Market 2020


January 2020


2019 END OF TERM HOTELS REPORT


Hotels snippets for end of year are published slightly early in 2019, ahead of the election.


Planning applications and permissions granted continue to fill a substantial proportion of my daily hotel ‘newswire’. This is unsurprising statistically, with a substantial UK development pipeline of around 235,000 bedrooms, a prospective addition of one third to present day stock.


But on an individual basis, the ability for a hotel development to ‘stack up’ is becoming ever harder, particularly as build costs increase. Taking a traditional leasehold budget hotel as a model, it is now difficult to see a rent of below £5000 per bedroom working, which itself can be hard to achieve outside major towns & cities and the south east, without additional ‘support’. Maybe public sector involvement or mixed-use schemes with a hotel element? Former department stores seem in vogue in 2019 in this regard. Or developers and investors able to find a means of taking on the operational risk of a branded management contract or franchise? Hotel pricing also has extremes. At the corporate top end a ground rental ‘layer’ may now be deemed necessary just to make a deal work; elsewhere, ‘second hand’ bedrooms can be far cheaper to buy than new build. Overall, however, demand for good hotel assets with core property fundamentals remains strong.


Most amusing story of the year was the Travelodge survey telling us that five nights per month away from home (in a Travelodge presumably) is the ideal number to sustain a happy marriage. I noted there was no comment from the publishers concerning sleeper ratios in the context of room occupancy.


Something may be working here, however, for Travelodge reported a 78.5% occupancy in its results for the calendar year 2018, surpassing Premier Inn at 77.9% in the Whitbread year to February 2019.


Despite such robust numbers and continuing investor demand, transactions have been hard work in 2019, in a far less liquid market than earlier ‘teen’ years. Undoubtedly this has been exacerbated following the Grenfell tragedy and hotels with cladding are now understandably subject to the most detailed scrutiny, with many simply not acceptable to institutions. Expect this month’s hotel fire in Brentford to maintain such focus.


On a personal note, and with all this market created free time, I completed three marathons in 2019, where better training resulted in an improved performance in each. In the second, the Arctic Circle’s ‘Midnight Sun Marathon’, which started at 8.30pm on a Saturday night in June, I achieved the dubious distinction of being the first finisher to take two days to complete the course! I also find running round town centres and locations visited on business helpful for ‘hotels knowledge’, in pursuance of the NJBHLP mantra, ‘corporate hotel property advice, UK nationwide’.


So best feet forward and good wishes for New Year and a new decade.


Nick Barber
07796 278720
nick@njbhlp.co.uk