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The Caterer

Regional hotel property focus: Liverpool

11 June 2014
Regional hotel property focus: Liverpool

IN ASSOCIATION WITH

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Liverpool has attracted a significant amount of investment over the past five years after being awarded the 2008 European Capital of Culture. The result has been a host of prestigious events held in the city. This has helped improve all KPIs in the hotel industry, with occupancy increasing by 2.2% to 70.1% in the year to March 2014 and average room rate (ARR) increasing by 4.2% to £72.62.

One key event over the past two years was the Sea Odyssey in April 2012, estimated to attract nearly 1 million visitors. Another was the Mobo awards, a highlight in the music calendar, which were held at the Echo Arena in November 2012, giving a boost to the hotel industry on a historically quieter month leading up to Christmas. These accompany annual events such as the Grand National, which is always popular.

The most notable difference in 2013-14 has been the city's ability to command a higher ARR each month compared with the corresponding month in the prior year. This has resulted in double digit revpar growth in six of the months of the year, and a total revpar improvement of 7.7% compared with the prior year.

The outlook is positive. The International Festival for Business will be hosted for the first time in June and July, and will attract delegates from all over the world for seven weeks of conferences. The Open Golf Championship will also be hosted in July, and European football will return next season with both Premier League teams likely to feature.

With events like these, and many more planned, there is cause for even more optimism for Liverpool's future.

Gareth Jones, partner, Mazars LLP

LIVERPOOL SUPPLY, PIPELINE AND TRANSACTIONS

Liverpool celebrated its 800th anniversary in 2007. It is a city steeped in heritage and several areas have been granted World Heritage status by Unesco.

Severe bombing during the Second World War and the sharp decline of the docks and manufacturing during the 1970s led to large parts of the city becoming derelict. However, since the mid-1990s, Liverpool has undergone significant economic revival and considerable regeneration, with developments such as Grosvenor's Liverpool ONE and the new Commercial District. Peel Group also recently received outline consent for its £5b Liverpool Waters long-term redevelopment.

Liverpool's hotel market has also changed considerably in recent times, more so than any other major UK city. More than 65% of its rooms have opened since 2000 and the current supply of almost 7,700 rooms has doubled over the past decade. More than 70% of rooms in the city are branded.

New supply growth has been particularly strong in the boutique, budget and serviced apartment categories, which are all well above national averages; notably the latter at 12% of total supply. Nine new hotels have opened in the past year, including Signature Living's 30 James Street, a 123-bed Ibis Styles, a 125-bed Travelodge, a 126-apartment Adagio, a 92-bed Z Hotel and a 51-bed Hoax Hostel.

Room supply will rise by at least 10% over the next two years, with imminent new hotel openings planned for a 153-bed Titanic hotel at Stanley Docks, a 116-bed Aloft and an 87-bed DoubleTree by Hilton. These will be followed in 2015 by a 180-bed Moxy and a 216-bed Pullman hotel at the new Exhibition Centre.

Major hotel transactions are likely to remain subdued while there is continued site availability and strong pipeline activity. The Malmaison Liverpool and the Liverpool Marriott Hotel City Centre were sold as part of portfolio transactions in 2013. The 209-bed Novotel Liverpool Centre, which is leased to Accor, is currently under offer at a £12.3m guide price.

Alan Gordon, director, AM:PM

LIVERPOOL HOTEL MARKET IS ABSORBING GROWTH

The Liverpool hotel market has grown considerably over the last few years with eight hotels opening (599 hotel bedrooms) in 2013, while 2014 is expected to see another four hotels opening (421 bedrooms). In spite of this increased supply of bedroom stock, the market is absorbing it with revpar growth of 2.4% last year in line with the broader UK regional market.

Leisure demand drivers in Liverpool are booming with sports, music and retail drawing in crowds of visitors. Liverpool FC and Everton FC also look certain to be playing European football next year, which will add to their already significant international following, particularly from Scandinavia.

Liverpool One, Grosvenor's retail-anchored development, has strengthened Liverpool's position as one of the North-West's most desirable retail locations,
and the Echo Arena hosts regular music events with leading international acts.

Hotel demand from the corporate market is also expected to see a healthy boost from the new £40m exhibition centre, which will open in 2015.

So it is no wonder that hoteliers continue to feel confident and investor interest in the city has returned. With financially driven buyers being forced to look outside the overheating London market, hotels in core regional cities such as Liverpool are being seen as a great recovery story.

However, the lack of suitable stock, continued improvements in the trading environment and increased availability of bank debt is leading to strong pricing being achieved for the right assets when they come to market. Savills is currently advising on the sale of the Novotel Liverpool Centre and received 13 first-round offers, all from highly qualified buyers with offers well ahead of original expectations. The exceptional appetite for this well-located asset clearly demonstrates reinvigorated investor confidence.

Martin Rogers, head of regional hotels, Savills

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