The Regional UK market still presents opportunities for investors, developers and operators, according to a study from Christie & Co.
The company said that, whilst London remained a key driver of UK tourism, capturing a large proportion of overall visitation, regional UK markets had gained popularity with both tourists and investors.
In the past five years revpar growth in Regional UK has surpassed London, with a 2.4% five-year CAGR, albeit with significant variances across markets.
The group said: “However, new supply has started to impact performance in some markets and the number of hotel rooms in the pipeline shows that the trend will continue in the foreseeable future, although this varies considerably by market. Other challenges such as National Living Wage increases, business rates revaluation and recruitment and retention difficulties have had some impact on profitability levels.
“It is necessary to understand the fundamentals and drivers of each individual market to accurately assess investment prospects.”
The report looked at the six largest regional cities by number of overnight stays, including Manchester, the third most popular UK destination after London and Edinburgh by number of overnight stays.
The study said that seasonality was mitigated by the many conferences, events, retail and sport events attracting leisure and corporate visitors all year round. Since 2014 Manchester has recorded a significant amount of new supply and is now the largest market outside London (by room count).
Despite continuous supply additions, performance levels saw moderate growth in revpar between 2013 and 2018. There was some minimal short-term impact as a result of the June 2017 terrorist attacks but the market proved to be very resilient. In 2019, revpar performance decreased by 5%, mostly ADR driven, as competition in the market intensifies with new hotels gaining market share.
2019 was a record year for transactions in Manchester, being the largest regional UK market in terms of transactional volume, as several large single assets exchanged hands. Appetite from investors remained strong albeit with the background of hotel performance creating some concerns as supply additions were creating increasing pressure.