Mid-Year Report - Britain Sees Strong Visitor, Hotel Numbers

It's been a year since the London Olympics ended, but the UK is still reporting impressive inbound tourism and hotel numbers. The latest figures from the International Passenger Survey indicate that the first half of 2013 saw record levels in spend and the strongest visitor numbers since 2008.

 

London Tourism and Hotels

Inbound Tourism

In the first half of 2013, Britain saw 15.2 million visitors (+4 percent), and spend across this period was a record £8.7 billion (+11 percent).

Over 2.89 million overseas visitors arrived in June alone, up 12 percent compared with last June. Expenditure over the same period saw overseas visitors spend a total of £1.84 billion, an increase of 13 percent from June 2012. This was also a new high, up 8 percent on the existing June record set in 2011.

June seems to be the month for breaking records with 1.22 million holiday visits, 17 percent up on the previous year followed by a new all-time record for the first six months of 2012 (2 percent).

The first time June has seen over 0.5 million visits from ‘Rest of World’ markets (+18 percent) points to another new record and means we are now 11 percent higher in the first half of 2013.

Double digit growth from high-volume and EU15 markets continue with 14 percent more visits from this part of the world compared to June 2012.

“This is the second consecutive month we have seen record visits and spend, while the first six months of the year have also delivered a record,” said Keith Beecham, overseas director at VisitBritain, in a statement. “Particularly encouraging is that we’ve witnessed a record 18 percent rise in visits from Rest of World markets, the first time June has ever seen us welcome over half a million visitors from these markets. This growth has been sustained over the first half of the year, up 11 percent and also a record.”

Minister for Tourism Hugh Robertson agreed: “We did all we can to showcase the best of Britain to the world in 2012 and it’s paying off. The tourism sector has a big role to play in delivering economic growth and we must keep up this momentum.” 

Hotels

HVS, Zolfo Cooper and AM:PM published the Hotel Bulletin: Q2 2013 late last week, with some impressive results for the UK.

Supply: Both London and the regions recorded RevPAR increases in Q2 2013, although these increases come on the back of weak comparators in the previous quarter due to the Diamond Jubilee and Easter falling in Q2 2012. Out of the 12 cities covered in the report, ten recorded RevPAR increases.

New supply levels in the second quarter remained subdued in comparison to 2012. The low supply levels are not indicative of the longer term trends in market size, with 28,092 bedrooms remaining in the active pipeline.

Following such a strong Q1 2013, Aston Hotels was the only portfolio transaction to complete in the quarter. There were however a number of single asset sales suggesting that the gap in valuation expectation is continuing to narrow.

The debt market for hotels is widening to include alternative providers such as debt funds, credit investors and family offices attracted by the cash generative and asset-backed nature of hotel assets.

Demand: Performance in the quarter has been positive on the whole, with ten of the 12 cities reviewed recording RevPAR increases.

Following a flat first quarter, RevPAR in London increased by 5 percent in Q2 2013. This increase has been exaggerated by the absence of Diamond Jubilee celebrations, which in June 2012 led to a RevPAR decrease of 7 percent compared to the previous year. Excluding this effect, performance metrics in London remained flat. This effect was experienced in other areas of the country. For example, RevPAR increases of 3 percent and 11 percent in Birmingham and Cardiff respectively were exaggerated by respective June 2012 RevPAR decreases of 8 percent and 20 percent compared to the previous year.

The regions returned to profitability growth in the second quarter for the first time since the downturn on a LTM basis. This has been driven by continued increases in RevPAR, payroll efficiencies and a decline in commission paid to travel agents in Q2 2013.

Slow and steady improvements in RevPAR and profitability should give hoteliers a foundation to plan and invest for the future rather than continuing to weather the downturn.

Notable openings: New openings remained at a low level in Q2 2013 in comparison to the high levels of new supply experienced in 2012.

1,575 bedrooms opened in the second quarter. Both Travelodge and Premier Inn continued to expand, opening 253 and 367 bedrooms in the quarter respectively. The two hotel groups now have 88,647 bedrooms in the UK, which equates to 16 percent of the UK hotel market.

Notable openings in the second quarter included:

The 224 bedroom Holiday Inn Express Birmingham Snow Hill following the £23 million conversion of Kennedy Tower by Sanguine Hospitality in a Downing Investors funded BPRA scheme. The hotel is operated by Interstate Hotels & Resorts. This marks the first new opening since the acquisition of Sanguine by Interstate and demonstrates the develop-to-manage strategy.

The 91 bedroom Park Inn Glasgow brings the UK Park Inn portfolio to 22 hotels and marks a return to the city for the brand after a two year absence.

Great Northern Hotel Kings Cross. The Grade II listed building has had £40 million spent on its renovation after being closed for 12 years. The five star hotel is independent of brand and is operated by Robson Asset Management.