Why the London attacks shouldn't deter travelers—or hotel investors

On the one-year anniversary of the Brussels attacks, another attack in Europe has thrust concern over terrorism, safety and security into the world's spotlight again.

In the mid-afternoon on Wednesday, a large vehicle mowed down pedestrians on London's Westminster Bridge, which leads to Parliament, killing two people and injuring others, before it crashed into a railing. At this point, at least one man left the vehicle and approached Parliament, where he stabbed an armed police officer to death and was fatally shot by the police. The Metropolitan Police currently believe that there was only one attacker and are treating today’s attack as a terrorist incident.   

What Happens Next

As the world grieves the loss of life and the violation of our sense of security, the travel and hospitality industry must also prepare for a likely decline in visitor numbers. If history is any guide, travelers may change plans in the wake of the attack, and the city’s hotels may suffer. Last year, following the terrorist attacks in Brussels and France, AccorHotels saw a decrease in profits. 

Six months later, Paris and Brussels continued to struggle, both weighed down by the impact of terror attacks and double-digit revenue-per-available-room declines. But as Dirk Bakker, head of EMEA Hotels at Colliers International, noted at IHIF Berlin earlier this month, Paris is on the rebound, although the recovery took some time. "France hasn’t had much shock yet," he said. "This was two times they got hit bad. That hurt the economy for a year."

But before travelers change their plans for travel to London, and before investors consider changing their plans to develop hotels in the city and the UK’s regions, they should stop and consider the numbers, and the city’s consistent appeal for inbound travel—and the need for hotels.  

The Case for London

London is an evergreen travel destination, and has seen consistent tourism growth since the start of the economic downturn nearly 10 years ago.  

London’s hotels and other accommodation recorded more than 56 million overnight stays in 2016, topping Europe’s charts and growing 7 percent year-over-year. According to European Cities Marketing, 41 million of those stays were from international visitors—strong evidence of the city's appeal for global travelers. Travelers from the U.S. made 2.1 million trips to London last year for nearly 12 million overnights.

All these visits have been a boon for the city's hotels. According to STR’s January 2017 data, London’s hotels reported the following in year-over-year comparisons:

• Supply is up 2.8 percent.
• Demand is up 8.8 percent.
• Occupancy has grown 5.8 percent to 70.5 percent.
• Average daily rate has increased 5.7 percent to £127.84
• Revenue per available room (RevPAR): +11.8 percent to £90.08

The 70.5-percent absolute occupancy level would be the highest for a January in London since 2008, while ADR would be the highest for a January since 1994. At the submarket level, London’s West End posted particularly high performance levels, with RevPAR up 20.1 percent year over year.

New Hotel Growth

As of January, London has more than 15,000 rooms slated to open in the coming year, and more than 140,000 guestrooms in the long-term pipeline. While investment in hotels has traditionally focused around London’s central areas, new infrastructure improvements and a booming digital economy has created a “Knowledge Corridor” from Bloomsbury to Paddington, taking in Fitzrovia and North of Oxford Street.  

Hotel activity is increasing as these areas grow, with Premier Inn recently opening another hotel on Tottenham Court Road and U.S.-based hotel operator Standard International opening its first hotel in 2018 in the former Camden Town Hall.

Shoreditch has also become a hotspot for hotel development due to building availability and lower costs compared to more central locations. New hotels in that neighborhood include Z Hotels and the Nobu Hotel Shoreditch.

Just this week, Travelodge, one of the UK's biggest hotel chains, announced plans to open 15 new hotels across the UK in 2017, five of which will be in London. The new hotels will be developed by third-party investors, with an approximate equivalent investment value of £125 million, and will bring the company’s total to 558 properties in the UK, Ireland and Spain. 

Dorsett Hospitality International, meanwhile, also announced plans this week to open two new hotels in London. The Hong Kong-based company said that Canary Wharf and Hornsey (in the London borough of Haringey), will be home to the new developments. Dorsett Canary Wharf will be part of a development that includes apartments and a school, with more than 200 guestrooms across 20 floors. The details of the Hornsey hotel have not been made public yet, but the property will be located in the historic Hornsey Town Hall building.

In short, just as Paris turned the corner after the terror attacks affected that city's tourism and hotel industries, London also will bounce back from this event. Investing in hotels now will pay off in the long run.