UK hotel market recovery exceeds expectations in FY22

The UK hotel market has continued its recovery in 2022, as a strong trading performance exceeded expectations for the year, Knight Frank has said. According to the latest UK Hotel Trading Performance Review 2022 by the property adviser, domestic leisure demand fuelled early recovery, and this was later supported by “robust” demand for business travel as well as flexible working trends generating new sources of demand. According to Knight Frank, London showed a “remarkable rebound” from the pandemic over the past seven months, with occupancy rates in the capital hitting 70% for the seven-month period to the end of October. Despite international visitor arrivals remaining lower than pre-pandemic, the ability to drive rates within a high inflationary environment saw ADR surge 22% ahead of 2019 prices. The Regional UK hotel market now exceeds its RevPAR performance by 3.5%, and London by 2.4%. The report also identified the top12 performing regional cities, with the top five cities ranked by their TRevPAR recovery named as Brighton, Leeds, Liverpool, Glasgow and Bristol. The Top 12 regional UK cities have shown a “robust” recovery during the past seven months, achieving a RevPAR penetration of 122% versus the wider regional UK market. Looking ahead, Glasgow, Brighton, Manchester, Liverpool and Birmingham were the leading regional UK cities in terms of future hotel supply. Of these five cities, Glasgow and Manchester are set to record the highest annual supply growth of 5.0% and 4.7% respectively between 2022 and 2025, compared to a national average of 1.4% growth forecast. Knight Frank noted that despite the “significant adverse impact” of the pandemic on the UK hotel sector, the pipeline of new hotel openings has remained buoyant. Over 30,000 new rooms have opened in the UK since the start of 2020, with regional UK accounting for 70% of this new supply. Over the next three years, London’s supply is set to grow by 2% per annum, with some 10,000 rooms either under construction or with a proposed date of opening. Nonetheless, annual supply growth in Regional UK is set to contract to 1.2% per annum over the next three years, as compared to a longer-term average of 1.6%, due to the increasing cost of debt, supplies and labour. Some 18,500 new rooms are currently forecast to open in regional UK by the end of 2025, with 51% of this pipeline confined to just ten regional UK cities. Looking ahead, a key challenge facing the hotel sector will be the rise in utility costs, Knight Frank warned. For the month of October, total utility costs for London hotels have increased by 56% and by 79% for regional UK hotels, compared to the same month in 2019.