Time To Check In

    Robert Seabrook, Director Hotels reveals four factors shaping the market.

    London’s upscale hotel market is not immune to the downturn but it is highly resilient. Two key measurements from Tri Hospitality Consulting tell the story. In 2008 the Revenue Per Average Room (RevPAR) dropped 22% on the previous year and by 2009 it was down again to £123. The Average Daily Rates (ADR) dropped from a 2007 peak of £197 to a 2009 low of £147. But the latest figures suggest ADR was back to £176 by the end of September 2011, while RevPAR for 2010 was up to £148 and continues to rise. Occupancy levels have remained relatively stable in the mid-80% range throughout the past five years.

    Visit Britain, the national tourist trade body, believes London has an undersupply of 40,000 hotel rooms. High barriers to market entry and competition from alternative uses curb incoming supply, particularly in the 4-star and 5-star categories. This allows hotels to maintain strong ADR and occupancy levels. The weakness of sterling has kept tourist levels high, while demand for corporate bookings is picking up.

    This has never been stronger with a huge volume of capital – mainly from the Middle East, North America and Asia – seeking inroads into London. As a result, there’s been considerable activity in the sector, including purchases of operational leases, management-encumbered hotels and vacant possessions. Hotel sales in the capital exceeded £1 billion in 2011, a level not achieved since the peak of 2007.

    Despite high barriers to entry and a shortage of suitable sites, some projects are progressing. The Berners hotel near Oxford
    Street, acquired by Marriott, is moving forward, while two Splendid Hotels developments – with Hilton in Southwark and InterContinental in Victoria – have been acquired after a competitive bidding process. Aviva’s 1 Berkeley Street completed at a price well above market expectations. If anyone doubts the appeal of high-profile buildings, watch for Admiralty Arch. This landmark is being marketed by Savills for the Government and is receiving interest from luxury operators and investors.


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