Hotel revPAR reaches pre-recession levels

Aberdeen, Bath, Edinburgh, Glasgow, Leeds, Manchester and London outperformed their 2008 results in the second quarter of this year, while Cardiff reached the same levels.

Belfast, Birmingham, Liverpool and Newcastle were still below 2008 levels despite revPAR growth in all cities.

“Reaching this benchmark is a cause for optimism and will give certain hoteliers the confidence to invest time and money in expansion as rate driven growth is likely to result in profitability improvement,” said co-author Tim Smith, director of HVS London.

“Consistent and strong growth is encouraging and is also likely to leave investors in a confident mood.”

Average revPAR across all cities increased by 10 per cent year on year – the third consecutive quarter of growth, according to the report compiled by HVS, Zolfo Cooper and AM:PM.

London v. regions​

London saw revPAR rise 4 per cent year on year, compared to 11 per cent outside the capital.

According to the Bulletin, growth was driven by average daily rate (ADR) improvement in all cities except Newcastle.

Belfast saw the steepest hike at 28 per cent, with Leeds at 16 per cent and Glasgow at 12 per cent – with prices​​ and occupancy largely affected by the Commonwealth Games​​.

Hotel market activity ​

Investment in the hotel market has picked up in recent months​​, and according to the report, about £1.9bn-worth of hotel transactions were completed in the first half of this year – over £411m of which in Q2.

The second quarter of 2014 saw year-on-year transaction levels rise by over £250m.

Single-asset transactions dominated the first half of this year, but further portfolio transactions are anticipated over the next six months, the report added.

The sector’s active pipeline is largely dominated by the budget segment (50 per cent) and brands (98 per cent), causing concern for independent hoteliers.

Edinburgh focus​

With the Scottish referendum looming, the Hotel Bulletin included a special focus on Edinburgh, stating that while some may believe investors have been put off by the uncertainty surrounding the Scottish economy, ‘there is no noticeable sign of hotel investment slowing down’.

“If Scotland does become independent the city may indeed benefit from the influx of professionals advising on structural change, which would increase demand for hotel accommodation in the short-to-medium term,” added Smith.