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UK hotel sector resilient despite Brexit

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UK hotel sector resilient despite Brexit

The UK hotel sector has had a resilient trading performance in 2018, with particularly strong revenue levels set to be recorded in the regions by the end of the year.

According to research from property consultancy Knight Frank, revenue per available room (revpar) levels recorded growth of 3.9% in London, while the top 20 regional UK towns and cities are set to achieve the strongest revpar growth at 4.5%.

2017 saw record revpar levels and robust growth in gross operating profit per available room but investors have experienced improved investor returns in 2018, in part due to an increase in average daily rate of 1.7% in London (to £172) and 2.0% in the regions (to £88) to year end.

Knight Frank’s UK Hotel Trading Performance Review 2018, in partnership with HotStats, analyses the revenue, cost and profitability of hotels in the UK from a sample of 111,500 rooms.

A strong global economy and the devaluation of sterling have continued to boost inbound tourism whilst also strengthening the domestic leisure market, ensuring that occupancy rates continued to grow to 83% in London (81.2% in 2017), while remaining stable at 77.4% in the regions (77.2% in 2017), for the year to October 2018.

Though there remain opportunities for investors due to the depreciation of the pound, operational costs are increasing, with payroll having have risen by 3.5% in London and 1.6% regionally.

Shaun Roy, partner in specialist property investment at Knight Frank, said: “We predict that whilst the resilience of the UK hotel sector will be persistently scrutinised, 2019 will be the year of opportunity. We retain a cautious yet optimistic outlook, predicting revpar growth next year of 2.4% in London and 2.5% in the regions.

“It’s clear that whilst the wider economic uncertainty may be discouraging investors in other real estate sectors, the competitive value of the pound is boosting UK tourism which in turn benefits the UK hotel sector’s trading performance as a result of investors capitalising on the weaker pound.

“The sector remains robust in the face of uncertainty and this trading performance growth is set to continue in 2019, albeit it at a slower pace. Differences of opinion in the market will allow shrewd investors the opportunity to make a mark and continue to seek investment in both London and key UK regional cities in 2019.”

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