Europe -  London, United Kingdom

For a comprehensive review of the Europe market, click below:
HVS In-Depth Europe Hotel Valuation Index:   2020 | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001

As the biggest financial hub in Europe, and with its rich cultural heritage, London benefits from both leisure and business demand. After the pound sterling depreciated significantly against the euro in 2016 following the EU referendum in June, London benefitted from increased leisure travel from source markets such as the USA and Europe. However, that was counterbalanced by decreased business activity due to the uncertainty in the market. As a result, occupancy stayed at roughly the same level in 2017 compared to 2016, despite a substantial influx of new supply that is to continue in the next few years. During 2018, occupancy levels increased and allowed London to finish the year with its highest annual occupancy level of the past decade.

In local currency, average hotel rates saw a modest increase in both 2017 and 2018, whilst in euro terms rates have slightly decreased for the same years due to currency dynamics. However, the market has benefited from RevPAR growth in 2018 (in both local currency and euro terms), driven primarily by the rise in occupancy. As a result, overall hotel values increased by around 1.2% in euro terms and 2.1% in local currency in 2018.

Supply in London currently stands at more than 1,700 properties comprising almost 143,000 rooms. There are currently more than 90 properties in the pipeline for London, all expected to open by 2022. These hotels will bring 18,000 new rooms to the market.

Brexit still dominates the discussions and the potential impact is strongly debated; however, until further political certainty is gained, it will be difficult to assess. Anecdotally, the market remains relatively positive. With a sort of soft or renegotiated deal, it should be ‘business as usual’, through an orderly exit of the European Union. With the absence of a clear deal regarding the future of relations between the UK and the EU, investors will have a particular focus on the free movement of people as this economic freedom largely impacts payroll costs of UK hotels and the accessibility of each other’s markets to UK and European investors. The hotel investment market in the UK will almost certainly face a slower year in 2019.

We live in a fast-moving world and investors are advised to maintain a close vigil on the development of the UK’s implementation of its withdrawal from the EU. Underpinning this, however, is a strong UK economy and a recognition that a compromise must eventually emerge which will remove the uncertainty and allow the country to return to some sense of normalcy in the medium term.

Transaction levels in London remain extremely high with almost £3.8 billion recorded for single asset transactions in the central London submarket, therefore accounting for almost 50% of all single asset transactions in the Greater London Area in 2018. The largest transaction was the Grosvenor House by JW Marriott on Park Lane, which in October 2018 was sold by Ashkenazy Acquisition, who had acquired the property only the previous year, and resold it for almost £620 million (£1.2 million per room).

The widespread impact of the coronavirus (COVID-19) has had an unprecedented impact on hotels and hotel values worldwide. Consequently, the latest HVI analysis may no longer reflect the most current measure of lodging industry strength or the hospitality investment market.

In each of our offices across the globe, we are working tirelessly to analyze the impact of recent events and provide timely insights to help you navigate these uncharted waters. Because it is unclear how long the pandemic will last or how long related restrictions will be in place, we are updating our analyses on a weekly basis using the most current data.

Additionally, examination of value trends in prior cycles can provide useful information. Historical patterns, together with an understanding of the market’s current expectations for the eventual recovery of the industry and its performance, can provide insights on the likely trajectory of decline and recovery for hotel values.

For the Latest Information and Analysis on the Impact of COVID-19Click Here

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For more information, please contact:

Sophie Perret, MRICS, MBA
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Magali Castells
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