UK’s Provincial Hotels See First Revpar Decline In Seven Years

, UK’s Provincial Hotels See First Revpar Decline In Seven YearsRevenue per available room, (RevPAR) in the UK’s regional hotels dropped 2.8% in Q1 2019, according to the latest UK Hotel Market Tracker: Q1 2019, produced by HVS London, AlixPartners and STR.

This was in marked contrast to the fortunes of London’s hotels, which saw like-for-like RevPAR up 3.6% against the previous year while occupancy reached 77%, up 1.7%, and average room rates rose 1.9% to £134.05. Strong performance in the last two quarters lifted the last 12 months’ RevPAR 4.1%, despite a relatively subdued six months trading.

In the regions hotel occupancy dropped 0.7% to 68% in Q1, with average room rate down 2.1% to £64.95 and RevPAR down 2.8% to £44.04, the first quarterly decline since 2012.

“London’s performance in the early months of 2019 was helped by the Six Nations rugby tournament and Passenger Terminal Expo at ExCel,” commented HVS chairman Russell Kett.

“Conversely outside London hotel performance was adversely affected by supply growth causing hotels to discount more aggressively in many locations. Ultimately this new supply should be absorbed but the effects of Brexit are also to blame for this,” he added.

The tracker predicts that with further cost increases expected for the remainder of 2019 and capex requirements continuing, regional hotels and investors will be keeping a close eye on cash flow through the remainder of the year.

The first quarter of the year proved active for transactions, however, with £2bn-worth of hotels being acquired in some 91 transactions, compared with 85 the previous year. Major London deals in Q1 included the sale of four Grange hotels to Queensgate for £1bn and the acquisition of Dalata’s Clayton Hotel, Aldgate for £91m. Regional transactions included Topland’s sale of 26 Hallmark Hotels for £250m.

London’s strength continues to be recognised by developers with the capital’s active pipeline for hotels rising during Q1 from 8% to 10%, as a percentage of supply.

“London will always be a popular destination for both business and leisure hotels, but the ever-growing supply of rooms will mean that RevPAR growth will be more limited going forward as hotels vie to remain competitive and as the uncertainty over Brexit remains unresolved,” said Kett.

“There continues to be a significant amount of available capital in the hotel market with multiple investors looking closely at opportunities but not wanting to overpay, meaning that yields have not seen a discernible change this quarter.”

 

 

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