Christie & Co report on UK hotel market: focus on key regional cities to unlock opportunities

Specialist business property adviser Christie & Co has launched a review of the UK’s regional hotel market with a specific overview of the six most visited regional cities outside London.

The UK is the 10th most internationally visited destination in the world, according to the UNWTO, with over 266m international overnights recorded in 2018. Simultaneously, domestic visitation has picked up with 2018 recording a 2.8% increase on the previous year. While hoteliers across the country are concerned about cost increases and supply additions, understanding individual and local market trends is necessary to accurately assess investment prospects.

Following 10 years of RevPAR growth, the regional UK market has experienced the first decrease in performance in 2019 as supply additions and moderate demand growth are taking a toll on hoteliers. However, there are significant variances across individual markets.

As part of the research, Christie & Co analysed 18 key markets based on metrics relevant to hotel performance and compared the markets to each other to understand their positioning in the wider regional UK landscape. Edinburgh, Manchester, Birmingham, Glasgow, Bristol and Liverpool were identified as the largest markets, aside from London, based on overnight stays. Demand, supply, pipeline, transactional activity and outlook for these cities are also included in the report.

Outlooks for each market are:

  • The Edinburgh market is expecting moderate supply increase given the current pipeline and strong fundamentals and performance is expected to remain positive supported by strong investor appetite.
  • 2019 was a record year for transactions in Manchester, which is the largest regional UK market in terms of transactional volume, as several large single assets exchanged hands. Appetite from investors remains strong albeit with the background of hotel performance creating some concerns as supply additions are creating increasing pressure.
  • The outlook for Birmingham is positive, supported by a small pipeline, with demand expected to be driven by the nearby city of Coventry being City of Culture 2021 and the city hosting the Commonwealth Games in 2022.
  • Glasgow remains one of the main tourism destinations in the UK. However, new supply has started to impact performance negatively and is expected to continue until the market absorbs the newly opened hotels and the coming pipeline.
  • The outlook for Bristol is positive, supported by growing popularity from domestic and international visitors and a reasonable pipeline. Furthermore, Bristol is the largest UK city currently without an arena-style venue. Once the YTL Arena Bristol is completed in 2023 it is expected to drive significant levels of demand.
  • In Liverpool the next two years are expected to be challenging for RevPAR growth as new supply enters the market (c. 860 and 500 rooms in 2020 and 2021 respectively) and competition within a relatively small market intensifies.

Olivia Chaplin, Director of Hotel Consultancy at Christie & Co comments, “It is important to look at individual markets and not at regional averages as each market presents different drivers. We continue to see interest in the UK’s regional markets from a range of investors. Despite some short-term uncertainty driven by supply increases in certain locations, political factors and more recently coronavirus risk, the long-term demand fundamentals are good in many towns and cities across the UK.

“In addition to our view of the bigger picture from a national and international perspective, through our strong network of offices, Christie & Co is uniquely positioned to capture local market insight and support investors, developers and operators to navigate local markets and unlock the right opportunities for them in the right location.”