Christie + Co share its insight into the key reopening trends for hotels in the UK during the first and second national lockdowns and how operators are reacting.
2020 has been a tumultuous year for hoteliers across the world. For the first time in recent history, all hoteliers have been faced with the difficult choice of either remaining open or temporarily closing the doors of their business.
We have taken a look back at the trends in the UK during the first and second lockdown and present the overall reopening picture of the hotel market.
The balancing act of reopening
On 20 March, hoteliers were requested to close as the UK entered the first period of lockdown. Properties could remain open for key workers only and some hotels opted to act as temporary facilities for patients, and homeless or vulnerable people. Our research indicates that over 50% of the total number of UK hotel rooms were temporarily closed during April.
As hoteliers adapted and found their “new normal”, more and more became confident in re-adjusting their operating models and seeking the opportunity to respond to the new demand that was in the market, coming from key workers. As a result, we saw an increase in open hotels during May and June, with total UK open room supply reaching a modest 54%. During this period, hotels were operated with reduced staffing levels and facilities, and saw occupancies at 23% on a national level, with significant variances across individual markets. Operators found it difficult to accurately assess the market dynamics and to ensure that there was enough unsatisfied demand to justify a reopening.
London reopened only 67% of the rooms stock in July
On 4 July, hotels in the UK were permitted to reopen to a wider public, under strict COVID-19 measures and with limited facilities and service offering. This marked the moment of an accelerated upward trend in open rooms in the UK. Estimates show that July ended with 85% of the rooms reopened across the UK. This was a significant indicator of confidence in the summer season.
Reopening Trends of Hotel Accommodation (based on percentage of trading rooms)
Sources: STR, AMPM Hotels, Christie & Co Research and Analysis
Disclaimer: Above information are for indicative purposes only and actual levels might vary.
However, not all destinations followed the summer rush. London reopened only 67% of the rooms stock in July and destinations such as Birmingham, Glasgow and Edinburgh kept only 60% of the rooms open due to local regulations and limited demand in the market, as corporate travel remained subdued.
Regional UK hotels, specifically in leisure destinations, followed a more accelerated trend in reopening across the UK due to demand from leisure holidaymakers. October marked the peak with 94% of total room supply trading. The capital remained 6 ppts below the national level with international and corporate demand absent from the market.
As we entered Lockdown 2.0, hoteliers started to lose confidence in surviving through a second wave of limited demand. Despite being able to remain open for corporate travel, many hoteliers decided to close, albeit in lower numbers compared to the spring lockdown. The lack of substantial leisure demand pushed the needle towards closures.
The reopening trend after the second lockdown was less spectacular, as the anticipated Christmas demand was put into question following the announcement around tiered restrictions. The Christmas peak never materialised, as leisure demand was slashed due to the U-turn by the government on placing the UK in full lockdown starting on 26th December, to get ahead of the new fast-spreading COVID-19 variant. Hotels in key cities, particularly London, decided to close after Christmas and we currently find ourselves in a downward trend of open rooms, as more and more hoteliers are struggling to operate during the low season.
The Luxury segment, accounting for circa 5% of the total market, fully capitalised on the summer season with over 80% of the supply open for peak leisure season.
Did the type of hotel matter?
Our research indicates that the overall reopening trend varied not only on location, with leisure destinations quicker to open than city centres, but also based on market positioning. Economy and Upper Midscale hotels are the largest segments in the UK, each accounting for 24% of the total room supply. However, the two segments behaved completely differently. The Economy segment operated only 30% of the available economy supply during Lockdown 1.0, whilst Upper Midscale had the highest proportion of operating rooms in the market, at 67% of the respective available supply.
One explanation for this trend is branding. Circa 73% of the economy supply is branded under Premier Inn (including hub by Premier Inn and Zip) or Travelodge.
In comparison, the Upper Midscale segment in the UK is 52% branded but spread over 20 individual brands, with 48% made of independent operators. This makes the segment less transparent (particularly with data providers) and potentially more disjointed in response to market conditions. However, this may also be due to large numbers of seaside, rural and leisure destination hotels being in the upper midscale sector and able to capture demand in those locations versus branded hotels which are more likely to be in town and city locations.
At the other end of the spectrum, the Luxury segment, accounting for circa 5% of the total market, fully capitalised on the summer season with over 80% of the supply open for peak leisure season. This was mainly driven by the location, as leisure destinations, particularly country houses, performed unexpectedly well during summer. However, our research indicates that the segment was also quick to close during the autumn and winter season, as a result of being unable to hold large weddings, corporate events and Christmas parties which are typical drivers during this period.
Below are some of the learnings hoteliers shared with us from managing closures, reopening and operating during unusual circumstances.
- Understand and quantify the available demand in the market before deciding to reopen
- Balance the costs with the demand, forecasting remains key!
- Think outside the box when it comes to demand segments, very often local businesses will be your biggest ally
- Often hoteliers that remained open during the entire year stated that this has favoured them to be more agile, capture demand from competition and provide a sense of consistency to their guests and corporate accounts
- Use the downtime period to carry out renovations, if possible. In fact, 2.3% of the total UK room supply is currently under renovation, with branded full-service assets leading the trend
- Understand when it doesn’t make commercial sense to remain open and seek to leverage the available government support to bridge the closure period