Christie & Co continue to see many opportunities for value creation in the hotel market and across brokerage, valuation and consultancy, we are well placed to provide all types of investors with advice.
The UK hotel market continues to show encouraging signs of growth in terms of RevPAR performance, supply growth and investor appetite. Portfolio sales were a prominent aspect of the market in 2018, with regional, single asset transactions keeping the market buoyant, a trend which is likely to continue into 2019.
Whilst 2018 has proven a more challenging year for hoteliers off the back of 2017’s strong performance, the market displayed positive performance metrics in both occupancy and ADR. Encouragingly, RevPAR growth forecasts for London and the regions remain positive, with increases of 0.3% and 1.2% respectively for 2019. While this will predominantly be driven by rate, 2019 performance may be influenced by Brexit developments to some degree too.
In terms of hotel supply, there is likely to be over 6,700 new rooms in London across 62 hotels and in the regions as many as 16,200 new rooms across 251 hotels in 2019. Most of the regional pipeline development is located within key gateway cities including Manchester, Belfast, Edinburgh and Liverpool.
The UK hotel market remains an attractive investment proposition and appeals to a wide range of buyers. International interest has continued with capital from across the globe, particularly from European investors, making up over half of UK investment in 2018. This was largely influenced by France and notable investment from Sweden, as well as investors from the Middle East and North America, high net worth individuals, family funds and institutional investors.
The UK hospitality sector employs 2.9 million people, representing 10% of UK employment and within this number, over 400,000 are EU migrant workers. Since it became apparent that the UK will leave the EU, the UK has become a less attractive destination for foreign job seekers resulting in a shortage of workers.
While the weak Pound Sterling after the Referendum benefited the UK as it drove overseas visitation, where the exchange rate will trade during 2019 depends on a number of economic factors including Brexit, inflation and interest rates.
Outlook for 2019
Top line revenue is foreseen to remain relatively stable, with marginal growth potential possible. At the same time operating and staff costs are rising, thus it will be in the underlying profit where owners and operators are likely to encounter challenges in 2019. Moreover, macro-economic factors such as inflationary pressures and potential interest rate movements may lead to an increase in distressed positions, likely to occur in H2 2019. At the same time, significant developments in technology are growing and may assist in customer experiences, cost savings and even increased productivity.