Over 140 new hotels opened in the UK in the last year
With relaunches, refurbishment and the extension and modernisation of existing properties, the BHA estimates that a record £3bn was invested in the UK hotel industry in the year. British Hospitality: Trends and Statistics 2007 forecasts a similar pace of construction in the years leading up to the Olympics.
The pace was hot, not only in London (where 19 hotels opened 2,700 new rooms). Manchester saw three 200+-room hotels open, with three more planned for 2008, and Liverpool, Newcastle-on-Tyne and Edinburgh saw investment. The leaders in the budget category opened almost 60 new sites between them: Travelodge (36) and Premier Inn (23) which also acquired Golden Tulip UK.
However, with the exception of Brighton, there was little expansion in seaside resorts and Luton Hoo, which opened after £60m investment, was the only new country house hotel. Bob Cotton, the BHA chief executive, comments that this research ‘shows UK domestic holidays declined in 2006 while overseas holidays boomed; we must try to reverse this trend and encourage more British people to holiday at home. These new hotel developments will help us to achieve this aim.’
Signs of a boom in progress
Reading through the beautifully produced A4 four-colour book, there are several signs of a small boom in progress. Whitbread has opened its 600th Costa Coffee store in Wimbledon, as well as 52 new ones overseas, bringing the total outside the UK to 200. Visits by overseas residents to the UK rose by 9% to a new record of 32.7m and spending by 12% to £16bn.
There are a few small clouds on the horizon, as John Calverley chief economist for Amex Bank explains while reviewing the economic outlook:
At the time of writing (September 2007) there is more uncertainty about the world economy than for many years. The US housing bubble began to deflate in 2006, and the resulting crisis in the US sub-prime mortgage sector has now spread to become a fully-fledged financial crisis as banks and investors pull back from risk.
Until mid-2007 everything was going so well… then along came the financial crisis of July/August. One of its effects was to tighten lending standards and raise interest rates, at least for some borrowers.
Calverley’s measured conclusion is that the financial sector is likely to have settled down by the end of the year, with the main effects limited to the property market, but he is wise to conclude ‘be prepared for some nasty surprises’.
Implications for the hospitality industry
At the time of credit crunch struck in August, banks worldwide faced $300bn of commitments made to fund leveraged buy-outs agreed in the private equity boom. By late October, Thorold Barker is writing in the Financial Times from New York that
these now look under reasonable control. Rather than …having to take all the debt onto their own balance sheets, the banks look like they will be able to sell much of it on.[1]
But the wall of cash which was taking major companies private and engineering huge mergers is no longer there, so the appetite for risk has diminished.
There is a sign of the times in British Hospitality: Trends and Statistics 2007: a picture of Richard Balfour-Lynn, chief executive of MWB – the property investment group – owners of Malmaison/Hotel du Vin, and whose other company Alternative Hotel Group acquired De Vere Hotels for £1.1bn in July 2006. The caption mentions that the £2bn Vector Hospitality fund he created failed to gain sufficient investor support in May 2007 and that although Malmaison/Hotel du Vin were put up for sale in summer 2007, they have since been withdrawn.
The season for big deals seems over for a while.
- Financial Times 27 October 2007 p 33
