The UK hotel market has delivered a strong trading performance so far this year thanks to domestic tourism levels bouncing back and robust demand for business travel, according to Knight Frank’s latest UK Hotel Trading Performance Review 2022, produced in partnership with HotStats.
London performed particularly strongly with occupancy rates in the capital hitting 70% for the seven-month period to the end of October. Due to the high inflationary environment, operators have been able to drive room rates, with the average daily rate (ADR) surging by 22% compared with 2019 prices and by 2.8% in real terms.
The regional UK hotel market now exceeds its revenue per available room (RevPAR) performance by 3.5% and London by 2.4%, compared with the same seven-month period in 2019. The top five regional cities ranked by their total revenue per available room (TRevPAR) were Brighton, Leeds, Liverpool, Glasgow and Bristol.
Knight Frank says stable supply growth is a key driver of strong RevPAR performance and looking ahead, Glasgow, Brighton Manchester, Liverpool and Birmingham are the leading regional UK cities in terms of future hotel supply.
Despite the significant fallout from the pandemic, more than 30,000 new hotel rooms have opened in the UK since the start of 2020, with the regions accounting for 70% of this new supply.
But while the supply of hotel rooms in London is set to grow by 2% per annum over the next three years, annual supply growth in the regions is expected to contract to 1.2% per annum over the next three years, compared with a longer-term average of 1.6% due to the rising cost of debt, supplies and labour.
Philippa Goldstein, senior analyst, hotels and leisure at Knight Frank, said: “Hotels have rebounded impressively since the challenges of the pandemic, with both London and regional hotels rallying significantly, especially in the last seven months. Weakening consumer sentiment may place downward pressure on demand, but the high ADRs continue to provide a cushion to the current high cost-inflation.
“Although the recovery is likely to be slowed by the economic downturn, there are many influences that will enable the sector to ride out the storm, for which the pandemic has been the catalyst for many of these factors. Hotel owners and operators are now increasingly savvy about their cost base and existing supply levels have been kept in check by the weight of hotel closures and modest future supply growth.
“Faced with rising costs and increased service levels, retention and the motivation of staff will be one of the critical factors for survival, stability and a profitable longevity, whilst ensuring that hotels are prepared for new opportunities and the ongoing upward swing of the sector’s recovery.”
