UNCOVERING HOTEL OPPORTUNITIES IN LONDON
JLL Sector Intelligence provides the most up-to-date information about what is going on in the industry…
In terms of location, the majority of hotels in London are concentrated in the central boroughs of Westminster, Camden and Kensington and Chelsea. The City of Westminster has the highest concentration of five-star hotels (26 per cent), while Hillingdon, which includes hotels around Heathrow Airport, has the largest concentration of four-star hotels at around 60 per cent of total room stock in the borough.
New hotel openings
Since 2012, more than 18,000 new hotel rooms have opened in London. The majority of these entered the market in 2012, ahead of London hosting the Olympic Games, with over half of these in the budget sector – providing affordable accommodation to those wishing to stay in the capital during the event.
More recently, around 40 new hotels opened their doors during 2015, with a mixture of brands entering the market. The two main budget operators, Premier Inn and Travelodge added almost 900 new hotel rooms between them (nine hotels). Other budget brands that expanded their offering included Holiday Inn Express, with properties in both Ealing and at ExCeL, as well as Z Hotels opening in the City and Shoreditch. Z Hotels has expanded rapidly since launching the new hotel concept in 2011 with its flagship hotel in Soho. Since then, the portfolio has grown and the Z City marks the group’s fifth property in the capital. Not only do these openings reinforce the wave of budget hotels that have entered the market over the past few years, but also the locational shift towards the outskirts of Central London to areas such as Shoreditch and Docklands in the wake of other real estate classes, owing to greater site availability and improving demand drivers.
At the upper end of the market, a handful of new five-star hotels have also recently opened, including the 292-room Hilton London Bankside, the 269-room M by Montcalm Shoreditch London Tech City and the long-anticipated 453-room InterContinental London at the O2.
The pipeline for London is expected to remain strong over the coming three years – with 16,000 hotel rooms due to open between now and 2018 – with almost 7,000 rooms in 2016 alone. The majority of new room supply will open in the budget sector (33 per cent), followed by the four and five-star sector.
While the West End remains one of the world’s most sought-after business locations, new hotel developments in the area have been limited. In the last four years, around 10 per cent of the 18,000 hotel rooms to open in the capital were in the West End with just less than half in the five-star sector, perhaps not surprisingly, as availability of sites in the West End is scarce and values high with competitive alternative uses.
Most recently, in 2014, new hotels to open included the 91-room Ham Yard Hotel in the heart of Soho and the 26-room Chiltern Firehouse in Marylebone, just off Baker Street. The West End has also seen almost 300 serviced apartments enter the market with brands such as Nadler Hotels, SACO and Go Native – a growing trend being witnessed throughout the UK hotel market in recent years. Hotels set to open in the West End during 2016 include the 80-room MGallery London Leicester Square, 137-room hub by Premier Inn St James’s Park and 106 serviced apartments at the Staycity Covent Garden.
High rents and values in the West End have led to the expansion of the traditional boundaries to this area. To the north, a combination of new infrastructure, improved public realm, government initiatives and a booming digital economy is creating a “Knowledge Corridor” that stretches from Bloomsbury to Paddington, taking in Fitzrovia and North of Oxford Street. Many typical Soho and Mayfair tenants have already crossed Oxford Street to the north, encouraged by the regeneration of King’s Cross, Euston and Paddington. JLL believes that this northward expansion will intensify over the coming years, the most important driver being the opening of Crossrail in 2018. The new stations at Tottenham Court Road, Bond Street and Paddington, and accompanying developments, will provide much needed new space while improving the local environment. Improved connectivity and footfall will boost demand to the area with many existing pipeline projects being mixed-use schemes, with additional retail, leisure and hotel space helping to bolster the vibrancy of various submarkets.
Hotel developers are increasingly seeing hotels as an important element of mixed-use schemes by virtue of the fact that they increase vitality and facilitate placemaking, with a knock on effect on values in the rest of the scheme – as demonstrated by The Chiltern Firehouse.
New hotels have been opening up in these areas over the past couple of years, including the 217-room Tune Hotel in King’s Cross and the 266-room Premier Inn London St Pancras – providing affordable accommodation in the area for cost-conscious travellers. To the south, budget operator Premier Inn opened their 153-room hotel in Holborn, while Hoxton Hotels opened their second London property in 2014. Looking ahead, Premier Inn will open another hub by Premier Inn hotel on Tottenham Court Road during 2016 – adding to the four hub hotels it already has in the capital. US-based hotel operator Standard International is due to open its first hotel in 2018 – the 270-room Standard London in the 150,000 square foot former Camden Town Hall annexe.
Across to the East, the hip and trendy area of Shoreditch has become a hotspot for hotel development, due to the availability of buildings and lower costs compared to more central locations. There are already a number of lifestyle hotels in Shoreditch including the Ace Hotel London Shoreditch, Boundary, Hoxton Shoreditch and Shoreditch House – with just more than 500-rooms between them. During the course of 2016, a further 800 rooms are expected to be added to the area. CitizenM will open a 216-room hotel in Shoreditch Village in the third quarter of the year, becoming the third CitizenM property in the capital. CitizenM London Bankside opened in 2012, while another hotel by the Tower of London is set to open in the summer of this year. Nobu Hospitality will also open its first European hotel – The Nobu Hotel Shoreditch London – during the second half of the year. The 156-room hotel on Willow Street will be managed under a long-term management agreement between Nobu Hospitality and the Willow Corp Sarl, the owner of the hotel. As with all Nobu properties, the design will reflect the city of origin as well as Nobu’s signature east-meets-west philosophy.
As new villages pop-up around the capital, creating new mini-destinations in London, so too will the demand for hotel rooms. While some areas like Shoreditch will continue to see hoteliers open boutique and lifestyle hotels, the need for affordable accommodation is becoming increasingly important, which reflects the development the capital has witnessed through the budget-boom over the last few years.
Wardrobes, trouser presses and fruit bowls have long been among the hallmarks of hotel bedrooms – but their days are numbered in many major mid-range chains.