London Hotel Development Activity 2019
London’s resilient trading performance and standing as one of Europe’s top performing hotel markets has been a key driver for hotel development
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As a global gateway city, London continues to fuel a strong pipeline of hotels, with supply set to rise by 4.2% for the full year 2019 and 4.5% in 2020, based upon analysis published in Knight Frank’s annual publication “The UK Hotel Development Opportunities 2019”.
Image: nhow London – Opening September 2019, 190 rooms.
Since the start of 2015 and including new hotel openings for 2019, London will have witnessed a net increase of some 23,000 new rooms, equivalent of 3.4% annual average growth.
With over 1,000 rooms closing in London for major renovation during 2018, London’s bedroom supply increased at its lowest rate since 2015, at 2.7% per annum, compared to 4.1% growth in 2017. Nevertheless, London’s impressive trading performance despite the significant quantum of new hotels opening continues to fuel a strong pipeline of hotels, with supply set to rise by 4.2% for the full year 2019 and 4.5% in 2020.
London’s share of the UK bedroom supply has grown from 21% in 2010 to approximately 24% by the end of 2019. London and the South-East of England have accounted for 36% of the new hotel bedroom stock in 2019.
By the year-end 2019, London’s hotel supply will have increased by over 10,500 rooms since the start of 2018. For the first time in over a decade, the growth in new supply in the four-star sector will outperform the growth of the budget sector. With the 4-star sector accounting for 40% of the new supply since the start of 2018, equivalent of some 4,200 rooms, compared to the budget sector accounting for only 32% of new supply.
Since the start of 2018, the area of greatest growth in London has occurred to the West of London, which can be attributed to the expansion of the Heathrow market. By the end of 2019, nine new hotels will have opened and the expansion of five existing hotels to have completed, resulting in more than 3,100 new rooms opening, equating to 24% growth in supply.
Elsewhere in London, the London Borough of Tower Hamlets and Hackney have together witnessed over 3,000 new rooms opening since the start of 2015, representing a 36% increase in supply and with a further 3,700 new rooms scheduled to open, this represents 22% of the scheduled London pipeline. Meanwhile, the City of Westminster and the City of London together represent a second strong hub of new hotel supply, with a net increase of some 4,200 rooms over the next four year, representing a 9% increase in supply.
Image: Lincoln Plaza London, Curio Collection by Hilton – Opened Q1 2019
London accounts for 38% of the UK hotel development pipeline, either under construction or under renovation and due to open by the end of 2019, equating to some 4,000 new rooms. London has a total of 13,500 new rooms under construction and due to open by 2023, equivalent of 8.5% of the existing hotel supply. Hotel development projects with detailed planning consent account for a further 10,000 rooms.
Based on data provided by Theobald & Gardiner, at the lower range of the scale, the average build cost for a London hotel (excluding FF&E and other standard exclusions), ranges from £67,500 per key for an economy hotel to £300,000 per key for an upper-upscale /5-star hotel. Meanwhile, at the highest range, build costs range between £85,000 per room for an economy hotel and £400,000 per key for an upper-upscale hotel. The average build cost for a London hotel has increased by approximately 4.6% per annum year-on-year, for the five-year period since 2015.
For more information or to see how Knight Frank can assist contact:
https://www.knightfrank.co.uk/commercial/sectors/hotels