The UK hotel industry saw the opening of 15,500 new hotel rooms in 2018, representing a 2.4% increase in UK hotel supply, according to the latest research by global property adviser Knight Frank.
Some 19,300 new rooms are forecast to open in 2019, an increase of 2.9%, and the annual UK Hotel Development Opportunities 2019 report revealed that the composition of new supply is “altering”.
Whilst the development of new build hotel rooms constitutes the “greatest proportion” of new supply, during 2018 there was a significant rise in hotel conversion, with a 42% year-on-year uplift.
Hotel conversion constituted 34% of new bedroom stock, as developers capitalised on increased vacancy rates from other asset classes, resulting in the greater availability of assets deemed suitable for hotel conversion.
Additionally, the report revealed that the budget hotel sector continues to “dominate” the market, with 7,500 new rooms expected to open by the end of 2019, which equates to a 5% increase on the previous year.
However, the continued rise of both branded and independent mid and upscale hotels, partially as a result of the growing trend for lifestyle hotels, has led to a continued decline in the market share of new budget hotel rooms.
As such, the market share for new hotel rooms opening in the budget sector accounted for 49% of total new supply in 2016, which is set to decline to 39% for the full year forecast 2019.
There was over £1.1bn of investment in hotel development projects in 2018 owing to increased investor confidence and the desire for long-term secure income. London attracted 60% of investment volumes, which is fuelling its future pipeline, with supply set to increase by 4.2% in 2019, constituting 38% of the total UK pipeline.
Shaun Roy, head of hotels at Knight Frank, said: “The hotel sector is undergoing robust levels of development activity, despite the continued uncertainty that Brexit brings. This is occurring both in London and the UK more generally and is particularly evident in those markets which have a diverse business mix, with a thriving leisure market such as Edinburgh, Birmingham and Brighton.
“There are clear opportunities for investors in the hotel sector nationwide at the development stage, which presents a long-term strategy providing a guaranteed stream of secure income.”