High times ahead

HOTEL occupancy reached record levels last year and the industry is optimistic of even better times ahead.

A survey of more than 20,000 hotel bedrooms in London, carried out by consultancy Pannell Kerr Forster Associates (PKFA), shows that average occupancy reached 82% in 1995, up two percentage points on 1994.

The ETB, in its English Hotel Occupancy Survey, reports slightly lower results. Occupancy for September 1995 was 75%, the highest since 1988.

Possible reasons for the upturn include the weakness of the pound, making London a good-value destination, and more tourists coming from new markets such as the Far East (especially Japan) and former Eastern Bloc countries.

"The London product is always different, always changing, which encourages people to come here," says Louise Wood of the London Tourist Board (LTB). This is backed up by the fact that 60% of the 21 million travellers to London last year were repeat visitors.

The Northern Ireland peace process may also be a factor, according to the LTB, as there was no bombing campaign in London in 1995. And the easing of the recession is helping - not just here, but in other European countries, too.

Last year was a success for all categories of London hotels from luxury to budget, according to industry sources. "The hotel market as a whole saw a great influx of tourists, three-, four- and five-star hotels all benefited," says Franz Ferschke, general manager of the five-star London Marriott Hotel.

"People have been making bookings later than usual, which is good for hoteliers because they can charge more," comments Ronald Kingston, general manager of the four-star Mount Royal Hotel, Marble Arch. "There is a lot of pent-up business out there. Those in the commercial sector have got to go out and get it and they will have to stay in hotels," he adds.

There seems to be a general feel-good factor spreading among London hoteliers and this has led to confidence in the market.

A recent spate of hotels for sale is perhaps further indication of a recovering market. "I do not think there have been any more for sale than usual, but as the market strengthens, a few hotels held by banks that now want to get their money back have come on the market," says Chris Day, managing director of property agent Christie & Co.

Growth in the market has highlighted a number of problems, however: Christie & Co estimates that 10,000 bedrooms are needed by 2000 and many of these should be in the middle range.

"We need a lot more bedstock at the middle, three-star category but we have to be realistic as far as central London is concerned as there is little area to build," says Richard Tobias, chief executive of the British Incoming Tour Operators Association (BITOA).

Finding land at a reasonable price is a problem, and this has led to two routes of development.

The first is to build hotels on sites "peripheral to main central London areas", says Day. Docklands is pinpointed as an ideal area for development, where both land and planning permission are available.

The London Docklands Hotel Demand Study, recently prepared by PKFA and property agent Knight Frank, shows that Docklands could sustain 2,600 hotel bedrooms from all levels of the market. This would be over a 15-year period.

Two main areas were highlighted in the study: the Isle of Dogs, which needs roughly 1,000 bedrooms, based on corporate demand; and the Royal Docks, needing 1,600, based on a forecast of visitors to a new exhibition centre, ExCel, the first stage of which should be completed in 1998.

hotel proposals

"As a result of the study, many proposals have already been put forward to the LTB from hotel operators," says Sally Robinson, a senior consultant with PKFA.

"Following an invitation to hotel operators to develop in the Docklands area, 12 operators put forward proposals and we have had nine submissions on specific sites," says Sunny Crouch, director of public affairs at the London Docklands Development Corporation.

"Of the 12 operators, an estimated eight are international hotel operators, ranging from five-star to budget accommodation," she adds.

Last December's announcement by Whitbread that it plans to develop three Travel Inns in central London locations - Euston, Putney Bridge and County Hall (News, 14 December) - is further proof of the trend.

In the same week, Giles Shepard, managing director of the Ritz, revealed plans to convert offices in London's Southwark Street into an 88-bedroom budget hotel.

The second area where there is development is in the conversion of disused offices into hotels. "I have seen a lot of interest recently in converting offices, and if other development areas do not come up then this trend is likely to continue," says Andy Duncan, a director at PKFA.

And Christie & Co's Chris Day adds: "You have to look at each situation individually - is the land cheap and will the building work well as a hotel? You need to get decent-sized bedrooms without spending too much on structural change."

New initiatives set up in conjunction with the LTB are also helping to address the lack of budget accommodation and shortage of land available for development.

A partnership between the board and Christie & Co aims to encourage the building of hotels in less traditional areas of the city. This will be done, says Day, by "highlighting the scarcity of rooms and bringing landowners and hotel operators together to do something about it".

The Central London Partnership, started in June 1995, is an ongoing project that aims to stimulate interest further in Docklands and other less developed areas of the capital. It has brought together a body of about 40 people from a cross-section of central London interests, made up of senior businessmen and local authorities.

The project will focus on the whole infrastructure, in areas such as transport. One particular aim is to develop hotels on the South Bank, looking again at the shortage of budget accommodation. "It is an up-and-coming area of London with the arts world and the new Tate being built there," says Jo Valentine, director for partnership at London First.

With the general feeling of optimism and renewed interest in development, all indications for this year are positive.

"People come for the heritage and culture and because it is a good-value destination - this will certainly continue into 1996. I would not rely on building a tourism strategy on the weakness of the pound," says Tobias.

Duncan comments: "Optimism leads to development and aquisition, particularly from the Far East. The danger is always that the market might get overvalued as trading picks up. People think everybody is getting into London so they have to be there and they go beyond their prices just to get a deal done. But there are still several good years ahead.

"Occupancy reached record levels in 1995, so growth cannot be sustained in that sense. But we will probably see growth through room rates and this will increase yield and, therefore, profitability," he adds. n