UK hotel revpar continues to increase, with development outstripping acquisition
The majority of UK cities are reporting strong revpar growth, albeit against weak comparators from the previous year.
That is according to figures published in the Q1 2017 Hotel Bulletin from AlixPartners, which reports that hotel transaction levels remain low, "unsurprising given the uncertain political climate". It adds that data in the upcoming quarters will soon reveal how triggering Article 50 has affected these trends.
Q1 2017 demand data from STR showed strong growth for the majority of UK cities apart from Aberdeen, with an average growth of 7% against Q1 2016.
For some cities, including London, Newcastle, and Glasgow, revpar growth follows disappointing performance in Q1 2016. Newcastle recorded 3% revpar growth this quarter against a decline of 11% in Q1 2016 following a significant increase in supply (10% growth in the previous 12 months). Newcastle revpar levels remain 10% below that of Q1 2015, highlighting the effect of new supply on the market.
Development activity, in contrast to transaction activity, continues to flourish. Transaction values in Q1 2017 totalled £500m, an improvement on the £300m of transactions that took place in Q1 2016, yet this total is still significantly below the £1.5b plus quarterly levels recorded in previous years.
The report said: "The UK hotel market currently has a valuation disparity and it's likely that, given demand growth in the last four quarters, many sellers are holding out for more significant prices while buyers are conscious of overpaying, particularly given expected operating cost challenges."
UK hotel sector to open 20,000 new bedrooms in 2017 >>
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