UK: Data from BNP Paribas Real Estate in Q2 2022 shows that ADR and RevPAR has reached record heights as hoteliers increase pricing to reflect occupancy levels and inflation.
In the UK, the total average hotel occupancy rose to 80 per cent in Q2 (up from 70 per cent in Q1), marking the highest occupancy levels seen since pre-pandemic times, compared to 81 per cent in Q4 2019.
As such, ADR increased to a new UK record up from £97.90 in Q1 to £122.86 in Q2, with RevPAR rising from £68.41 to £98.60. The growth comes as inflation hit 9.4 per cent in June.
Rebecca Shafran, senior associate director of alternative markets research at BNP Paribas Real Estate, said: “The latest ADR growth figures are a reflection of the current confidence of hotel operators to raise their rates in light of high demand levels and in spite of the challenging economic backdrop. Generational change and increased sentiment towards international travel, events and return to work has a lot to do with this. [Hoteliers] know consumers within the key 18-65 demographic are willing to spend for experiential or convenience stays, and have reflected this in the rate alongside their various overheads.
“However, with the Office for Budget Responsibility (OBR) forecasting a 2.2 per cent per-person reduction in real household disposable incomes (RHDI) in 2022-23, the biggest fall in living standards in any single financial year since ONS records began, we do anticipate some downward rate pressure during Q4.”
Regarding the transaction market, investment volumes have slowed down in response to economic uncertainty, however totalled £1.2 billion in Q2 – the strongest on record since 2018 (Q2: £1.9 billion). The total was largely influenced by the £410 million purchase of Point A by Tristan Capital Partners.
Regional hotel sales continued in Q2 and recent activity includes PGIM launching a joint venture with Madison Cairn to acquire, develop and reposition UK hotels in domestic leisure destinations. BNP Paribas advised on the first acquision in Brighton.
Richard Talbot-Williams, senior director of hotels at BNP Paribas Real Estate, said: “Increased interest rates have led to a reduction of transactional market pace with hotel deals agreed whilst rates were lower currently taking longer in due diligence whilst pricing is re-analysed by buyers. The UK still has a substantial hotel development pipeline, and whilst in some markets, new openings can be expected to dampen market RevPAR initially, the newest product with the strongest ESG credentials is anticipated to remain relatively more attractive to the majority of investors.”
