Demand for London’s hotels has been upgraded to 6% growth, the market’s highest rate of growth since 2013.
STR’s comments were made before the terrorist attack in London Bridge, with observers suggesting that hotel performance was unlikely to be affected.
STR said that hotel performance in the UK capital could reach record levels between late June and mid-July, driven by events including Adele’s four-night concert series at Wembley Stadium, followed by Wimbledon 2017, positioning the market for a 19-day period that is expected to bring both high occupancy levels and average daily rate.
“London hotels had an exceptional start to the year,” said Michele Pasqui, STR forecast analyst. “The results we’ve seen thus far have in part been a rebound from a weak first half 2016, but more important has been the increased international tourism to the UK due to the pound devaluation. We expect this strong performance to continue through the remainder of 2017, and are projecting a 6% increase in demand for the year, which would be the market’s highest rate of growth since 2013.
“Along with strong demand, inflation is also picking up this year, and we expect London’s ADR to increase by around 5% for the full year, which should result in one of the market’s strongest performances for the last five years.”
In addition to the overlapping concert dates and tournament, STR analysts expect the market to see an influx of tourists from the Middle East after the Eid holiday ends on 26 June.
London currently has the largest pipeline in Europe, according to STR, with 4,730 rooms in 27 projects.
The forecast was made prior to the terrorist attack at London Bridge. STR told us: “Hotel performance in London has reached record levels thus far in 2017, due primarily to the pound devaluation and a subsequent boost in leisure business. The market maintained performance growth without disruption following the two previous attacks in the U.K., but at this point, it is still too early to gauge any potential impact as a result of this recent tragedy. We will continue to monitor performance and will report out should we identify any disruption in hotel demand or rates.”
Jonathan Langston, co-founder HotStats, told us that a sudden drop in revpar such as that seen in Paris was “unlikely, because the Westminster Bridge attacks caused barely a blip. It seems that London has a much higher level of resilience as a market – there is such a high level of demand. London is a bedrock of commercial demand and it takes a lot to shake that”.
Liz Hall, head of research for Hospitality & Leisure, PwC, told us: “Safety and security are key concerns so it’s bound to have an impact on holiday visitors especially if potential visitors to London expect more attacks. I think it depends too on the response to protect key places such as barriers on bridges.
“The weak pound is probably going to have a larger impact especially if it falls further – it is already driving quite a boom in inbound tourism, helped by poor comparisons. Business travel has been rather weak lately, but that is more likely being impacted by uncertainty as a result of the election and Brexit. If you have to travel on business you have to travel.”
STR reported that, there was no evident performance decline for London’s hotel industry following the terrorist attack on Westminster Bridge 22 March. Data from 22 to 28 March, reported that London’s occupancy levels remained in line with typical March performance patterns.
Three days after the attack, occupancy was 86.4%, while ADR reached GBP147.32, a 22.6% increase compared with the same day in 2016.
“We’re seeing now that the way a hotel market reacts to an attack really does depend on the severity,” said Thomas Emanuel, STR’s director of business development.
HA Perspective [by Katherine Doggrell]: London remains a strong market, aided by the fall of Sterling and its position as a commercial hub.The leisure market may be slightly more wobbly: Mark Brumby, analyst, Langton Capital, said: “Inbound tourist numbers may not fall immediately but plans currently being laid to visit the UK may be changed on the margin.”
And so it is likely that any impact will be felt on the edges, rather that seeing the capital suffer the dramatic drops in Paris. The lesson from Paris, sadly, was that resilience wanes in the face of repeated attacks and the hope is that London will not follow that route.
As for the supply coming into the market, the ongoing high occupancy suggests that it will be absorbed. This is not likely to be true across the board – the luxury sector may suffer if the leisure market drops, but the corporate sector is providing a strong backbone. Just don’t mention Emmanuel Macron’s attempts to lure The City to Paris.