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Strong regional hotel performance brings out investors and buyers

14 August 2013
Strong regional hotel performance brings out investors and buyers

Profitable growth returned to UK regional hotels on a last 12 month basis for the first time since the start of the recession, according to the Hotel Bulletin for Q2 2013, published by Zolfo Cooper, HVS and AM:PM.

Consistent growth in revenue per available room (revpar), combined with improved cost controls including payroll savings, boosted profits, providing hoteliers with more confidence for the future.

Graeme Smith, head of the hospitality sector at Zolfo Cooper, said that the profitable growth has resulted in an increase in the number of investors and buyers looking at hotel assets around the country.

"There is a lot of interest in particular, from a corporate standpoint, in Manchester, Edinburgh and Aberdeen," he said.

Ten of the 12 cities covered in the report recorded revpar increases during the second quarter of the year, although it was in comparison to a weak quarter in 2012, due to the presence of the Diamond Jubilee and Easter.

Following a flat first quarter, revpar in London increased by 5% in Q2. Meanwhile, the strongest performances in the regions were recorded in Aberdeen, which recorded revpar growth of 22%, Leeds (+12%), Cardiff +11%) and Edinburgh (+9%).

Aberdeen's buoyant performance can be attributed to the presence of the oil and gas industries, together with a low level of new hotel openings in the city.

Only Belfast and Newcastle achieved negative repar growth during Q2. Belfast's revpar decrease of 3% was in comparison to the same period last year when the city experienced a 26% increase due to the events surrounding the centenary year of the sinking of the Titanic. The 5% drop in revpar in Newcastle can be linked to the 15% increase in the size of the city's hotel market between June 2011 and June 2011. Quarterly repar growth was last experienced in the city in the fourth quarter of 2011.

"We're also expecting to see positive growth outside of London in the next quarter, although we won't get a true reading until Q4 because of the Olympic impact," added Smith.

A focus in the bulletin on Liverpool highlighted a city which has strong leisure business, alongside an emerging corporate market with the £5.5b Liverpool Waters development likely to attract national and international companies.

With leisure customers being more flexible than their corporate counterparts, the key challenge for hoteliers in the city is to maintain rates without sacrificing occupancy.

Performance in the last 12 months has been mixed. Apart from a revpar increase as a result of the hosting of the Mobo Awards in the city in November, performance until January 2013 was down on the previous year. Since February, revpar has improved in every month in comparison to 2012, which is particularly impressive given the poor weather and the timing of Easter. The Grand National at nearby Aintree produced a strong April for the city with revpar 25% higher than the average for the year.

"In recent years, demand has remained buoyant in Liverpool despite the increase in supply, which is a testament to the dramatic improvement in the leisure market," concludes the report. "Developments should attract corporate customers to the area, and in the long-term, Liverpool hoteliers are likely to increase more predictable revenue stream and an increase in average rates."

Manchester is ripe for hotel growth, says report >>

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