Manchester lures investment despite May terrorist attack

Salford Quays in Manchester, UK. Photo credit: Daniel_Kay//iStock (Media City, Salford Quays, Manchester, UK)

Despite a May terrorist attack, Manchester’s hotel market continues to draw interest from investors and brands, alike. The latest: Singapore's Fragrance Group acquisition of the Townhouse Hotel and a Marriott Moxy-branded hotel being developed by Henry Boot Developments.  

Growth has come from the budget and four-star sectors and, as the brands march in, competition is putting the city’s independent hotels under pressure as the face of Manchester evolves.

Fragrance Group bought Townhouse Hotel from Harcourt Developments for £12.5 million, its third acquisition in the regional UK this year.

“The city forms a cornerstone of our UK investment strategy, and the Townhouse is a property that we view as having tremendous potential within this," said James Koh, founder, chairman and CEO of Fragrance Group. "We are excited to be investing in Manchester at a time when it is rapidly establishing itself as one of the foremost destinations in Europe, both commercially and in the eyes of tourists.”

Martin Rogers, head of UK hotel transactions for Savills, said: “The hotel investment market in the North is performing strongly with transactions totaling £304 million in the first half of this year alone.”

Added Tom Cunningham, director, hotels & leisure for Savills: “There’s been real value for money in the regions and we expect to see increase continue from investors for the foreseeable future. These places are trading well, the pound makes it cheaper and there is added demand from staycations. Manchester still hasn’t reached saturation for hotels, there is still demand.”

The Townhouse Hotel in Manchester was acquired by Singapore's Fragrance Group in August.

Brand Bonanza

Manchester is increasingly in the sights of the brands, with Marriott International signing a hotel under its Moxy brand, with building work due to start within six months.

Anil Khanna, director, Khanna Enterprises, which will manage the hotel, said: “KE Hotels are looking forward to developing and operating Moxy by Marriott in Spinningfields which has become the city's leading business destination and a place to eat, drink and shop. It is very exciting for this location to be the only hotel in Spinningfields.”  

The city has added approximately 2,308 rooms between 2012 and 2016, taking it to 16,600 rooms, according to property consultancy Lambert Smith Hampton. The four-star and budget sectors currently account for 37 percent and 35 percent of the bed supply, respectively.

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Of the total supply, 40 percent is operated under a global or international brand, and 46 percent are operated by a national or regional brand with the remainder being independent.  

Alistair Greenhalgh, director of hotels for Lambert Smith Hampton, said: “Most major international brands are now in Manchester, and supply is dominated by the big players. The majority of confirmed schemes in the city are either four-star standard or budget, demonstrating this continuing shift in market demand.

A Moxy hotel is planned for Manchester's Spinningfields area. 

“We believe Manchester’s hotel sector looks healthy and that occupier demand can sustain current growth. However, increased competition will challenge private and independent hoteliers to stay at the front of developments in social media and mobile websites to maintain market share. Capital expenditure will be needed to offset increased competition from newer hotels.”

Added Savills Cunningham: “There’s still a place for the independent operators, but with the brands you see a consistency of quality. As long as independents keep their standards high, they can compete.” There remains a place for independent hotels and for third-party operators such as Bespoke who seek to keep them competitive.

Katherine Doggrell is an editor at Hotel Analyst, the U.K.-based news analysis service for hotel investors.