Hotel Intelligence
September 2015
London
London remains the world’s top-ranked destination with 18.82 million
international visitors in 2015, according to the MasterCard Global
Destination Cities Index 2015. London is the most liquid market in Europe
and on the wish-list from investors around the globe, all keen to tap into
the huge potential London has to offer. Although trading performance
during the first half of 2015 was muted, the second half is set to be
boosted by the Rugby World Cup. The outlook for the UK capital remains
promising.
Demand
Tourism
London remains one of the most visited cities globally and the most popular
destination for international tourists arriving in the UK. More than 18.82 million
international visitors are expected in 2015, beating Bangkok, Paris and Dubai
to the top spot. There is an almost 60/40 split between international and
domestic visitors and demand is driven both by leisure and business visits.
According to the 2015 MasterCard Global Destination Cities Index, New York
is the most important feeder city for London, accounting for close to 1 million
visitors in 2015 and US$1.2 billion of spending.
London is served by five international airports, which, in 2014 recorded 146
million passengers, a 5% growth compared to the prior year. During the first
quarter of 2015, London’s airports recorded a 7.7% growth in total passengers
to 32.1 million. This strong growth was seen across the UK, with UK airports
reporting the strongest first quarter of any year since the start of the global
financial crisis. Controversy over which London airport would be home to the
next UK runway came to a conclusion in July, with the Airports Commission
recommending that Heathrow was the best option, however, not surprisingly
this has been met with some objections.
Performance
Supply
At July 2015, there are c. 1,506 hotels in London with c. 137,831 rooms. Over
1,500 new hotel rooms have entered the market so far this year, with 50% of
these in the budget sector. Much of the new supply has moved to the outskirts
of the city following the development in other real estate classes into areas
such as Shoreditch and Docklands. Notable entrants have included the Zetter
Townhouse Marylebone and the Z Shoreditch. Looking ahead, c. 3,500
additional rooms are expected to enter the market before the year is out, the
majority in the budget segment.
The London hotel market is one of Europe’s best performing cities with
occupancy averaging around 80%. The first half of 2015 saw London hotels
get off to a slow start, with RevPAR down a marginal 0.3% to £109. While
occupancy dipped slightly to 79.7%, average rates were up just 65p to £137.
The second half of the year is expected to see improvements in performance,
particularly during the Rugby World Cup in September and October when
three London venues host a number of games.
London Hotel Supply (as at July 2015)
137,831
Quick facts
Room Supply
July 2015
32.1 million
Passenger Arrivals
in Q1 2015
15,721
New Rooms
Expected by 2018
10%
5 Star
11%
8%
4 Star
3 Star
20%
£137
Average Rate
0.5%
79.7%
Occupancy
0.8%
36%
£109
RevPAR
0.3%
Serviced Apartments
15%
Source: AM:PM Hotels
 % change compared to the prior year
Hotel performance data sourced from STR Global
Budget
Other
€
Investment
London Transaction Volumes
Investment activity in the London hotel market reached £1.5 billion during 2014,
despite falling 14% compared to 2013. The cooling off in the market was due to
the lack of available stock, which led investors to seek opportunities in other UK
cities.
£2,500
£2,000
Millions
During the first half of 2015, hotel transaction volumes exceeded £2.3 billion - a
result never recorded in the UK capital. However, we must note that c. 70% of this
deal volume came from the sale of the Maybourne Hotel Group to the Middle East
Sovereign Wealth Fund Constellation Hospitality LLC for £1.6 bn. If this deal was
excluded from overall volumes, London deal volumes would be up 10% compared
to H1 2014. Apart from the aforementioned deal, other notable deals included the
sale of the Ace Hotel Shoreditch by Starwood Capital Group to Deerbrook Group
and the Think Serviced Apartments, both closing in the first quarter.
£1,000
£500
£-
With robust trading performance and a steady market environment, London
continues to be on the wish-list of investors from across the globe. Cash-rich
investors from Asia Pacific and the Middle East, in particular are keen to secure
their footprint in the capital city.
Recent
Openings
£1,500
2010
2011
2012
2013
2014
H1
2014
Source: JLL Hotels & Hospitality
Notable
Deals
Pipeline
H1
2015
Infrastructure
Developments
M by Montcalm Shoreditch
London Tech City
269 rooms, Opened 2015
Hub London Spitalfields
189 rooms, Due 2015
Grosvenor House Hotel
July 2015, Debt Transaction
Thameslink Programme
Completion Due 2018
Zetter Townhouse Marylebone
26 rooms, Opened 2015
Nadler Victoria
73 rooms, Due 2015
Maybourne Group
April 2015, £1.6bn
Cross Rail
Due 2018
Z Shoreditch
111 rooms, Opened 2015
InterContinental at The O2
452 rooms, Due 2015
Ace Hotel London Shoreditch
March 2015, Price Confidential
One Nine Elms
Due 2018
Holiday Inn Express ExCeL
204 rooms, Opened 2015
CitizenM Tower of London
370 rooms, Due 2016
Think Serviced Apartments
January 2015, Price Confidential
Battersea Power Station
Due 2023
Outlook
While hotel performance during the first half of the year was relatively muted
for the UK capital, the second half is expected to see a boost in performance,
thanks to the Rugby World Cup. However, with more than 3,500 new rooms
expected to enter the market, this uplift may level out again towards the end of
the year.
We have already seen a shift to the East in terms of both new hotel supply and
investment, as a result of result of oversupply and lack of available product in
the historic centre of the capital. We expect this trend to continue in the near
future.
New infrastructure developments within the city are driving regeneration and
unlocking interest into hidden corners of the capital. Not only is this likely to
heighten visitor demand and trading performance in the future, it will aid the
absorption of new supply.
Contacts
William Duffey
Hotels & Hospitality Northern Europe
Will.Duffey@eu.jll.com
+44 (0)207 087 5587
Jessica Jahns
Head of EMEA Hotels & Hospitality Research
jessica.jahns@eu.jll.com
+44 (0)20 7399 5821