UK hotels report slowdown in RevPAR growth

Martha Elwell Martha Elwell Uploaded 08 November 2017

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UK: Some investors could become increasingly wary of hotel assets as UK RevPAR plateaus

Rooms revenue per available room (RevPAR) has plateaued amid predictions of labour shortages and increasing costs, according to Hotel Bulletin Q3 2017 published this week by HVS, AlixPartners, STR and AM:PM.

In Q3 2017 average growth in RevPAR at 5% was the lowest level since Q1 2016, though the long-term outlook for UK hotels remains firmly positive.

These growth figures exceed UK GDP growth, which has averaged below 1% in the same period. However, the impact of a lower growth environment, global political uncertainty and an increasing threat of terror is taking its toll on performance across hotels in the 12 UK cities, according to the Bulletin.

Transaction values in the third quarter were £1.6bn, helped by the sale of Grosvenor House for a reported £550m. Total transaction values reached £1bn in the same period, partly due to the keenness of investors to complete transactions before the impacts of Brexit are felt.

Forecasts expect year-end RevPAR to show an overall increase of 4.5%. However, the report highlights other central concerns for the industry going forward. Those in the sector will need to pay a closer eye to controlling costs, particularly labour costs, and the sourcing of staff due to declining net migration and the UK's expanding hotel supply.

HVS chairman Russell Kett said: "The UK hotel industry has faced a stream of headwinds in recent years, including rising costs, supply growth, terrorist attacks, and the evolution of third-party distribution and sharing economies. However, the five-year trend suggests that hotel operators will continue to adapt and innovate to drive continued growth and profitability, and thereby value.

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