London set to become one of world's leading hotel markets

By Carina Perkins contact

- Last updated on GMT

Related tags: Uk hotel market, Investment, Hotel

London’s hotel market is set to boom in the coming years as tourism visits to the capital continue to rise, according to consultancy firm HVS.

A London Update breakfast seminar organised by HVS, which was attended by 70 hotel operators, analysts and investors - concluded that London will become one of the world’s leading hotel markets in the near future, on the back of strong visitor growth and recent Chinese visa changes​.

“London has enjoyed a strong return since the financial crisis and, with the exception of Paris, is the only European gateway city outperforming its peak pre-crisis RevPAR (revenue per available rooms) levels,” said Charles Human, managing director of property specialist HVS Hodges Ward Elliott.

“In 2013 London was the most invested city in the world in terms of commercial real estate.”

London is also benefiting from easier access to lending for hotel development, although most of the key recent hotel deals in the capital have been secured on an all-cash basis with the intention of future refinancing when the time is right.

“London has a shortage of hotel stock on the market, which pushes both demand and prices higher and means that development costs are lower than acquisition costs,” said Human.

“The capital also has a high proportion of poor quality hotels which needs replacing – either as hotels, or residential units." 

Hotel market growth

In April, a report from BDO LLP​ stated that returning optimism among UK hoteliers and interest from foreign investors was driving growth in the UK hotel market, with total transaction values hitting £2.5bn in 2013. A separate report from Savills revealed that the UK hotel market is on track to exceed £3.5bn this year, with investment volumes for Q1 2014 totalling £952m.

According to BDO, London dominates the UK investment market, with 75 per cent of all hotel deals taking place in the capital last year.

Visits to London grew by 8.6 per cent in 2013​ – hitting 16.8m – and hotels in the capital achieved average occupancy levels of 83.1 per cent in 2013. The city was ranked number one destination for Brits looking for a holiday this summer in a recent TripAdvisor study​.

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