The hotel industry is one of the biggest within the leisure sector. Everyone snaps up the chance to get away from every day life and bask in the tranquility of a holiday. Travelling abroad is what many UK holidaymakers eagerly anticipate when summer makes its arrival. However, a report on travel dating website Tourbar, stated that travelers have named staycations their preferred style of travel for solo trips in the past six months, with 15% naming various locations in the UK. Along with more visitors from overseas. So what does the future hold for the UK hotel sector going into 2016? In this piece, we look into performance in the sector based on 2014 and 2015 statistics as well as the forecast for 2016, in regards to visitor numbers and revenue. If you wish to read a summary of this piece, you will find an infographic at the bottom.
Hotel Sector on Upward Path
In BDO’s Hotel Britain 2015 guide, partner in the Leisure and Hospitality services, Robert Barnard, spoke positively of last year’s performance. He said that regional hotels outperformed London based ones, adding “As demand for hotels remained strong, hoteliers succeeded in pushing AARR up, and resulting in regional hotels experiencing a higher compound annual growth rate over the last five years when compared to the capital.”
However, London still shows its importance in the sector, with occupancy being one of the highest across Europe. Things are looking up, as Mr. Barnard concludes: “The future of the hotel market is expected to continue on its upward path. International visitors are expected to continue to increase in 2015, reaching 35m, boding well for future hotel performance.” It seems the UK is becoming a must-visit destination. Last year, transactional activity reached £61bn, the highest figure since 2006.
Increasing Number of UK Visitors
Also in the report, it shows how international visitors grew for the fourth consecutive year. The holiday segment attributed 7.7 per cent, accounting for two-fifths of the total amount of visitors. It is expected that the visitor numbers will surpass the 35 million mark during 2015. In addition, the UK Civil Aviation Authority stated that there was another strong year of passenger number growth in 2014, with an increase by 4.4 percent, to a total of 238.4m, a fourth year of growth. Expenditure is also expected to grow by 4.5 per cent, which is £1bn in cash terms, to a new record for the tourism industry, £22 million.
The UK is still a big player within the sea of top tourist locations as, according to the Tourism statistics 2015, it summarises UNTWO’s tourism highlights from 2014, which stated that the UK is the eighth largest international tourism destination. This is ranked by visitor numbers and joins stellar list of seven other destinations, which includes; France, USA, Spain, China, Italy, Turkey and Germany. In total, the UK accounts for 3.5 per cent of global international tourism receipts.
Looking into 2015, PwC and its UK Hotels Forecast 2016 report said that within the first six months of this year, there were over 16.8 million overseas visitors to the UK. This is a 3 per cent increase over 2014. It was also reported that over two million visits to the UK were for business reasons within the first three months of this year, which is the first time this milestone has been met since 2008. Demand for hotels seems to be ever growing in the UK and the big cities are beginning to accommodate.
Substantial Number of Hotel Openings in 2015
In 2015 it was reported that there were going to be a significant number of hotel openings across major cities in the UK. London alone is having 6,400 opened, followed by Manchester with 838 then Liverpool at 472 and Aberdeen with 540. Meanwhile regionally, there are staggering 9,400 hotel openings. It seems that 2016 is continuing that trend and according to PwC’s report, there will be over 16,000 rooms being opened.
Growth Y-o-Y of UK Holidays
Holidays are now being taken for other reasons than warmer climates as Visit Britain Monthly reported, in December of last year, 13,760 people visited the UK for a holiday, which is a 5.8 per cent growth year-on-year. This figure continued onto 2015, where Visit Britain Monthly also said that between January-April there were 28.7 million trips taken in England, which is an 18 per cent increase year-on-year, the highest period since the survey began in 2006.
Expensive Deals Made
Throughout 2014, there was a significant growth deal volume in 2014 and was driven predominantly by regional hotel transactions. Revenue per available room’s growth equated to 7.7 per cent last year which is the highest it has been in recent years, with volume exceeding £5.5 billion. While in 2015, a new record was set for UK deal activity and “Far exceeded expectations” says pwc.
It was forecasting to reach £10 billion and currently there has been £6.5 billion of transactions up to July 2015 alone, which is ahead of 2014’s result. There were many major transactions this year that attributed to this impressive statistic, including; Jurys Inn which was the biggest with £675 million, followed by Kew Green at £400 million, Malmaison and Hotel Du Vin at £360 million, Bewleys with £320 million and LRG Group B with £225 million in transaction.
Moving into 2016, there are several rumoured transactions that include the sale of hotel staple Travelodge and Lone Star’s Aman’s group. PwC expect the activity in the regional portfolio market to be particularly strong. The report continues to say that “In addition to the availability of finance, we have seen a rise in private equity investment in the sector as a result of the low interest rate environment and continued gap between bond yields and real estate yields, resulting in the sector being appealing to investors looking for strong returns and value enhancing opportunities.”
Looking Forward into 2016
So 2016 is nearly upon us and now is the time for reflection. The UK hotel sector over the last two years has evidently seen some triumph and that positive vibe looks to move into 2016. PwC’s report stated that “Growth is in the air” and that the UK continues to see growth in hotels thanks to improving economic and travel backdrop. The sector will continue seeing Growth but is expected at a much slower pace. Hotels will always be a popular investment and sees no sign of slipping.
What do you think about UK hotels? Will our nation become the must-visit destination for years to come? Let us know in the comments below.
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