UK hotels achieve 10% profit growth in first quarter of 2014

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UK hotel achieved an average rise in year-on-year profits of 10% in the first quarter of 2014, the highest increase since the downturn.

According to the latest Hotel Bulletin for Q1 2014, compiled by HVS, Zolfo Cooper and AM:PM, hotels in all 12 cities reviewed recorded a growth in RevPAR for the second consecutive quarter.

In London RevPAR increased by 6% compared with Q1 2013. For the first time since August 2013 London’s hotels saw profitability grow on an annual basis, despite comparators including the unprecedented profitability recorded during the 2012 Olympic games.

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Outside London, the 11 regional cities reviewed recorded an average RevPAR increase of 11%. The majority of cities recorded occupancy and rate improvements, a trend which has contributed to continued regional profitability growth.

The Hotel Bulletin, which tracks the performance, demand and supply of hotels across the 12 key UK cities, reports that hotels in Belfast, Glasgow and Aberdeen experienced the highest RevPAR growth.

Belfast’s hotels recorded RevPAR growth of 22% on the top of strong comparators in Q1 2013. The city received a significant amount of investment prior to the Centenary year of the sinking of the Titanic, including the development of the £97 million Titanic Belfast attraction.

Glasgow’s RevPAR increased by 19% in Q1 2014 compared with Q1 2013. Demand was bolstered by record conference bookings this year and the opening of the 12,000-seat SSE Arena in 2013.

“These results show that the UK’s hotels are back on track and experiencing sustained growth. While hotels in London fared well during the downturn, those in the provinces suffered considerably, particularly as conference business fell away alongside the leisure market. It’s encouraging that both markets are now experiencing growth and this is likely to continue throughout 2014,” commented HVS director Tim Smith.

Budget and higher-end hotels continue to dominate the UK’s new supply activity. The budget market, already the largest in the UK, represents 50% of the active pipeline in the UK, with the four and five star markets combined accounting for 39%.

The UK’s five star sector is set to grow by some 4000 rooms over the next three years.

The UK’s three-star hotels sector continues to lose favour. Despite having 30% of current supply, only 3% of the active pipeline is represented by three star properties. Budget offerings such as Hampton by Hilton and brands such as CitizenM are drawing investor attention away from this sector.

“The three-star market has been caught in the middle – being neither budget nor luxury – and has failed to reinvent itself sufficiently well to attract investor interest. While current activity lies mainly in the budget, boutique and luxury ends of the market, it needs a brave operator to attempt to reinvent the three-star sector,” added Tim Smith.

The 12 cities reviewed were Aberdeen, Glasgow, Belfast, Liverpool, Cardiff, Bath, Edinburgh, Newcastle, Leeds, Manchester, Birmingham and London.

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