Report Reveals Resilience of the UK Hotel Market

A report reveals that the UK hotel market proved resilient throughout the pandemic and has recovered at a faster rate than first anticipated since January 2022, with overall performance nearing or surpassing 2019 levels since May 2022. However, the coming months may prove more challenging for the sector’s different stakeholders due to the cost-of-living crisis, weakened GDP, and increasing inflation rates.

The report provides insight into the positive and negative factors that are impacting the hotel market. Following the pandemic, hotels that were considered popular ‘staycation’ destinations have seen increased performance, particularly in more rural areas such as Belfast, Cardiff, and Newcastle. Hybrid hotels have also continued to perform well since the pandemic, as guests seek more flexibility in these spaces.

The impact of the Ukrainian war on the rising cost of gas and electricity bills has already affected hoteliers’ financial decisions in 2022, with many maintaining high ADRs to balance increasing cost pressures. Rising interest rates are predicted to directly impact financing options for hoteliers next year.

Regional UK markets such as Edinburgh, Birmingham and Liverpool saw the highest increase in revpar in the first half of 2022, surpassing 2019 levels by 6.9%, 8.5% and 7.5% respectively. In comparison, London has been slower to recover as the capital relies on international source markets and business travellers. Since January, operators have maintained high average daily rates in order to balance some of the increasing cost pressures as well as partly protecting their profit conversions.

The success of this strategy has been made possible by a change in consumer behaviour in the face of rising costs, with holiday spending being prioritised, the report said.

Transactional volumes have remained strong and a total of £1.9bn was spent on UK hotel transactions in the first half of 2022, an increase of 32% compared with the first half of 2021. Interestingly, domestic buyers are far more active in the market compared with last year.

In 2021, cross border investors represented 52% of the buyers yet this number dropped to 23% in the first half of 2022, likely due to international travel restrictions imposed over the past few years due to the pandemic, although this is unlikely to be a long-lasting trend, the report said.

Carine Bonnejean, Managing Director – Hotels at Christie & Co, adds,
“This publication clearly shows the opposite forces currently shaping the UK hotel market, as hotel performance is positive and improving yet significant economic and operational challenges pose a serious threat to the sector’s recovery. The next few months will be another litmus test for the various stakeholders. We are starting to see the first signs of distress but to date there is still a functioning yet cautious transactional market.”