London pipeline may temper occupancy

fireworks in London
London's pipeline will mean luxury growth

Softening occupancy was described as “a concern” in London, as more hotels were due to come on stream in the city.

Hotels in London saw revpar growth of 0.9% on the year in the fourth quarter, to £135.25, according to HVS London, AlixPartners and STR.

Average occupancy for hotels in the capital dropped back slightly in the final quarter of the decade to 84.8%, although average room rates rose 1.9% to £159.53.

The UK’s regional hotels saw revpar fall in the quarter, down 2.7% to £50.73 and occupancy down marginally to 73.6%, while room rates fell by 2.1% to £68.94.

“Softening occupancy will be a concern in London, particularly given the high number of hotels projects in the pipeline, although the fact room rates have risen by nearly 2% is encouraging,” commented HVS chairman Russell Kett.

“Any improvement in yields will take longer to reach provincial hotels but they should start to see some change as we move through 2020. However, the active hotel pipeline, currently at 6% of supply outside London, will continue to prove challenging as it will in the capital.”

Transaction volumes in London saw an increase to £1.5bn, although transactions in the regions were down 38% to £2.2bn. The largest transaction in the fourth quarter was the sale of the 211-room Fairmont St Andrews golf resort in Scotland to Great Century for a reported £135m.

Moving forward investors were expected to be cautiously optimistic about a resurgence in transaction activity.

“The recent UK election result and the ensuing Brexit decision is likely to make the UK more attractive to many investors,” said Kett. "This is likely to have a more immediate impact on transaction yields in London during 2020, although any improvement may be tempered by the pipeline of luxury hotels in inner London.”