Over £13bn invested in UK hotel industry in ten years

By Melodie Michel

- Last updated on GMT

Related tags: Hotel, Uk

The hospitality sector has enjoyed over £13bn of investment in the past ten years
The hospitality sector has enjoyed over £13bn of investment in the past ten years
UK hotels have enjoyed their most prolific decade yet, with £13bn invested in the industry between 2003 and 2013.

More investments are still in the pipeline, with 9,300 more rooms planned for 2014 and 2015 in London and over 14,700 rooms elsewhere in the UK, according to the Institute of Hospitality’s Hospitality Digest 2014.

The ten-year period to the end of 2013 was the largest expansion in the industry’s history, with 106,380 new rooms. However, with the closing of over 40,000 rooms, the net addition is in more around 66,000.

According to the publication, which used figures by construction consultant Gleeds, over £13.6bn was invested in new hotel construction, rebranding and refurbishment in the past decade, with the largest amount (£4.9bn) spent in London.  But the institute warns that this figure excludes professional fees, land costs, start-up costs and finance during construction and should be taken as “a conservative estimate since it is impossible to estimate the cost of refurbishing many independently owned hotels”.

In another one of the publication’s eight articles on trends in the industry, hotel consultant Melvin Gold forecast that 60 per cent of the UK hotel industry will be corporat- branded by 2030. “The independent hotel and bed and breakfast sector will live on but it will face more challenging competition from the marketing and sales muscle of the branded properties,” he wrote.

“Hotel ownership will be even more fragmented than it is today and the smaller owner-operators of reasonable sized properties will prefer to be franchisees (or in a consortium) than unbranded independents.”

The publication also looked at rising payroll costs, particularly in relation to the statutory workplace pension scheme, which are creating a need for increased productivity.

Another article, written by consultant David Battersby, suggested that about one third of working time is wasted, with wide variations in productivity. The report points out that in hotels, every £1 spent on labour generates between £2.14 and £18.44 of sales revenue; for restaurants the return is narrower and lower - from £1.66 to £6.12 of sales revenue.

“Three-quarters of that wasted time within hospitality businesses is down to poor planning, a lack of work organisations and inadequate supervision. Yet for many employers, productivity growth, how to measure it and how to achieve it, remains something of a mystery,” added Battersby.

The digest also highlighted a drop in the number of apprentices in the industry due to government funding proposals. “We are in danger of losing a powerful source of trained staff from what is already a small minority of employers who employ apprentices; at the same time,  cut-backs to FE college funding will mean they will unable to meet the shortfall,” said John Hyde, chairman of Hospitality Industry Training.

At the Boutique and Lifestyle Hotel Summit​ held on 13 May in London lenders and investors gave hoteliers advice on how to access funding. While HSBC senior corporate banking manager Huw Zachariah admitted hotels needed “decent equity” in order to get a loan, Sixty Hotels co-owner Stephen Brandman encouraged them to show passion about their project. “Equity investors get involved in projects they are passionate about, so emotion plays a big role. Be completely convinced it will work and you will attract investors,” he said.

Meanwhile, PPHE Hotel Group vice-president of asset management Saar Sharon explained that hoteliers should not limit their search for investors to the UK​. “There’s a lot of international money looking for unique opportunities so go far and wide to find funding,” he added.

Related topics: Hotels, Trends & Reports

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