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UK Hotels Turn The Corner To Recovery As RevPAR Reaches Pre-Downturn Levels

Hotels in eight out of 12 UK cities in the latest quarterly Hotel Bulletin for Q2 2014 recorded RevPAR (rooms revenue per available room) beyond pre-downturn levels with the remaining four cities almost reaching these levels.

The Hotel Bulletin, compiled by HVS, Zolfo Cooper and AM:PM, reports that hotel performance in London and the regions has continued to improve in Q2 2014 with average RevPAR increasing 10% year-on-year.

For the third consecutive quarter all the cities reviewed recorded RevPAR growth. London saw a hike of 4% year-on-year with hotels outside the capital seeing an 11% rise. Growth was driven by average room rate improvement in all cities except Newcastle.

Belfast recorded the highest year-on-year RevPAR improvement (28%), with Leeds at 16% and Glasgow at 12%. Hotels in Aberdeen, Bath, Edinburgh and London are now trading in excess of 2008 RevPAR levels, with those in Belfast, Birmingham, Liverpool and Newcastle trading at pre-downturn levels.

“Reaching this benchmark is a cause for optimism and will give certain hoteliers the confidence to invest time and money in expansion as rate driven growth is likely to result in profitability improvement,” commented co-author Tim Smith, director, HVS London.

“Consistent and strong growth is encouraging and is also likely to leave investors in a confident mood.”

In the first half of this year some £1.9 billion-worth of hotel transactions have been completed, over £411 million of these were in Q2. The quarter saw year-on-year transaction levels rise by over £250 million.

Single asset transactions have dominated the deals completed this year, although further portfolio transactions are anticipated over the next six months.

The Hotel Bulletin includes a special focus on Edinburgh in the run-up to the Scottish referendum. It says that while observers believe investors may have been put off by the uncertainty surrounding the Scottish economy, there is no noticeable sign of hotel investment slowing down.

“If Scotland does become independent the city may indeed benefit from the influx of professionals advising on structural change, which would increase demand for hotel accomodation in the short-to-medium term,” added Smith.

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