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Regional hotel property focus: Nottingham

23 December 2013
Regional hotel property focus: Nottingham

BRAND BREAKDOWN

- Upmarket hotel brands

HotelsRooms
Crown Plaza1210
De Vere Venues1202
Park Plaza1178
Hilton1176
QHotels1120

Mid-market hotel brandsÂ

HotelsRooms
Jurys Inn1264
Holiday Inn2220
Best Western3214
Park Inn by Radisson1172
Britannia Hotels - 1 - 166

Budget hotel brandsÂ

HotelsRooms
Premier Inn6499
Travelodge4268
Ibis1142
Holiday Inn Express1120

Source: AM:PM

NOTTINGHAM SUPPLY, PIPELINE AND TRANSACTIONS

Hotel supply has been stable over the last five years. The opening of the 202-bed eco-friendly Orchard Hotel at the University of Nottingham's East Midlands Conference Centre in late 2012 was the first major new hotel addition since 2008.

Room supply growth of around 5% over the past five years has been broadly in line with the UK average, but it has been noticeable that hotel developers and investors have focused less on Nottingham in comparison with most other regional UK cities over the same period.

At present, there are no active major pipeline hotel projects in the city. There are a number of significant mixed-use schemes at varying stages of development that may lead to more new hotels. In the nearer term, Nottingham Council is exploring the potential to convert the historic Guildhall building into a 100-bed upmarket hotel.

Three-star hotels account for the largest proportion of the market (see 'Brand breakdown'), which is generally well-represented by the majority of the major global and national brands (see 'Performance') and accounts for 77% of bedrooms. This is set to rise next year when the 106-bed Nottingham Gateway hotel completes a refurbishment and rebrands as a DoubleTree by Hilton.

Some smaller independents are being marketed for sale, but with the exception of Marsh Management's acquisition of the 87-bed Rutland Square Hotel from Akkeron, there have been few major hotel transactions in the past two years.

Alan Gordon, director, AM:PM

INDEPENDENTS

Paul Davey, managing director, Davey Co

Activity in the independent sector of Nottinghamshire's suburban and village hotel and inns market has substantially overshadowed subdued activity in the corporate operator-dominated city centre over the past year or so. The acquisition of the 87-bedroom Rutland Square Hotel by Marsh Management is the only notable recent deal of any size in Nottingham city centre.

The small to medium-sized independent market is far more fluid, supported by Davey Co's sale of the 21-bedroom Clarence Hotel on the western edge of the city in November.

The 11-acre Redbrick hotel weddings, conferencing and high-end woodlands lodges site in the heart of Sherwood Forest in the north of the county further demonstrates this point. Supply of instructions to the market has undoubtedly been an issue. Clearly, deals can be hard to come by given the absence of a good range of available businesses to present.

Would-be sellers in the independently owned sector should be heartened by the significant improvement in the licensed property market generally over the past year
and seek our advice early as to the realities of what the market may yield.

PERFORMANCE: NOTTINGHAM, YEAR-ON-YEAR CHANGE

OccupancyARRRevparTotal revparGOPPAR
November 20120.83%-0.95%-0.12%-0.87%-4.60%
December 2012-0.36% - 2.42% - 2.06%1.37%-9.02%
January 20137.18%-4.10%2.78%3.21%-1.12%
February 2013 - 9.30%-2.78%6.26%9.50%23.46%
March 20139.05%-2.11%6.75%3.85%-0.07%
April 20135.43%1.60%7.12%5.77%9.59%
May 20132.51%-3.81%-1.40%-3.20%3.23%
June 2013-0.42%5.58%5.14%15.03%23.02%
July 201310.16%7.45%18.37% 12.86%36.02%
August 20137.93%-3.03%4.67%2.94%9.53%
September 2013-0.68%-0.94%-1.61%-0.72%-7.11%
October 20131.96% 0.45%2.42%2.75%4.95%

Source: HotStats -

In performance terms Nottingham is considered to be a tertiary city market, exhibiting among the lowest revenue per available room (revpar)
and gross operating profit per available room (goppar) performance levels nationwide.

Like other areas outside London, Nottingham was heavily affected by the recession and is at last showing signs of a recovery. To illustrate
the extent of the recession on the Nottingham hotel market, the current goppar is below 75% of that achieved in the 12 months to August 2008, before the collapse of Lehman Brothers triggered the recession.

In the 12 months to October 2013, while Nottingham experienced a sustained decline in average room rate performance, this was counterbalanced by greater demand and improved occupancy performance. As a result of the combination of the movement in price and volume, revpar experienced relatively strong monthly year-on-year growth between December and August (with the exception of May) ranging from 2% up to approximately 18%, which was achieved in July 2013.

In terms of profitability, while the local hotel market showed erratic goppar year-on-year movements throughout the 12 months to October 2013, with the operational gearing and high-fixed cost component of hotels, the data clearly illustrates the dramatic improvements in profitability that can be achieved through increases in revenue.

With a currently benign future supply threat, with all potential hotel projects in the city on hold or categorised as 'speculative', with the improving economic conditions in the UK clearly filtering through to the benefit of markets like Nottingham, we would expect to see further positive performance gains in the coming months and year ahead.

David Bailey, senior director, CBRE Hotels, Europe, Africa and the Middle East

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