Hotel Construction: Strong Growth in Hotel Construction Despite Downturn

Despite the recession, the UK hotel industry is continuing to expand, with over 10,400 rooms opening in 2010 and a further 43,000 planned for the period 2011-2015.

Since the present hotel construction boom started in 2003, over 95,000 new rooms have been added to UK hotel stock, excluding re-launches of existing hotels, such as The Savoy and Four Seasons in London. Just over half (55 per cent) of the new-builds are in the budget sector.

Figures from the British Hospitality Association’s annual Trends and Developments Report reveal that, although the industry did not see a significant decrease in the number of new rooms opening during the year, compared with 2009, up to 70 projects were abandoned or put back to an indefinite date in the future.

“Undoubtedly, the recession has curtailed bank funding and sent some developers into insolvency,” it says.

“Although there are exceptions (for example, the Cornwall in St Austell, the Oxfordshire in Thame and the Casa in Chesterfield) the majority of the new hotels are branded properties with many of the developments undertaken by franchisees.”

Hotel Construction: Budget Brands

The BHA reports that the budget sector continues its expansion with over 5,300 new rooms added in 2010 and with new brands, such as Citizen M, H10 and Tunes, opening their first properties in the UK. In 2001, there were 50,000 budget rooms, a figure which has risen to 112,600 in 2010.

Even though budget hotels are responding to consumer demand by introducing less expensive, but high value, rooms that are attractive to both the business and leisure market, they felt the impact of the recession in 2009 with lower occupancies, and average room rate and revenue per available room.

On insolvencies, the BHA believes that the number in the hospitality industry – 2,429 in 2009, a rise of eight per cent – has reached a peak.

“Although the figures for 2008 and 2009 showed a significant increase on 2007, in the context of the industry’s 200,000 establishments, it’s clear that it has survived in better shape than many thought possible. Of all the sectors, hotels suffered the least.”

Ufi Ibrahim, BHA’s chief executive, says that the industry has successfully survived the recession without incurring the widespread damage that was predicted at the outset.

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