Why London's economy hotel segment is booming


A new report by property consultant JLL and London & Partners, the Mayor of London’s promotional company, indicates that London’s budget hotel sector has seen significant growth since the city hosted the 2012 Olympic Games.

More than half of the 18,000 hotel rooms that have opened in London since 2012 have been in the budget sector. In addition, 33 percent of the 7,000 rooms due for completion this year will also be in the same sector. The London Hotel Development Monitor has found that low-cost hotels now make up 20 percent of the total room stock across the city.

Segment Breakdown

Development Hotspots

Traditionally, investment in hotels in London has focused around central areas; however, this new report shows that high rents and values in the West End are leading to the expansion of traditional boundaries.

New infrastructure improvements and a booming digital economy has created a “Knowledge Corridor” that stretches from Bloomsbury to Paddington, taking in Fitzrovia and North of Oxford Street. Hotel activity is increasing as these areas grow, with Premier Inn opening another hotel on Tottenham Court Road this year 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 with new hotels including Z Hotels and Nobu Hotel Shoreditch opening up. During 2016, a further 800 rooms are expected to be added to the area.

The report shows that London dominates investment across Europe's hotel sector, with the capital attracting 36 percent of total investment.

“2015 was an exceptionally strong year in terms of hotel transactions in London," Graham Craggs, managing director in JLL’s Hotels & Hospitality Group, said in a statement. "Activity will remain high in 2016 and we expect the trend will shift towards single-asset transactions. Underlying market fundamentals continue to be positive and the outlook for hotel performance in London is good.”

The GLA 2015 London plan seeks to achieve 40,000 net additional hotel rooms by 2036. New hotel development is being encouraged within the City of London, Westminster, the Eastern edge of the Royal Borough of Kensington & Chelsea (RBKC), Southern parts of Camden, Islington, the ‘city fringe’ edges of Hackney and Tower Hamlets; and the Northern parts of Southwark, Lambeth and Wandsworth.