Colliers International’s inaugural COVID-19 Recovery Hotels Index, which analyses the impact on the rate at which hotel markets recover across the UK, has positioned Plymouth as the top city in the ranking of 35 markets nationwide. The area’s predicted success is due to the fact that it benefits from a predominantly domestic tourism base (86 per cent), as well as a significant portion of its domestic travellers visiting for leisure purposes.
Plymouth, also known as Britain’s Ocean City, is renowned for attracting domestic tourists with a range of leisure attractions such as the Royal Theatre (one of the UK’s best attended regional theatres), National Marine Aquarium (the largest in the UK), Royal Citadel and The Barbican. The city is also the last city along the coastline before Cornwall, making it a popular base for coach and group tours to explore the English Riviera sub-region.
In addition, Plymouth’s hotel room stock is largely concentrated at the lower end of the market, with budget brands such as Premier Inn and Travelodge forming a large part of the market. The city’s score is further enhanced by its modest reliance on the meetings, incentives, conferences and exhibitions (MICE) sector which is likely to experience a slower recovery period.
The COVID-19 Recovery Index, which has been created in tandem with Colliers’ fourth annual edition of its UK Hotels Market Index, has identified five core indicators to analyse for 35 markets in the UK. These indicators are those that have shown-up in other markets, such as China, USA and certain European countries (where hotels have reopened already) as being important in influencing the rate of recovery. The selection of markets has been broadly based on the original UK Hotel Market Index, as well as data availability, although certain tourist hotspots have also been included for comparison purposes. The indicators considered are:
- Domestic visitors as a % of total travel
- Leisure visits as a % of total domestic travel
- Budget and serviced apartment rooms as a % of total hotel supply
- Branded rooms as a % of total hotel supply
- Reliance on the meetings, incentives, conferences and events (MICE) sector
These criteria are individually scored on a scale of 1-5 for each market, with one being the lowest and five the highest. These are then consolidated into an overall weighted index figure and ranked accordingly. By consolidating such varied criteria into a single figure, an assessment has been made as to which markets are likely to recover at a faster pace, and which ones are expected to take longer to reach 2019 performance levels. The Recovery Index does not indicate the strength of a market, just the rate at which it is expected to recover to its own normality. The main hotels index is a better indicator of underlying market strength.
The Isle of Wight ranks second, mainly due to over 90 per cent of its visitors travelling from domestic markets for leisure purposes. Additionally, it has a large proportion of budget hotels and limited reliance on MICE demand.
The Isle of Wight is a popular holiday destination due to its known beaches and seafront promenades including the sandy Shanklin Beach, Ventnor Beach and its historic Chalk Rock Needles and light house. The Isle of Wight’s score is pulled down slightly due to the lack of branded hotel stock in the local market.
Exeter is in third place due to its large domestic travel base, as well as its pull as a popular leisure destination within the UK. Exeter attracts a significant amount of tourism through its historical sites such as Exeter Cathedral, Royal Albert Memorial Museum and the Exeter Quay. Furthermore, Exeter has a favourable hotel market structure, with a high percentage of both budget and branded hotels; two factors which will contribute to a quicker recovery timeline.
Additional markets which have been ranked in the top 10 include some of the UK’s most popular seaside destinations such as Cornwall, Bournemouth and Blackpool, all of which enjoy large volumes of domestic leisure travel. These coastal towns are likely to experience high demand levels from British holidaymakers when lockdown restrictions have been relaxed across the country, benefitting from pent-up demand and also serving as an alternative to international beach destinations for some travellers.
Another unusual suspect is Bradford, which albeit is at the bottom of Colliers’ UK Hotels Market Index 2020, has reached the top 10 in the Recovery Index rankings. Bradford’s positioning can be attributed to its significant supply of budget hotels, limited MICE-related demand and a considerable reliance on domestic and leisure visitation; all factors which are favoured in Colliers COVID-19 Recovery Hotel index.
The firm notes that although not included as part of its analysis, it would expect other coastal resort towns in the UK to also experience a similar recovery pattern. Latest trends observed on SiteMinder.com regarding future bookings across the UK also support this analysis.
These do however come with some exceptions such as Brighton, which has scored lower than anticipated on the Index. While Brighton is a renowned seaside resort town, it has a lower proportion of domestic travellers when compared to similar markets, as well as a limited supply of budget and branded hotel rooms. The lack of affordable accommodation options in Brighton is likely to deter a substantial number of visitors who are price sensitive following the COVID-19 crisis. Brighton also has a greater reliance on the MICE sector with year-round events and festivals, as well as several conferences such as its annual TNC event; the largest European research and education networking conference, Water Environment and Transport Conference and The Brighton UKSG Annual Conference and Exhibition.
Marc Finney, Head of Hotels and Resort Consulting at Colliers International commented: “Given that our recovery index punishes a low domestic and leisure tourism base, a high percentage of non-branded hotels, a lower share of budget and extended stay room stock and a strong reliance on the MICE sector, some of the best hotels markets, such as London, Edinburgh and Bath, will rank lower than expected in our recovery ranking. It will take these very strong markets longer to recover back to where they were.
“Of course this is a general market recovery index and site/property specific factors will lead to significant variances. This is particularly relevant for individual budget/midscale hotels and serviced apartments, which we expect to cope better with the COVID-19 crisis. Similarly, we envisage hotels with a higher reliance on rooms revenue to outperform full-service products. This is due to social distancing protocols which will inevitably limit the use of public areas and ancillary facilities in the short-term, including restaurants, bars, meetings spaces and spa amenities.”
Spotlight on Bottom 3 Markets
London ranks the lowest in Colliers’ Recovery Index, owing its position to a strong reliance on both international tourism (around 60 per cent) and the MICE sector, as well as having one of the lowest proportions of budget hotel room stock (approximately 50 per cent) when compared with other markets. It will have been a long time since London appeared at the bottom of any hotel market analysis
London is one of the world’s leading tourism destinations for international travellers, playing host to major year-round events including Wimbledon Tennis, London Fashion Week, Chelsea Flower show and the bi-annual Farnborough Air Show. The capital city also holds an extensive range of conferences and exhibitions, with London ExCeL alone hosting 400 events in 2019 with over four million delegates. These venues and events have historically been key demand generators for London’s hotels, however, will not contribute to room night demand in the near future due to the global travel restrictions and rules against large gatherings, quite apart from the fact that the ExCel centre is now a Nightingale Hospital! Another reason why London is likely to recover at a slower rate than other destinations in the UK is its source markets, with American travellers representing the highest proportion of inbound tourism (approximately 14% in 2018). With long-haul flights expected to be the last to resume normal operation, this will further delay London in welcoming tourists from the USA. London is also a global financial hub, generating a healthy portion of business related demand, particularly from overseas travellers. As business travel is predicted to be the last to resume, this is another factor that will delay the city’s hotel market recovery.
Oxford and Cambridge are also positioned in the bottom three, sharing similar characteristics with London in terms of a low domestic demand base, coupled with limited hotel stock at the lower end of the market. These markets are also major university hubs and due to the uncertainty of students returning in 2020, they are expected to face a significant reduction in visitation from friends and relatives of students as a consequence. Furthermore, they have a significant reliance on MICE related demand with their venues hosting the Oxford annual International Conference on Childhood Education, the Oxford Farming Conference and the annual Cambridge FinTech conference. It is important to stress here that these markets are in fact some of the UK’s top performers in terms of RevPAR levels, and the Recovery Index only ranks these markets according to how fast their hotel performance is likely to recover to 2019 levels. London, for example, boasts the highest RevPAR in the UK and is one of the most sought after hotel markets in Europe. However, given that our index punishes a high reliance on international tourism and the MICE sector, as well as a low percentage of budget stock, the capital city ranks at the bottom of the index.
Other Weak Performers
Additional markets which have been ranked in the bottom 10 include some of the UK’s most important MICE destinations such as Glasgow, Manchester and Edinburgh. Glasgow has traditionally attracted a significant amount of international travellers as a leading international conference destination, recording the highest volume of delegates across Scotland. The SEC Centre in Glasgow, which includes the SSE Hydro Arena, is Scotland’s largest exhibition and conference venue for public events, concerts and conferences, and a key generator of hotel demand. Manchester is also a highly event-driven city where concerts and sporting events (particularly home football fixtures with Manchester United FC and Manchester City FC as well as test cricket at Old Trafford cricket ground generate high volumes of international demand and overnight visits throughout the year. Edinburgh also hosts a large volume of conferences and is known as the world’s leading festival city, with 12 major annual festivals including Edinburgh International Festival, Edinburgh Fringe Festival, Edinburgh International Book Festival and the Edinburgh International Science Festival. These markets, together with other weak performers such as Reading and Bath, also score lower on the index as they rely more heavily on international visitation (between 30-44%). Edinburgh and Manchester are in fact the most visited provincial UK cities by overseas travellers, recording 2.4 million and 1.4 million visits in 2018, respectively.
Manchester and Reading also generate a substantial amount of business related demand, which is likely to have a strong impact on their hotels in 2020. Manchester is the largest regional corporate finance and stockbroking centre in England and Reading is home to several major international companies such as Microsoft, Prudential, PepsiCo and Oracle, all of which are considered to be some of the main demand generators in the area.
Stratford-upon-Avon and Bath rank in the bottom 10 primarily due to the structure of their hotel markets, with a much higher portion of hotels positioned at the upscale level (67 per cent and 52 per cent, respectively). Brighton, which is a strong domestic leisure destination, ranks lower than expected due to similar characteristics.
Finney continues: “Fundamentally, we anticipate that domestic leisure locations will recover at a quicker pace, given their smaller reliance on certain sources of business which have been badly affected by COVID-19 such as the number of overseas visitors and larger MICE events. So good news in the short-term for traditional British seaside resorts such as Blackpool and Bournemouth, national park locations and Devon and Cornwall. This said some of these markets within the top 10 have traditionally been very small – so even though they appear top of the list, the uptick will be small in absolute terms.
“Conversely, the bottom 10 locations are heavily reliant on overseas visitors and MICE business. No surprise that restrictions on air travel, quarantine measures and gatherings of large groups could affect these markets well into 2021. For hotel investors who have deeper pockets and the patience to wait for the market to return, clearly cities such as London, Oxford and Edinburgh remain of great interest to investors.”