UK hotel sector could have reached ‘peak demand’

By Emma Eversham contact

- Last updated on GMT

The hotel sector could have reached peak demand says HVS as revPAR drops for the first time in four years
The hotel sector could have reached peak demand says HVS as revPAR drops for the first time in four years

Related tags: Hotel

The UK’s hotel market could have reached ‘peak demand’ according to industry analysts as average RevPAR drops for the first time in four years.

Average RevPAR grew by just 1 per cent in the first quarter of this year, according to the latest Hotel Bulletin, the lowest increase since the first quarter of 2012. 

Although Aberdeen’s drop of 37 per cent year-on-year heavily skewed results for the 12 cities analysed, Russell Kett, chairman of HVS, publisher of the report along with AlixPartners and AM:PM, said the figures were significant enough to highlight.

“These figures give us a strong indication that the peak of the UK’s hotel occupancy market has been reached and the growth we are seeing now is rate driven rather than occupancy driven,” he said. 

Investment​ 

The RevPAR drop comes at the same time as a slowdown in the UK’s hotel investment market. A separate report by CBRE found that hotel transaction turnover declined by 58 per cent in the first quarter of this year. 

Kett said investment was still being made in ‘most parts of the UK’, but it had slowed down. 

“Investors are currently delaying decisions because of uncertainty fuelled by a combination of terrorism concerns, the forthcoming Brexit vote, China’s economic situation and the US elections,” he said. 

With, Kett said there were concerns hoteliers would start cutting rates to stimulate demand, which, in turn would force competitors to follow suit.

"Once room rates fall across the hotel sector the likelihood is that values will soften," he said. "This is a big concern for London’s hoteliers, particularly with the large number of bedrooms due to open in the next 12 months unless demand starts to pick up again."

Average revPAR change Q1 2016 city by city:

  • Glasgow: -1%
  • Aberdeen: - 37%
  • Belfast: -6%
  • Edinburgh: 6%
  • Liverpool: 2%
  • Newcastle: -9%
  • Birmingham: 7%
  • Leeds: 1%
  • Cardiff: 8%
  • Manchester: 2%
  • Bath: 2%
  • London: -2%

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