AlixPartners, AM:PM and HVS have published the Q3 2015 Hotel Bulletin
Demand
This quarter’s figures show an average increase in RevPAR of 3% across the UK, the lowest since Q1 2013. The top performers this quarter benefitted from hosting international sporting events including the Rugby World Cup and Ashes test matches. Cardiff recorded the highest RevPAR increase of 17%. Birmingham recorded a RevPAR growth increase of 12%. For the third consecutive quarter Aberdeen was the worst performer (RevPAR decline of 22%) due to a combination of strong new supply and the lack of recovery in the oil industry. However, new hotel investment plans may indicate investor confidence in the long term. Glasgow and Liverpool also recorded RevPAR decreases of 10% and 3% respectively.
Graeme Smith, Managing Director at AlixPartners, comments: “The UK market has enjoyed a continuous period of RevPAR growth. The rate of growth slowed this quarter but this is heavily influenced by sporting events. There will be a focus on performance in Q4 to see if this reduction in growth rates continues.”
Supply/pipeline
The budget sector continues to grow, adding more than 1,500 rooms in Q3 2015 and for the first time accounts for more than half of the total UK active pipeline. Of the 3,000 new bedrooms that opened this quarter, 2,500 were branded.
Transactions
Asian investors continued to dominate the transaction market. This is due in part to a number of Chinese tour operators acquiring hotels to integrate with tour operations. Added to this overseas markets such as the UK are considered to be stable and often offer higher yields than certain local markets such a Singapore.
Focus: Brand penetration
Branded hotels represent 84% of the active pipeline compared to 16% being independent. This reflects investors, developers and lenders opting for the relative safety of branded investments. The ability of the brand’s reservation system to drive room nights helps to provide comfort over revenue forecasts.
BDRC Continental recently examined the concept of brand margin – the premium (or discount) each hotel brand achieves when compared with an unbranded hotel in the same tier. BDRC examined 92 hotel brands across four tiers, luxury, upscale, midscale and budget. Based on the analysis BDRC concluded that the higher the tiers, the higher the consumer added value a brand brings to a hotel. Also that various brands within any given tier are far from equal and brands hold more relative value in metropolitan areas.
The Hotel Bulletin analyses demand, supply, pipeline and transactions in the hotel market in 12 cities across the UK. This edition includes a focus on branded hotels.
Click here for a copy of the full bulletin or visit www.alixpartners.com
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