The UK saw a decline in visitor numbers in September, driven largely by an 8-percent fall in travelers from the U.S. The drop, which came despite the overall value of the pound remaining low, was attributed to last year’s terror attacks—but had not, as yet, deterred investors.
Tourism Drop
The 8-percent year-on-year fall in visitors from the U.S. compounded another 8-percent drop from the previous month.
The British Hospitality Association’s Travel Monitor reported that short-haul travel numbers also declined 0.3 percent year-on-year, despite the previous increase in August of 8 percent. Inbound holiday passenger numbers grew 1.7 percent year-on-year, but this lagged behind the 15-percent rise year-to-date.
Overall UK spend by overseas residents was up 2 percent, but business traveler numbers continue to decline, down 18 percent year-on-year for September
“It is disheartening to see visitor numbers decline after positive growth for the previous three months," Ufi Ibrahim, CEO, BHA, said. "This fall has been largely driven by a reduction in passenger numbers from North America and this demonstrates, in part, the knock-on effect that this year’s tragic terror attacks have had on long haul bookings.
“The BHA travel monitor also notes that the number of business travelers to the UK again declined, falling 18 percent year-on-year for the month of September. This is an important reminder to the government of the need to recognize the priorities of business when negotiating Brexit.”
Inbound UK visitors had seen a spike following the EU Referendum as the falling pound made the region more attractive. Last year, PwC said that it expected RevPAR growth to drop from an anticipated 6 percent in 2017 to 2.4 percent this year, as a weakening economy and increase in supply combined with the positive impact of the weak pound falling off.
Investment Stays High
The anticipated slowdown in performance was not slowing down investors, with Colliers International forecasting “an improving level of hotel transactional activity in 2018.” Julian Troup, head of hotels agency, Colliers International, told Hotel Management that despite performance fears, “there is still considerable demand from both domestic and overseas buyers, as hotels continue to be an attractive and popular investment opportunity.”
Troup said that Colliers had seen “increasing demand for UK provincial hotels, particularly for global branded stock. We are seeing an emerging trend of increased demand for quality provincial hotel opportunities from a diverse buyer set, including international investors, who have been attracted by weaker sterling; and from private buyers, attracted to the benefits of a lifestyle opportunity, to corporate investors attracted to favorable returns and real estate alternatives. Since the beginning of 2016, [more than] 20 percent of UK hotel sales completed by Colliers were to international buyers.”
A similar message was delivered by Fleurets, which expected transaction volumes of more than £5 billion in 2017, approaching 30 percent ahead of last year. These volumes will be supported by prevailing economic conditions, strong hotel trading levels, low interest rates “and a wealth of capital competing for limited numbers of investment opportunities.”
The broker said that buyers were looking for “properly priced, underinvested and underperforming hotels with turnaround potential, where experienced buyers can capitalize on untapped quick wins through improved management, operational efficiencies and refurbishment/rebranding”.
While investors are looking for a bargain, the drop-off in overseas business means that hotels will be turning to the domestic market to make up the numbers. With interest rates rising and Brexit creating uncertainty, the staycation market may not provide the hoped-for rich pickings.
Katherine Doggrell is an editor at Hotel Analyst, the U.K.-based news analysis service for hotel investors.