Hotel sector on verge of reaching peak in the market

10 May 2016 by
Hotel sector on verge of reaching peak in the market

A decline in hotel performance, combined with a fall in transactions, during the first quarter of the year suggest that the hotel sector has reached a peak in the market, according to new research.

The Q1 2016 edition of the Hotel Bulletin said that the hotel sector has long been regarded as a barometer of the wider economy. Now, after several years of largely consecutive growth in revenue per available room (revpar) figures across all regions, the trend is shifting.

Average revpar figures for the 12 cities reviewed in the report declined in the first quarter for the first time in four years, recording a 3% year-on-year drop.

London's revpar decreased by 2% during the first three months of 2016. The capital has now recorded five consecutive quarters of flat or declining revpar, creating concern among hoteliers about the large number of bedrooms due to open in the capital over the next 12 months.

Newcastle also recorded a revpar decline, down 8%, partly driven by the 10% increase in room supply over the past year.

The quarter's top performer was Cardiff with 8% revpar growth as the city hosted the World Half Marathon championship in March, with Birmingham achieving a revpar increase of 7%.

The first three months of the year also recorded the lowest total quarterly transaction value since Q3 2013, with £305m worth of completed sales. The sale by Chelsfield Partners of two London Club Quarters hotels to a joint venture between AXA Investment Managers and Danish pension fund ATP accounted for more than half of the total number of transactions during the quarter.

It could be that the number of transaction may be significantly lower than Q1 2015 as a result of more completions in Q4 as fewer transactions were delayed into the new year. However, it is believed that the volume of properties changing hands has been impacted by terrorism levels, the possibility of Brexit, the US presidential elections and below-expected economic growth in China.

The news in February that Travelodge has stalled its £1b sales process following reports of in adequate offers, perhaps indicates the change in mood for transactions.

The report concluded: "There has been a modest but still perceptible shift in sentiment, especially in the investment community where a much greater sense of caution is being adopted over future growth prospects.

"Some already believe the market has reached a peak, whether in terms of asset values or trading performance. Inevitably, economic activity relies in confidence, so it will be important to monitor the extent to which any further shift in sentiment manifests itself more meaningfully in market activity during 2016."

The Hotel Bulletin is compiled by AlixPartners, AM:PM, HVS and HotStats.

London could be heading for a peak in hotel trading, warns report >>

Branded hotels set to increase in UK >>

Serviced apartments increasing foothold in UK >>

Latest video from The Caterer

*Are you looking for a new role? See all the current hospitality vacancies available with The Caterer* Jobs >>

The Caterer Breakfast Briefing Email

Start the working day with The Caterer’s free breakfast briefing email

Sign Up and manage your preferences below

Check mark icon
Thank you

You have successfully signed up for the Caterer Breakfast Briefing Email and will hear from us soon!

Jacobs Media Group is honoured to be the recipient of the 2020 Queen's Award for Enterprise.

The highest official awards for UK businesses since being established by royal warrant in 1965. Read more.


Ad Blocker detected

We have noticed you are using an adblocker and – although we support freedom of choice – we would like to ask you to enable ads on our site. They are an important revenue source which supports free access of our website's content, especially during the COVID-19 crisis.

trade tracker pixel tracking