UK Hotel, Tourism & Leisure Monthly Round-Up, August 2024

UK Hotel Market Poised for Growth Amid Investment Surge and Interest Rate Cuts

The UK hotel market is expected to see a 3% RevPAR growth in 2024, driven by increases in occupancy and rates, with regional hotels outperforming London so far. However, stronger results are anticipated in London during the summer due to events boosting demand. Despite challenges, the UK sector has added 8,300 rooms in the past year, with 21,000 more under construction, though new-builds have slowed due to higher costs. The recent reduction in interest rates to 5% is expected to boost investor confidence and create opportunities, despite ongoing financial pressures causing distress and an increase in sales among independent hotels. In fact, the living and hotels sectors accounted for one third of all UK commercial real estate investment over the past 12-months as major funds have recognised the added-value of the “beds” sectors.

Oasis to follow Taylor Swift’s contribution to hospitality sector next summer…

The reunion of the iconic British band Oasis is expected to significantly boost the UK hospitality industry, generating millions of pounds to the sector. The band’s comeback tour has led to a surge in hotel bookings, restaurant reservations, and other related services.

Fans from around the world are expected to flock to the UK, eager to see the band perform live after years of speculation about their reunion. This influx of visitors is providing a much-needed economic boost to cities hosting the concerts. Industry experts predict that the positive impact on the hospitality sector will continue throughout the duration of the tour.

Hotels have been accused of cancelling pre-booked rooms to cash in on Oasis’s 2025 reunion tour. One has cited “technical errors” that led to overbooking and subsequent cancellations. The hotel chain has apologised and stated that all reservations will be honoured, while it investigates the issue.

…highlighting the appeal of mixing events with accommodation…

The Radisson Hotel Group’s expansion into The Bolton Stadium Hotel, a member of Radisson Individuals continues to highlight a strategic trend.

Integrating hotels within stadiums offers a unique experience for sports fans and event attendees, providing convenient accommodations and amenities at the venue.

This can lead to increased revenue streams from higher occupancy rates and additional sales from food, beverages, and event spaces. By diversifying their portfolio, hotel groups can attract both leisure and business travellers, mitigating risks associated with seasonal demand fluctuations.

…In the meantime, Economy and Midscale hotel operations are under some pressure…

Over the past year, demand at the lower end of the hotel market has cooled due to high inflation impacting consumers’ discretionary spending, similar to trends seen during the global financial crisis.

Despite a strong recovery between 2021 and 2023, demand growth slowed in late 2023 and early 2024, turning negative as lower-income consumers felt the pinch of rising living costs. The midscale sector, in particular, having initially proved resilient post-pandemic, now faces significant challenges due to prolonged high inflation and lower earnings growth.

..but must continue to invest in new technologies to maintain their market share…

New research from SHR reveals that for the first time, more than half, 51.3%, of UK online hotel bookings are made on mobile devices (48.1% last year). In conjunction, desktop bookings have decreased to 46.5% (48.3% last year) and tablet bookings have dropped to just 2.2% (3.6% last year).

Despite this shift, desktop bookings still generate more revenue (50.1%) compared to mobile (47.3%), though mobile revenue has increased by 6.6% year-on-year.

The shift towards mobile bookings in the UK hotel industry means hotels must enhance their mobile platforms and marketing strategies to capture this growing segment. International travellers, particularly Americans, still prefer desktops, requiring hotels to maintain strong desktop systems.

Portfolio Companies, Corporation Tax and Difficulties for Private Equity Investments

For many privately owned companies, establishing the number of associated companies will be straightforward. However, for those companies who have a PE investment, it may be complex or even unachievable.  The difficulty arises due to the potential for all concurrent investments made by a PE house to be deemed to be under common control.

PE funds are commonly structured as limited partnerships. Under the previous 51% group companies test, the various investment stacks owned by the same partnership wouldn’t have been associated with each other. Now, they will be if the partnership has a controlling interest, as it is inevitable that the investment stacks will have the same control.

Transaction disputes – Is there a scenario in which you can ever get back more than you paid?

With cross-border transactions increasing and the inherent complexities involved so are the number of disputes. The latest London Centre for International Arbitration report noted that 15% of arbitrations related to Shareholders’ / Share Purchase or Joint Venture disputes in 2023 compared with 10% in 2022.

Whilst there might be some legal and factual implications for each individual case. This article explores whether you can have a negative value.

Annual Hotel Conference: Serviced Living Concepts: Bridging Residential and Hospitality

Vedika will be hosting a panel that will explore how hospitality is expanding into the living sector, including co-living, PBSA, senior living, branded residential and more, and why it makes sense for investors. Otherwise come meet us all at Stand 30!