Hotel occupancy in in London showed its sixth consecutive quarter of year-on-year decline as the capital continues to be affected by increased global terrorist activity.
And Brexit poised to subdue the sector further, according to the latest Hotel Bulletin for the second quarter of the year published by industry consulting service HVS, AlixPartners and AM:PM.
The impact has been a 2% decline in revenue per available room compared with the second three months of 2015 and average room rates failing to increase for the second consecutive quarter.
HVS chairman Russell Kett said: “Whilst this is significant in the short term, London is, and will remain, a huge magnet for inbound tourism so the longer term future of the capital’s hotel sector is still positive, even when taking account the new hotels in the pipeline and the potential impact of the Brexit implementation causing economic wobbles.”
Across the UK the picture was more varied, although with overall demand sluggish average revpar growth only reached 2%.
Apart from the £575 million acquisition of Atlas Hotels by London & Regional, mergers and acquisitions in the sector have also been subdued throughout 2016 due to uncertainties surrounding Brexit, weaker economic growth in China, terrorism in France, Belgium and Turkey, and the US presidential elections.
Now the outcome of the referendum is known and Britain gears up to leave Europe, there is cautious optimism that the hotel sector will remain an attractive source of investment for global investors interested in the medium-to long-term growth perspective.
However, this is reliant on the UK remaining an investor-friendly market post-Brexit.
“The Brexit decision is having the double-impact of weaker sterling and a reduction in anticipated economic growth,” Kett said.
“This is both good and bad news for the sector in that Britain becomes a cheaper destination for overseas visitors, dampening outgoing UK travel but potentially increasing the food and beverage costs as some suppliers pass on price rises.
“Hotel transaction activity is also likely to slow down as investors assess the outlook of future trading but in the longer term we are optimistic the UK will remain an attractive source of investment for global investors.”