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Corporate Sector Keeping Hotel Demand High

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United Kingdom  London  Robert Barnard  Hotel Investment Performance 

Corporate Sector Keeping Hotel Demand High

By - Tuesday 31 December 2013

Hotels have long represented a significant investment opportunity and the asset class is strengthening further as demand rises. New figures from BDO suggest the corporate sector is behind this improved outlook, with the rise in business travel allowing hotel operators in the UK to report impressive growth in November - yet another month where gains have been made.

In London, room yields increased to GBP 116.01 last month - a rise of 6.5 per cent in November. BDO claim this was achieved thanks to a five per cent increase in room rate from GBP 131.63 to GBP 138.20. There was also a 1.4 per cent rise in occupancy levels to 84 per cent, compared to the 82.7 per cent recorded a year ago. The outlook was also positive in the regions, with room yields increasing by 8.3 per cent year-on-year from GBP 41.11 to GBP 44.52. Room rate grew by 3.7 per cent from GBP 59.24 to GBP 61.41. This was coupled with a 4.5 per cent rise in occupancy from 69.4 per cent to 72.5 per cent.

Robert Barnard, partner at BDO, said: "The hotel sector's strong run continues to gather momentum. The data show that operators are successfully boosting occupancy without having to resort to discounting, which suggests that underlying demand is heading in the right direction.  However, this demand is currently lop-sided. Hotels tend to rely on corporate occupiers during the autumn, and much of the recent recovery in operator performance has been driven by increasing business confidence and spending."

At the other end of the scale are consumers. Mr Barnard claims people are still experiencing negative wage growth and are consequently engaging less with the hotel sector. Businesses are still faced with the challenge of luring consumers into hotels and until finances improve, discounts appear to be the only way to go. Attracting guests for the leisure market will also be one of the battle lines for competitiveness, with the most innovative likely to win over consumers.

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