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News: London hotels pull away from regional competitors

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Trading in quarter three for UK hotels has again showed a considerable contrast between those in London compared with the provinces.

That is according to the latest UK hotel market tracker, produced by HVS London, AlixPartners and STR.

With London properties seeing rate-driven RevPAR growth of 5.1 per cent to £145.97 year-on-year, hotels in the regions saw a decline of 1.3 per cent to £63.42, the third consecutive quarter of decline.

In London performance was largely boosted by strong room rates, up 5.3 per cent year-on-year to an average of £165.69, despite a slight fall in occupancy of 0.3 per cent to 88.1 per cent.

Performance in the capital was boosted by the devaluation of sterling, which reached a low in August, making London cheaper for incoming tourists to visit.

Events including Wimbledon helped boost visitation.

Conversely hotels in the provinces saw average room rates fall nearly one per cent in quarter three and occupancy fall by 0.3 per cent to 82.3 per cent.

With lower margins in the provinces, hotels are more susceptible to a performance downturn, a concern given active pipeline levels of five per cent mean more intense competition is to come.

The active pipeline of new hotels planned for London In quarter three saw the opening of the Hoxton Southwark and the Stay Camden, although nine per cent of current rooms supply is still set to open over the next few years. 

“It has been a tough quarter for UK hotels with intense pressure on margins from increasing costs, staffing issues as well as wavering consumer confidence.

“In addition, hotel operators in London will need to work exceptionally hard to maintain such performance growth in the face of these new hotel openings,” commented HVS chairman Russell Kett.

“London remains a popular destination for incoming tourists and has now become a marginally cheaper destination with the fall in the value of sterling.

“When the market weakens hotels outside the capital will always find it tougher and operators will need to keep a firm hand on costs and margins.”