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Strength of UK Hotel Sector Supporting Economic Recovery

By +Eric Jafari

Strength Of UK Hotel SectorUK hotels are helping to drive the country's economic recovery, with research showing business activity has increased in the service sector as a whole in the three months to May.

According to the Confederation of British Industry's (CBI) quarterly Service Sector Survey, optimism levels are also on the rise. Consumer services, including hotels, are leading the charge. Business volumes are rising at the fastest pace since August 2007, in spite of increasing employee costs.

However, there are concerns among firms about the shortage of internal finance and the inability to access external funding. Nevertheless, consumer services expect growth to be sustained, with profits rising strongly. Stephen Gifford, CBI director of economics, said:

"There appears to be a sense of growing confidence in the service sector. We've seen some turnaround in activity this quarter, and a more positive outlook for the next."

Despite this, caution is advised when entering the hotel market, as conditions "remain tricky". Mr Gifford explained that Britons are continuing to feel a squeeze on real incomes, meaning their spending power is limited. What's more, business confidence is "vulnerable to any adverse developments in the global economy".

Nonetheless, it cannot be denied that things are looking up for UK hotels. During Q1 investment totaled £1.9 billion - nearly quadrupling year-on-year. During the same period in 2012, just £492 million was transacted. There are currently over £1.2 billion assets currently being marketed across the UK and Savills claims that transactions will exceed annual levels recorded over the last five years, even if just a small proportion of units are sold.

Although business and investment activity is increasing, Michelle Web, director of hotel investments at Savills, isn't convinced this environment is sustainable. "This has been an exceptionally strong first quarter in the hotel investment market, boosted by the sale of three significant portfolios, the Hotel du Vin/Malmaison, Principal Hayley and Mariot which had all been on the market for some time, as well as the recent sale of the InterContinental London Park Lane."

30 May 2013


Hotel Investments,Hotel Performance