Hotels in Edinburgh and Belfast produced the strongest revenue per available room (revpar) growth during the third quarter of the year, according to the Q3 2017 Hotel Bulletin from AlixPartners.
While both cities recorded revpar growth of 11%, figures from STR showed that average revpar growth of 5% across 11 major UK cities was the lowest since the first quarter of 2016 (excluding Aberdeen, which has experienced 11 consecutive quarters of revpar decline).
However, the robustness of the hotel sector is demonstrated by revpar growth across the 12 top cities averaging 6% over the past 20 quarters, compared to UK GDP growth averaging below 1% during the same period.
Belfast’s comparative performance was strong between July and September, given the 17% revpar growth during the third quarter of 2016. The city and the nearby Giant’s Causeway coast has particularly benefited by being named by Lonely Planet as the best region to visit in the UK in 2018.
Edinburgh is performing well due to an ongoing growth in tourism, which has seen visitor numbers increase by over half a million to 3.85 million over the past five years.
Meanwhile, London recorded a 2% increase in revpar during the third quarter despite a decline in occupancy, due to an increase in supply outpacing demand. The weaker pound against other currencies resulted in 5.5 million overseas visitors arriving in the city during the second quarter of the year, including a 30% increase in victors from North America.
The Q3 2017 Hotel Bulletin, which is compiled in conjunction with AM:PM, HVS and STR, also highlighted that hotel transactions in the third quarter had totalled £1.6b, with around £1b of this figure related to single asset transactions. More than half the total value of single asset transactions was due to the sale of London’s five-AA-star, 494-bedroom Grosvenor House hotel for a reported £600m, to US-based Ashkenazy Acquisition Corp.
The report suggested that the recent increase in hotels values was “partially attributable to investors rushing to complete transactions before the effects of Brexit are felt.
“To date, the weaker pound has bolstered top-line performance in the UK hotel market, but some investors are likely to become increasingly wary of hotel assets as plateauing revpar growth is combined with the expected labour shortages and increasing costs following Brexit.”
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