International visitors to UK hit new high

■ International visitors to the UK reached an all time high during 2013, reaching 32.8 million and surpassing the previous 2007 peak.

■ This increase was largely driven by the improving attraction of London. The city reported an 8.6% growth in numbers making it the most visited city in the world by international tourists, outperforming Paris the previous holder of the title.

■ European visitors continue to dominate with improving economic conditions in the Eurozone helping to boost numbers by 5.7%. However, the UK's widening international appeal meant that it was visitor numbers from outside Europe and North America that reported the greatest increases.

■ Visitor numbers from the wider Asia Pacific and Central & South American regions have grown by 8.5% and 14% per annum respectively since 2009. China and Brazil have been stand out countries reporting an average growth per annum of 16.1% and 14.2% respectively.

■ With UK visitor numbers for the first five months of 2014 already 5.8% higher than the same period last year, 2014 is likely to see another new high in international visitors.

Regional performance continues to improve

■ The improvement in overseas visitors to the UK corresponded with a pick up in regional hotel performance last year following several years of relatively lack lustre performance.

■ According to BDO's Hotel Britain Report, both occupancy and average room rates saw growth of 1.5 percentage points and 1.4% respectively. This resulted in a 3.5% increase in Revenues Per Available Room (RevPAR) over three times greater than the 0.9% reported for the previous year. More reassuring was the greater number of UK cities and towns reporting RevPAR improvements increasing to 29 markets up from 20 the previous year.

■ Aberdeen reported the highest growth in RevPAR across the whole of the UK over 2013 of 16.7% driven by the continued expansion of the city’s oil industry. Leeds, Oxford, Liverpool and Edinburgh all reported double digit growth in RevPAR over the same period with Oxford being the highest yielding market behind London with an average RevPAR of just under £89. Liverpool’s strong growth in RevPAR (11.1%), driven by a 10.1% in average rates, marked a significant reversal of fortunes after reporting one of the largest declines in RevPAR the previous year.

■ The resurgence in the regional hotel market has continued into 2014 with a number of UK cities reporting RevPAR growth over the first six months of the year. Again, Aberdeen has been one of the strongest performers with a further 10.5% uplift in RevPAR over the first four months of 2014 according to HotStats.

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Arrival of new brands opens up new hotel markets

■ London's rise as one of the key tourist destinations in the world has attracted an increasing number of new international brands looking to capitalise on this expanding demand base. The diversity of London's international tourists also means that it offers operators the opportunity to market their brand to a greater variety of new consumers.

■ A number of US brands have made the jump across the pond to open their first European outpost in London. Andre Balazs, who owns The Standard hotel group amongst other boutique hotels, launched his first hotel outside the US this year with the opening of Chiltern Firehouse in Marylebone. The Mondrian, part of the Morgan Hotel Group, will open its first European hotel on London's Southbank later this year and Gansevoort Hotel & Resorts will open in Shoreditch in 2015.

■ The growth in Chinese tourism and streamlining of the visa system for Chinese Nationals, which is expected to boost visitor numbers, has also coincided with the arrival of new hotel brands from Hong Kong and mainland China.

■ Shangri-La Hotels & Resorts opened their 202-bed London hotel in The Shard in May. Peninsula Hotels secured a site on Hyde Park corner last year and Dorsett Hospitality International will operate two hotels in the Capital by 2016 with their first hotel opening in Shepherds Bush this summer. Wanda Group's mixed use development at Nine Elms is proposed to be home to the UK's first mainland Chinese hotel brand. Further details on the potential impact Chinese tourism growth will have on the UK hotel market can be found here.

■ The arrival of these new brands, combined with development opportunity constraints in London, has opened up new hotel sub markets and facilitated the spread of upscale hotel brands beyond the traditional West End. For example, the Southbank and Old Street/Shoreditch areas will see a 79.9% and 225.6% increase respectively in upscale provision over the next four years.

Taken from
UK Hotel Investment Monitor Q3 2014