Impacts of terrorism on U.K. hotel performance
We have received a number of queries from clients asking how recent tragedies in the U.K. have affected the market’s hotels. While there is still not a long enough range of data to draw any definitive conclusions, we wanted to take this opportunity to send you a quick market update.
The U.K. hotel market has experienced a strong start to 2017, with year-over-year RevPAR growth of 6.5% as of April year-to-date data. As evidenced by March data from VisitBritain, the country has seen an influx of arrivals, thanks in large part to the devaluation of the pound following the Brexit vote last June.
Now, questions have emerged around the sustainability of this performance, following the recent terrorist attacks in the country. Earlier reports have suggested an impact on visitor numbers to attractions in the U.K. It is reasonable to expect a negative impact on hotel performance given the unthinkable tragedies the country has experienced over the past several months.
The U.K. maintained performance growth without much disruption following the March Westminster and May Manchester attacks, but it is still too early to fully gauge the effects of the 3 June attack at London Bridge or the 18 June attack at Finsbury Park, though some insights are available for the former.
An initial analysis from the Manchester attack shows that the city’s hotels experienced a minor year-over-year dip in occupancy (-1.9%) the day after the attack, before returning to growth the following day, 25 May (+2.7% to 79.8%). Following that date, performance has fluctuated due to other factors, including the hosting of the U20 Rugby Championship.
Daily figures suggest that the London Bridge attack may be impacting the U.K. Capital’s performance more significantly than previous attacks this year have. Preliminary data shows that performance started to decline on Wednesday 7 June, with both occupancy and ADR declining in a year-over-year comparison. The sharpest declines were seen on Thursday 8 June, with an 11% drop in occupancy and a 4% drop in ADR. However, these decreases may be in part a reflection of the comparison with the time of the EULAR medical congress last year.
In closing, STR again stresses that it is essential to analyse a longer time period and more complete dataset before drawing definitive conclusions. Specifically in London, hotels have shown resilience during difficult times in the past.
We will continue to monitor performance and will send updates should we identify any disruption in hotel demand or rates. If you have any further questions regarding this developing situation in the U.K., please contact your STR representative.