London’s hospitality zone heads east

 —  Article by JLL Staff Reporter
Hipster cyclists crossing the road at busy crossroad near Hoxton Square. Shoreditch is one of London's most distinctive areas , hotel in east london
Image credit: Shutterstock

Hotel growth is breaking from tradition in the UK capital. In the last four years only one in ten of the 18,000 hotel rooms that opened in London were in the West End – the historic heart of the city’s hospitality industry.

Driving hotels outside the capital’s traditional zone is a combination of high rents and land values, plus scarce supply and competition from other businesses for real estate.

In contrast, hotel activity is growing rapidly in the more northerly ‘Knowledge Corridor’ which stretches from Paddington in the city’s west to Bloomsbury and Fitzrovia North of Oxford Street, out into more eastern parts of the capital such as Shoreditch, Docklands and Bankside.

The shift eastwards looks set to continue, says Graham Craggs, Managing Director of JLL’s Hotels and Hospitality Group in the UK.

“New infrastructure developments in London such as Crossrail and the Thameslink upgrade continue to drive regeneration and unlock interest in hidden corners of the capital. Not only is this likely to heighten visitor demand and trading performance in the future, it will also aid the absorption of new supply.”

Budget boom

As the hotels sector expands into less expensive areas, there’s also growth in the less expensive parts of the sector. Budget hotels are booming and now make up 20 percent of London’s total room stock.

Since 2012 more than half of the 18,000 hotel rooms that have opened in London have been in the budget sector. And 33 percent of the 7,000 rooms due for completion in 2016 will be in budget hotels. Only 4-star hotels have a higher share of London’s hotel room supply with 36 percent of the city’s total rooms.

The budget sector’s growth stems from reduced competition and lower prices for central sites that had other uses, such as former banks and other commercial buildings. In the wake of the global crisis and in the run-up to the 2012 London Olympics, budget chains went on a development spree.

The operators with the largest number of rooms within a single brand are Premier Inn (9,467 rooms) and Travelodge (8,164 rooms).

Craggs adds: “Developers are recognising that hotels can create vitality and positively influence values for other property uses in the immediate vicinity and as part of mixed use schemes. This recognition, in addition to increased numbers of visits to the capital, is spurring new development activity across London, particularly in fringe hotel locations.”

Who’s moving in?

US-based luxury hotel operator Standard International is opening its first UK hotel in King’s Cross in 2018. New hotels coming to Shoreditch include budget chain Z Hotels and Nobu Hotel Shoreditch. During 2016, a further 800 rooms are expected to be added to the area, which benefits from building availability and lower costs.

Investment in new locations and budget accommodation is just part of the weight of investment in London’s hotels. In 2015 the UK capital accounted for about 36 percent of total investment into the European hotel sector, with volumes hitting £3.9 billion – more than twice the amount reported in the previous year.

Meanwhile in the same year the city hosted 18.8 million international visitors – an increase of 4.4 percent on 2014 when comparing the first three quarters of the years. And overnight domestic visits rose to 9.4 million during the first three quarters of 2015, representing a 9.2 percent growth on the same period in the previous year.

With London firmly established as one of the world’s top destination cities, there’s no shortage of visitors to fill the city’s growing number of hotel beds.

Download Report
Read more of this article