Home Business NewsBusiness Revealed: The most attractive cities for hotel investments

Revealed: The most attractive cities for hotel investments

12th Jul 18 1:33 pm

The UK hotel industry saw the opening of 15,200 new hotel rooms in 2017, constituting a 2.4 per cent growth in the UK hotel supply, with the proportion of new build hotels increasing significantly, rising by 37 per cent, and making up 66 per cent of all new rooms. The pace of development in 2018 continues, with  21,000 new rooms forecast to open, representing a 3.3 per cent growth in the UK hotel market, according to the latest research by leading global property adviser Knight Frank.

The annual UK Hotel Development Opportunities 2018 report has discovered that the budget hotel sector continues to dominate the market, representing 69 per cent of all new build hotel stock and 65 per cent of all hotel extensions, with some 8,300 new branded budget hotel rooms planned to open in 2018.

The unprecedented growth in 2018 of the four-star and serviced apartment sectors, equating to some 8,500 rooms, is set to challenge the market share of new rooms in the budget sector, falling to around 39 per cent of the total new bedroom stock in 2018.

The branded budget sector, however, is set to continue to grow its market share, accounting for over 25 per cent of the UK hotel supply, whilst the quantum of new supply in the four-star sector will serve to maintain its share at 29 per cent. Meanwhile, 10 per cent annual growth in the serviced apartment market during 2018, will translate into a growing 3.5 per cent share of the UK hotel market.

London has seen a dramatic 70 per cent increase in new build hotel openings, with over 4,100 new build rooms opening, fuelling this growth has been the strong rise of budget hotel rooms in the capital, which account for 67 per cent of all new build bedroom stock. In 2017, total new bedroom supply in London increased by 4 per cent and this growth is set to continue, with a rise of over 5 per cent forecast.

Development is also on the rise across the UK, with regional markets offering an attractive alternative route for investment, with a plethora of both domestic and overseas investors attracted to the sector. The regions are set to contribute approximately 13,000 new rooms in 2018, representing 62 per cent of the total UK new bedroom stock for this year.

The Knight Frank UK Hotel Development Index identifies which UK cities pose the best prospects for hotel investment and development and has named Inverness, Brighton, Edinburgh, Cardiff and Liverpool as the UK’s top five most attractive cities. Meanwhile, London and Manchester have both fallen out of the top ten of this year’s index.

Julian Evans, Head of Hotels, Healthcare and Leisure at Knight Frank, said: “The UK is currently experiencing an unprecedented level of development activity, with the staggering figure of over 5,200 new hotel rooms opening during the first six months of 2018 and a further 15,000 rooms forecast to open later this year. This is great news for the industry, as growing demand is reflected in development hotspots regionally, whilst London continues to see an increase in new rooms, demonstrating there are compelling opportunities for investors across the country.”

Charles Fletcher, Partner, Specialist Property Investment at Knight Frank, said: “The robust demand for fixed lease hotel investments, combined with a lack of built stock available and suitable to lease, has led many investors to explore the development route via forward funding or forward commitment structures. In the branded budget hotel sector, we have seen a marked increase in the number of developers taking the opportunity to de-risk developments at an early stage in the development process as a result.”

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