While many of us will have struggled to find a room in a good London hotel without breaking the bank, this may not be an accurate portrayal of the health of the sector. True, the market has remained resilient during the economic downturn, proving that the capital continues to be a draw for holidaymakers and business travellers alike. However, concern is mounting that as investors jump on the hotel bandwagon, market saturation will lead to hard times ahead for existing companies.
So just what does the future hold for London's hotels? According to Jones Lang LaSalle, this all depends on how far ahead you're looking. Graham Craggs, managing director of Hotels and Hospitality, stated: "We had found no clear evidence that a strong supply increase in the city has had a materially negative impact on the trading performance of existing hotels. This was even the case in the City of London and Southwark where supply growth has been the highest." Nonetheless, he added that limited room demand amid growing supply in 2013 "could result in more challenging market conditions for hoteliers in the short term".
The end of the Jubilee and the Olympic Games will undoubtedly lead to a drop-off for London hotels and the British economy as a whole, which continues to be sluggish. "We believe that additional supply will increase the likelihood of a potential flattening or even a decline in RevPAR (revenue per available room)," Mr Craggs stated. But just how long with this negative picture last for the city?
With occupancy remaining around a stable 80 per cent in recent years and the capital continuing to attract foreign visitors and investors in their droves, property investment in the hotel market is still a good choice. In fact, with domestic and international hotel operators expanding into this core market, indicators suggest there is potential for a lucrative time ahead. Supply is also continuing to grow strongly, with a further 31 hotels with 4,600 bedrooms scheduled to open in this year alone.
- Thursday 14 February 2013