Two-thirds of hospitality leaders remain optimistic on the long-term future of UK hotel market, according to Deloitte’s European Hotel Industry Survey 2020.
Serviced apartments overtook hotels to become the most attractive asset class to invest in Europe, rising by 25 percentage points, year-on-year.
Over two-thirds of respondents were ‘strongly’ or ‘slightly’ optimistic about the long-term future of the UK hotel market, with the majority also predicting a rise in profitability over the next five years.
Compared to 2020 levels, over a quarter of respondents expected revpar growth to be greater than 9% in London in 2021, with 21% expecting the same revpar growth for UK regions over the same period. However, half of the respondents believed that a no-deal Brexit would lower the attractiveness of London for hotel investment.
More than half of respondents believed the UK investment cycle would take more than two years for performance to normalise. Private equity was expected to be the largest source of equity capital for UK hotel acquisition in 2021, up 35 percentage points year-on-year, with domestic and North American investors expected to be the primary sources of investment this year.
Andreas Scriven, head of hospitality and leisure at Deloitte, said: “The hotel industry has been one of the hardest hit by the outbreak of Covid-19. However, as vaccination developments look increasingly promising and consumers think ahead to 2021 travels, senior hospitality figures are more optimistic about the year ahead. Indeed, many expect profitability to rise between now and 2025.
“The restrictions on international travel this summer saw many UK consumers switch their holiday plans to domestic staycations. UK destinations also remain attractive for hotel investment, with Cambridge overtaking Edinburgh to the top spot this year, the latter moving to third place behind Oxford.”
Cambridge climbed to the top spot of most attractive UK city for hotel investment in 2021, with Oxford and Edinburgh ranking second and third, respectively.
Amsterdam remained the most attractive European city for hotel investment in 2021, followed by London and Paris.
Nikola Reid, director & head of UK hospitality advisory at Deloitte: “Across Europe, hotel investors continue to look for opportunities in Amsterdam which retains its place as the most attractive European city for investment for the fifth year in a row.
“Second to Amsterdam is London but, as the Brexit transition deadline approaches, investors indicate some caution. For half of this year’s respondents, a no-deal Brexit scenario would lower London’s attractiveness for hotel investment.
“Combined with the challenges that Covid-19 has presented this year, boosting consumer confidence to once again pack their suitcase will be key to a speedy recovery of the hotel industry, and ensure long-term projected investment is realised.”