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

By Elliot Sheasby on July 3, 2024

HHTLUK Newsletter June 2024

UK Market Remains Resilient

In May, hotel performance improved despite a slower trading period due to bad weather and calendar shifts. Year-to-May results show a 2% uplift in RevPAR, driven by increased occupancy and average rates. Weekday business supported revenue growth, while leisure demand varied due to occupancy-driven strategies. The ongoing recovery of international travel is expected to boost UK demand during the summer, with VisitBritain forecasting a 4% increase in inbound visitation to 39.5 million visits in 2024. However, downside risks include slowing real incomes, geopolitical tensions, and higher international travel costs.


UK hotel profits return to pre-pandemic levels, largely driven by ADR …

In May, UK hotel profits surpassed pre-pandemic levels, reaching 38.9% gross operating profit (GOP) margin.

London’s average GOP margin also increased to 43.4%. Although occupancy improved year-on-year, it slightly lagged behind pre-pandemic levels. Average daily rates (ADR) fell, but room rates remained higher than pre-pandemic rates.

Overall, the hotel industry benefited from consumer confidence, wage growth, tax cuts, and increased demand, especially during the two bank holidays in May.


… which could have impacts on business rates for the service sector …

Despite overall inflation falling to the Bank of England’s 2% target, services prices continue to rise rapidly.

UK hotel ADR in May was £124, up 12% from last year and 48% over pre-pandemic levels.

Various services, including meals, tickets, and car services, also increased by 6% to 11%, putting pressure on household spending despite the decline in headline inflation.


.. even though the hospitality industry is still struggling …

In May 2024, there were 2,006 new insolvency appointments, representing a 20% decrease compared to the same month in the previous year.

However, this decline is somewhat misleading because May 2023 had witnessed the highest rate of new insolvency appointments since 2008.

Despite the recent decrease, the insolvency rate remains persistently high, having surged earlier in 2023 but now appearing to level off. Businesses continue to grapple with challenges stemming from the cost-of-living crisis, cost inflation, and high interest rates, which sustain the insolvency rate.

While the UK economy seems to be stabilizing, it operates at a higher cost base than a few years ago. Notably, hospitality businesses faced a particularly high rate of insolvency appointments during this period.


… as investment groups sense opportunity …

Despite higher interest rates, hotel investment activity in the UK picked up at the start of the year. Sales volumes are poised to surpass 2023 levels, driven by portfolio sales amounting to approximately £1.5 billion.

Notably, big-ticket single-asset transactions have contributed to deal activity. Private equity investors have engaged in potential large acquisitions. For example, KKR is in talks for the ADIA portfolio, which includes 30 Marriott-branded properties priced at £800 million or more and Starwood Capital’s acquisition of 10 Radisson Edwardian hotels for £800 million highlights investor interest, especially in central London properties.

These developments underscore the sector’s resilience and the return of major portfolio deals and private equity activity as debt markets improve.


… the latest being Village Hotels!

Blackstone’s acquisition of Village Hotels demonstrates a notable level of confidence in the UK hotel investment sector. By adding 33 mid-market hotels to their portfolio, Blackstone is signaling optimism about the recovery and growth potential of the UK hospitality industry.


Our election pledges for the Real Estate sector

Reading the manifestos from all of the major parties, it is clear that Real Estate is a central issue that any future Government is going to need to address.

‘Housing’, ‘Planning’, ‘Sustainability’ and ‘Business Rates’ are common buzz words across the manifestos for the main parties. Establishing how we want to use space, connect those spaces through infrastructure, create communities and support development across the country is fundamentally tied to our built environment and therefore the politics around it.

We have set out a list of our main pledges that we would like to see addressed to ensure that the landscape of our Real Estate continues to evolve and develop.


Cybersecurity challenges in the HTL sector

The Hotel, Tourism and Leisure (HTL) sector has become an enticing target for cyber threats due to its reliance on Internet of Things (IoT) devices, extensive supply chains and the vast amount of sensitive customer data it processes.

As the industry embraces digital transformation more extensively, it becomes vulnerable to a range of cybersecurity challenges that have come to light in recent years. With notable data breaches affecting leading hotel chains like Marriot Group, Hilton Hotels and Premier Inn, cybercriminals are persistently drawn to targeting the sector.

Elliot Sheaby

About the author

Elliot Sheasby