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Q3 Proves Tough For UK’s Regional Hotels As Revpar Falls Again

, Q3 Proves Tough For UK’s Regional Hotels As Revpar Falls AgainTrading in Q3 for UK hotels has again showed a considerable contrast between those in London compared with the Provinces, according to the latest UK Hotel Market Tracker: Q3 2019, produced by HVS London, AlixPartners and STR.

With London properties seeing rate-driven RevPAR [rooms revenue per available room*] growth of 5.1% to £145.97 year-on-year, hotels in the regions saw a decline of 1.3% to £63.42, the third consecutive quarter of decline.

In London performance was largely boosted by strong room rates, up 5.3% year-on-year to an average of £165.69, despite a slight fall in occupancy of 0.3% to 88.1%. Performance in the capital was boosted by the devaluation of sterling, which reached a low in August, making London cheaper for incoming tourists to visit. Events including Wimbledon helped boost visitation.

Conversely hotels in the provinces saw average room rates fall nearly 1% in Q3 and occupancy fall by 0.3% to 82.3%. With lower margins in the provinces, hotels are more susceptible to a performance downturn, a concern given active pipeline levels of 5% mean more intense competition is to come.

The active pipeline of new hotels planned for London In Q3 saw the opening of the Hoxton Southwark and the STAY Camden, although 9% of current rooms supply is still set to open over the next few years.

“It has been a tough quarter for UK hotels with intense pressure on margins from increasing costs, staffing issues as well as wavering consumer confidence. In addition hotel operators in London will need to work exceptionally hard to maintain such performance growth in the face of these new hotel openings,” commented HVS chairman Russell Kett.

“London remains a popular destination for incoming tourists and has now become a marginally cheaper destination with the fall in the value of sterling. When the market weakens hotels outside the capital will always find it tougher and operators will need to keep a firm hand on costs and margins.”

It was a similar result for hotel transaction levels in the year to Q3, with London’s asset sales activity boosted by 31% to £1.4bn, driven largely by a boost in portfolio sales. Transaction levels in the regions were down 37% to £2.1bn.

“The continuing saga over Brexit fuels the uncertainty over the UK hotel transaction market, which is unlikely to see a material change until there is greater clarity. Yields remain largely unchanged for the same reasons,” added Kett

 

 

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