Influx in overseas visitors aids hotel recovery

The research reported that London hotels achieved an occupancy rate of 82% in June 2023, a rise of just over 3% from 2022, while hotels outside the capital recorded growth to almost 81% occupancy versus 77% in 2022.

It stated that recovery of the UK hotel market is partly supported by an increase in overseas visitors, citing London's Heathrow Airport, which recorded total overseas passenger arrivals of almost 6.7 million, 1.9% below June 2019, with many from Asia and the US.

While seasonal demand has aided the boost, the report added that high inflation has also led to many hotel operators seeking to maximise their room rates in place of full occupancy recovery. The report said this strategy has facilitated growth in gross operating profit per available room (goppar). For the first half of 2023 London saw goppar growth of 42% versus the same period in 2022, while the regional UK recorded 16% goppar growth over the same period.

Karen Callahan, head of hotel valuation and partner at Knight Frank, said: "London's performance during the first half of the year has seen ADR growth continue to trend upwards and, along with much improved occupancy levels, this strong occupational performance is supporting profit margins and gross operating profit per available room growth.

"This is a welcome counterbalance to the softening of yields that has resulted from the increasing cost of debt, and with hotels acting as an inflation hedge, investor appetite for the sector remains strong."

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