Rising Demand for London Hotels

Demand for London hotels on the rise again

It is no surprise that with its extensive cultural, sporting and historical attractions London was crowned the World’s most visited city in 2013.

The ONS has revealed that the capital attracted 16m tourists in 2013, with 4.9m visitors between July and September, up almost 19.5 per cent on the bumper Olympic summer of 2012. According to the ONS, London tourists spent £3.372bn during the summer period, a rise of 5% on the Olympic year. As one of the world’s leading financial centres and now the most popular destination in the world we expect a positive 2014 for the hotel sector.

PwC has forecast an increase in both occupancy and average daily room rates (ADR) to continue throughout 2014. Occupancy is forecast to grow to 82% in 2014 and combined with an expected 1.5% growth in ADR we expect ReVPAR to reach £112.80 in 2014.

The London hotel market is not without its risks. The market has seen significant development activity in recent years as investors and operators have sought to enter one of Europe’s most robust and best performing hotel markets. This has resulted in above average levels of new hotel supply with 5,000 rooms opening in 2013. This follows around 8,000 new rooms in 2012.

However, we see a number of opportunities at the budget end of the London hotel market. With a fragmented London hostel market there is an opportunity to create a standardised low cost hostel-hotel hybrid. With all development activity in the London hotel sector and London now surpassing Paris as the most popular destination in the world it is surely time for the hostel sector to step out of the shadows and develop into a recognised real estate sector of its own.