UK hotel performance defies Brexit uncertainty as occupancy levels reach record high
UK hotels have experienced their ninth consecutive year of growth, with occupancy levels reaching a record high despite Brexit uncertainty causing major headaches for other consumer-facing sectors.
According to Hotel Britain, a report published today by accountancy and business advisory firm BDO, occupancy levels for UK hotels increased 1.8% to a record high of 78.8% in 2018.
Despite average room rates decreasing slightly by 0.8% to £99.82, occupancy was the main driver of growth resulting in the ninth consecutive year of rooms yield growth.
Overall UK rooms yield rose by 1.1% to £78.64, helped largely by a strong performance by the London hotel market.
London hotels saw rooms yield increase by 4% to £131.52. Occupancy rose 3.7% on the previous year, achieving the highest level on record at 83.6%.
BDO says the positive results highlight the resilience of the London hotel market and its capacity to absorb new supply following the opening of approximately 8,000 rooms in 2017-18.
The strong performance also comes despite a drop in visitor numbers. According to ONS and VisitBritain, the UK welcomed 37.8m visitors in 2018 – down 3.5% from the 39.2m visitors the previous year.
But an uplift is predicted, with an additional one million visitors expected in 2019. BDO says this will be a welcome boost against a backdrop of political uncertainty.
Robert Barnard, partner at accountancy and business advisory firm BDO, says: “The continued political and socioeconomic impacts of Brexit remain a source of huge uncertainty, however the UK hotel industry has banked another strong performance, especially when compared to other consumer-facing industries.
“While the government’s focus is on the UK’s economic future, hotel brands and owners have a number of competing priorities on their agenda, most notably investing in the right technology, managing a EU-heavy workforce and overcoming competition from online platforms.”
The UK hotel market remained attractive for both domestic and international investors in 2018 despite Brexit concerns. According to Knight Frank, the volume of M&A transactions in the UK hotel market increased by 29% last year to a total of £7.4bn worth of deals.
“With international visitor numbers forecast to increase in 2019, together with a reduced pipeline of new hotels, I do not foresee any major shocks for the sector,” says Barnard.
“Inevitably there’ll be challenges ahead but I’m confident the UK hotel industry will continue to experience growth over the next 12 months and investor appetite will remain strong.”
BDO’s Hotel Britain also analyses regional hotels’ performance. In contrast to the London hotel market, regional hotels saw overall performance decline by 1.3%. Occupancy, which only increased by 0.6%, could not offset the negative impact of a 1.9% drop in average achieved room rates.
Hotels in Liverpool saw the strongest rooms yield growth of all UK regional cities – up by 12.4% and ten years on from being the European Capital of Culture in 2008.
At the bottom of the scale, Newcastle experienced a 10.4% decline. This was followed by Edinburgh – last year’s top performing city – which traded 9.7% below 2017 levels following an intense year of new supply.