 2015.
“We have already seen strong competition for hotel assets this quarter resulting in impressive sale valuations and fully expect this to continue as the demand for high quality assets still exceeds supply” said Smith.
Click here for a copy of the bulletin or visit www.zolfocooper.eu