London hotels defy forecasts to post positive 2015 results

Contrary to forecasts posted at the beginning of the year and despite a significantly lower number of tourists visiting the capital this Christmas, London hotels achieved positive growth in 2015.

London hotels recorded a 2% year-on-year increase in profitability, and this was mainly due to the ‘Rugby World Cup effect’ according to CBRE Hotels, when demand for London hotels reached impressively high levels.

In October, at the peak of the World Cup, average room rates in the capital surpassed £160.

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Joe Stather, CBRE hotels intelligence manager, EMEA commented: “By Q3 2015, economic uncertainty in the key source markets of China and Russia, plus a 4% increase in new hotel stock throughout the year meant that the London Hotel market was potentially facing negative growth by the end of 2015.

“In Q4 however, with over 2.5 million visitors coming to the UK to watch the Rugby World Cup, and 3 out of the 13 rugby stadia being in the capital, there was an explosion in demand for London’s hotels, returning the sector to profitability by year end.”

Appetite for investment into the sector remained strong throughout 2015, with a number of high profile deals including the sale of the 203-bedroom Regency Hotel in Kensington that sold in excess of £100m.

Q4 also saw 12 new hotels pop up including the five-star InterContinental London The O2 and the London Hilton Bankside.

Joe Stather added: “London is one of the few UK markets, owing to high actual trading performance, that can support new hotel development, despite rising construction costs. This was reflected in a number of forward sale and forward funding deals that took place.”



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