2018 to build on record year for UK hotels

It is an interesting time for the UK hotel sector. While Britain’s impending departure from the European Union has instilled a cautious atmosphere in the residential market, it seems to have supercharged the hospitality industry.

The decline in the value of the pound is both attracting inbound tourism from around the world and discouraging Britons from expensive trips abroad, thereby reinvigorating the trend for staycations.

Inbound visits to the UK in 2017 were estimated at 39.9m, up 6.2% on 2016, with total spend up 11.6% at £25.1bn (Visit Britain). Similarly, in the first half of 2017 domestic overnight holidays in England rose 7%, with visitors spending an incredible 17% more than in the same period in 2016 (BBC). Visit Britain has forecast 4.4% more inbound visits and 6.8% higher spending in 2018.

This surge in tourism spending is translating into record performance for the hotel industry. Regional hotels saw RevPAR growth of 4.4% in the first half of 2017 – equivalent to around £2 of extra revenue for every room in every hotel every day, whether occupied or not (PwC). Many cities, including Edinburgh and Belfast, saw ADR growth in excess of 13% in the same period (PwC).

Like all markets, increased demand will also incentivise new supply. Savills estimates that investment volumes in new hotels hit £5.1bn in 2017, up 25% on 2016. Overseas investors account for most of that growth (again driven by the cheap pound), with their share increasing from 7.3% in 2016 to 38% in 2017 (Savills).

The challenge for new and existing hotels alike will be to channel the present boom into sustainable long-term performance by gaining repeat customers, improving standards, and marketing effectively. PwC forecasts slightly slower but still very solid RevPAR growth in 2018 of 2.4% for London and 2.3% for the regions.