Hotel room supply in nine of the top 10 UK markets has been forecast to grow by more than 12 per cent in the next few years, according to a report by Christie & Co.
According to Christie & Co’s The UK Hotel Market Snapshot H1 2023, London, Bristol, Birmingham, Manchester, Liverpool, Glasgow, Edinburgh, Cardiff and Belfast will experience double-digit growth over their current supply. However, Newcastle brings up the rear with a pipeline sitting at a more moderate 5.7 per cent planned increase.
As at the end of H1 2023, across the ten cities, an aggregated 35,800 rooms are now in the active pipeline, either at the final planning stages or already under construction. The new rooms will equate to a 14.8% increase on the current aggregated room supply of all ten markets, with Glasgow, Edinburgh and Cardiff expected to see the largest injections to their room stock with supply growth rates reaching 22.9 per cent, 19.1 per cent, and 17.7 per cent respectively.
This forecast comes in addition to Christie & Co’s findings that in the first half of 2023, revpar growth surpassed both 2022 and pre-pandemic 2019 levels across all ten markets, led by Edinburgh and Belfast in the North of England and London and Birmingham in the South.
Turning to transaction volumes, across the top ten cities, volumes reached £567 million in the first half of 2023 which was just over half of the volume recorded over the same period in 2022.
Why it matters
While the development pipeline has been delayed in recent years due to the pandemic, a difficult financing landscape as well as other factors, Christie & Co’s forecast is a ray of hope for the sector and confirms the appeal of the UK hotel sector to both domestic and foreign investors as well as their interest in investing in regional UK cities beyond London.
What they said
Pierre Ricord, head of consultancy – hotels at Christie & Co said: “We are pleased to report the encouraging performance levels seen across the top ten UK markets in the first half of 2023, reaffirming the hotel sector’s resilience and remarkable ongoing recovery.
“The events of recent years have noticeably delayed the pre-pandemic pipeline of new hotels, which will have facilitated the recovery of hotel KPIs. Nevertheless, the development pipeline remains active. This is expected to positively contribute to the renewal of ageing stock, with six out of the ten markets under review noting 50 per cent or more of their inventory as being 10 years or older.”
Carine Bonnejean, managing director - hotels at Christie & Co added: “Sales over the first half of the year, which were largely dominated by single-asset transactions, were constrained by accumulating headwinds leading to a price gap between sellers and buyers. The opposing forces of continued trading performance elevation and increased financing costs have largely underpinned this gap. However, there is evidence that the gap is narrowing which will allow deals to accelerate in the coming months.”