jll hotel intelligence - london (march 2015)
TRANSCRIPT
Hotel Intelligence
Tourism Demand
Supply Performance
Qui
ck fa
cts
March 2015
London
Source: AM:PM Hotels
London is one of the most visited cities globally and by far the most popular destination for international tourists coming to the UK. It’s almost a 60/40 split
between international and domestic visitors and demand is driven both by leisure and business visits. London topped the MasterCard Global Cities Index as the most popular tourist destination in the world in 2014, beating
Bangkok and Paris.
London is served by five international airports, which, in 2014 recorded 146 million passengers, a 5% growth compared to the prior year. Heathrow,
Gatwick, London City and Stansted each handled their highest ever totals. Controversy over which London airport (Heathrow or Gatwick) will build the next UK runway continues, with revised expansion plans from both airports
released in May 2014. The final decision will be made after the general elections in 2015.
As at February 2015, there are approximately 1,476 hotels in London with c. 137,000 rooms. Despite major developments in the budget sector, the London hotel market remains dominated by 4-star rooms, accounting for 37% of total room stock. Notable entrants during 2014 included the 91-room Ham Yard Hotel close to Piccadilly Circus managed by Firmdale Hotels, the 202-room
Shangri-La at The Shard and the much anticipated 359-room Mondrian London at Sea Containers. Hotel development will remain buoyant with nearly
16,000 new rooms expected to enter the capital by 2018.
The London hotel market is one of Europe’s best performing cities with occupancy averaging around 80% between 2004 and 2014. 2014 saw hotels
in the UK capital report its fifth consecutive year of RevPAR growth, rising 3.3% to £117. Occupancy rose marginally to 83%, the highest rate in Europe, while almost £4 was added to average room rates, to close the year at £141. Growth was boosted by a broader economic recovery combined with strong
uplift in tourism arrivals.
Recently voted as the world’s most visited city in the MasterCard Global Destination Cities Index, the UK capital continues to go from strength to strength. Reporting a fifth consecutive year of RevPAR growth in 2014 has given London hoteliers something to smile about. Despite a cooling off in investment activity during 2014 due to lack of available stock, London remains the most liquid market in Europe, accounting for around 12% of total transaction volumes. Considered a safe-haven for investors, it is no wonder this capital city continues to attract investors from all corners of the globe.
136,541Room Supply February 2015
146 millionPassenger Arrivals
in 2014
16,000New Rooms
Expected by 2018
£141Average Rate2.7%
83%Occupancy0.6%
£117RevPAR3.3%
% change compared to the prior yearHotel performance data sourced from STR Global
11.4%
36.5%
14.8%
19.4%
17.9%
5 Star
4 Star
3 Star
Budget
Other
London Hotel Supply (as at February 2015)
Contacts
Investment
€
Outlook
NotableDealsPipeline
Recent Openings
InfrastructureDevelopments
Jessica JahnsHead of EMEA Hotels & Hospitality Research [email protected]+44 (0)20 7399 5821
London Transaction VolumeInvestment activity in the London hotel market reached £1.5 billion during 2014, despite falling 14% compared to 2013. The cooling off in the market was due to the lack of available stock, which led investors to seek opportunities in other UK cities.
Major transactions during the year included the sale of the Marriott Grosvenor Square Hotel for £125 million. The 237-room hotel was sold by Strategic Hotels & Resorts Inc. to Joint Treasure International Limited, who is based in Hong Kong. Other noteworthy transactions included the sale of the 173-room London Edition by Marriott International, Inc. to the Abu Dhabi Investment Authority for £150 million and the purchase of 50% stake in the Savoy Hotel on the Strand through a joint venture led by Katara Hospitality.
With strong trading performance and a steady market environment, London continues to attract significant investor interest. Cash-rich investors from Asia were keen to pick up assets in London, with private equity firms and investment funds from the region remaining the key buyers, followed by hotel operators.
The London hotel market is expected to continue posting strong results in 2015. The Rugby World Cup, which will take place in September, will no doubt have a positive impact on hotel performance with an influx of visitors descending in the UK.
In terms of hotel supply, around 54 hotels representing almost 6,000 rooms are expected to join the market during the year, with almost 50% of these in the budget sector.
As occupancy levels out, operators are likely to put emphasis on improving average rate. However, increased competition from new supply is likely to make trading growth more challenging in 2015. This could prompt some
owners to consider selling giving space for opportunistic investment. However, the shortage of available stock is likely to keep pushing investor’s interest into the regions.
Firmdale Ham Yard91 rooms, Opened 2014
Z Piccadilly112 rooms, Opened 2014
Shangri-La at The Shard202 rooms, Opened 2014
Mondrian London at Sea Containers
359 rooms, Opened 2014
Hub London Spitalfields189 rooms, Due 2015
Hilton London Bankside292 rooms, Due 2015
CitizenM Tower of London370 rooms, Due 2015
Marriott Grosvenor SquareMarch 2014, £125m
The London EditionJanuary 2014, £150m
The Savoy Hotel (50% stake)December 2014, c. £220m
Kingsway HallOctober 2014, £96m
Thameslink ProgrammeCompletion Due 2018
Cross RailDue 2018
InterContinental at The O2452 rooms, Due 2015
One Nine ElmsDue 2018
Battersea Power StationDue 2023
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
£ M
illio
ns
Source: JLL Hotels & Hospitality
William DuffeyHotels & Hospitality in [email protected]+44 (0)207 087 5587