UK Hotels Market
There are no government statistics for the hotel industry. However according to the British hospitality Association there are over 20,000 hotels, bed and breakfasts’ and guesthouses in the United Kingdom officially registered with local tourist boards. This could increase to approximately 60,000 by including the hotels, and breakfasts and guesthouses that are not officially registered. On average they contain 20 rooms and collectively have a total turnover of around £27 billion a year. Centred around London the industry has enjoyed decades of organic growth both in terms of the number of establishments, occupancy rates and industry employment. The major conurbations of the UK provide the greatest concentration of hotels supporting business activity such as conferences, access to major international transport links, major sporting events and regional commuter routes.
The economic conditions of the country strongly affect the occupancy levels which have remained between 60% and 70% the last 20 years. Falling occupancy rates have reduced the yield per room down to around £60 in regional areas and around £130 in London. In 2008 and 2009 the credit crunch has forced hoteliers to reduce rates to compete and survive. Other major factors that impact occupancy rates are international sporting events such as the Commonwealth games, major football tournaments and the imminent London Olympics 2012. Threats to people and businesses have also deterred international travellers from flying to London to stay in London hotels such as the 2001 terrorist attacks in New York and more recently bird flu and swine flu outbreaks. Similarly the London bombings of 2003 had a direct impact on hotel bookings particularly in major tourist areas such as London Theatre land. Despite these terrible events demand for hotel rooms remains buoyant and have in the past tended to bounce back following a period of stability.
Outside of the major cities there are tens of thousands of smaller family run bed-and-breakfast accommodations providing places to stay for holidaymakers in notable popular hotspots in the South West, the Peak District, Scotland and seaside resorts. In the middle of a recession families are choosing not to pay for flights to overseas destinations and instead take their holidays in the United Kingdom. This has led to a surge in popular seaside tourist destinations directly benefiting small bed-and-breakfast and guesthouse bookings. Other prominent concentrations of establishments are closely linked to major industrial locations such as oil refineries, oil rigs and major ports (where the movement of people to and from those locations require short term accommodation). In the United Kingdom the major hotel brands include Whitbread (who owns Premier Travel Inn), Travelodge (the budget hotel chain) and Intercontinental Hotels Group (who own among other brands the Holiday Inns and Holiday Express chains). The structure of the luxury end of the market is also targeting activities such as health spas and golfing resorts and in the last few years has seen many creative promotions linked to reward points on credit cards, Air Miles and other cross selling opportunities.
The mid range market (consisting of three star and four-star ordinary hotels) is now tending the struggle in 2009 as it has confused selling points. They are losing out to both the budget chains and luxury market (which have clearly defined markets where guests have strong buying motives and see simple benefits). Mid-range hotels are sometimes perceived as.a bit pricey for a short weekend break. Or alternatively ‘a bit old than tired looking’ for someone who wants to splash out and have a bit more of a luxury stay.
The hotel industry has seen lots of private investment activity recently including sale and leaseback deals from venture capital and private equity funds. Despite the collapse of general commercial property values the demand for hotel rooms has remained generally consistent providing a level of comfort and security for potential investors. The return on investment for investors may not be as exciting as high-tech industry sectors but hotels do provide a greater degree of predictability (which is becoming more and more sought-after by nervous overseas investors). The lack of ground level liquidity for struggling smaller hoteliers has had the impact of restricting investments in building extensions, redecorations and recruitment of temporary staff. The industry employs many part-time workers including other workers from across the European Union. However rising living costs and falling wages is seeing a slowing in the number of these types of workers available to work across the major hotel groups.
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