Hotel Demand Studyaa

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Hotel Demand Study

June 2006


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Hotel Demand Study

Prepared by Grant Thornton and

The Leisure & Tourism Organisation

for the Greater London Authority

June 2006


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copyright

Greater London AuthorityJune 2006

Published byGreater London AuthorityCity HallThe Queens WalkLondon SE1 2AAwww.london.gov.ukenquiries: 020 7983 4100minicom 020 7983 4458

ISBN 1 85261 872 8

This publication is printed on recycled paper

Grant ThorntonGrant Thornton HouseMelton StreetEuston SquareLONDONNW1 2EP

T 020 7383 5100F 020 7383 4715

The Leisure & Tourism OrganisationThe Leisure & Tourism Organisation112 Manor Road NorthEsherSurreyKT10 OAG

T 0208 339 2591

The views expressed in this report are those of the consultants and do notnecessarily represent those of the Greater London Authority.


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Greater London Authority

Hotel Demand Study

Contents

Page

1 Executive Summary 1

2 Introduction and background 8

3 The London tourism market 11

4 Trends in London hotel supply 23

5 Hotel market characteristics 36

6 Provision of accessible accommodation 43

7 Forecasting hotel demand 56

8 Conclusions on the supply benchmark 65

Appendix 1: Econometric analysis and scenarios 76

Appendix 2: Sub-regional analysis 83

Appendix 3: Future work on accessible accommodation 86

Appendix 4: National Accessible Scheme 89

Appendix 5: Sources 90


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1 Executive Summary

1.1 Key pointsThe London Plan 2004 is currently being revised. It contains policies to secure and

enhance the economic benefits of London s visitor industry and provides guidance on the

nature and geographical distribution of new provision.

A key policy tool in the London Plan is the benchmark target for the provision of new

hotel bedroom supply. The current benchmark is for an extra 36,000 rooms over the

2001-2016 period, the equivalent of 2,400 new rooms per annum in total. This

benchmark was developed in a 2002 study by PricewaterhouseCoopers (PwC)1. This new

study undertaken by Grant Thornton and the Leisure and Tourism Organisation tests and

updates this benchmark to ensure that it is robust in meeting London's future needs to

2026.

This study concludes that 2,000 extra ("net") rooms will be required per annum over the

period to 2026. To meet this target, a total of around 2,500 new ("gross") hotel rooms will

be required each year, as we also expect a loss of 500 rooms each year.

Stronger growth is expected in the first decade. We estimate that around 2,800 gross new

rooms will be required each year over the 2007-2016 period. This is slightly higher than

the PwC annual benchmark of 2,400 over the 2001-2016 period. The key reason is that

our figures have an allowance for a loss of hotel stock, which appears not to have been

allowed for in previous studies.

Estimates of rooms "required"

Gross new

rooms required

Net extra rooms required

(Gross rooms minus loss)

2007-2016 2,800 2,300

2017-2026 2,200 1,700

2007-2026 2,500 2,000

Note: Includes all serviced accommodation, includinghotels, bedand breakfast establishments (B&Bs) andguesthouses.

To arrive at this benchmark, this study has:

reviewed long-term trends in the tourist market in London;

considered current trends in the provision of serviced accommodation and likely

trends for the future;

considered the impact of the London 2012 Olympic and Paralympic Games and

demand for Conference and Business travel;

reviewed the supply and demand of accessible accommodation; and

examined the pipeline of new hotel bedrooms and estimated the expected loss.

1 PricewaterhouseCoopers, Demand and Capacity for Hotels and Conference Centres in London: SDS TechnicalReport Thirteen, August 2001


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Greater London Authority - Hotel Demand Study

Grant Thornton and The Leisure and Tourism Organisation

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1.2 London's tourist marketLondon is the most visited city in the world by international tourists, with 1.75% of the

world's international arrivals visiting London.

International visitor numbers to London have been growing solidly over the past 20

years. Despite a slowing in growth in the early part of the 2000s, London's share of

international arrivals has increased again in the past three years. International

arrivals grew by over 14% in 2004, and a further strong increase of around 6% was

estimated in 2005.

Domestic visitor numbers to London have risen over the long term, but have declined

slightly in recent years. Low cost airlines flying from regional capitals have

increased competition with London.

London's profile has been developed and raised in recent years. The establishment of

Visit London has contributed greater marketing and promotion of London, while the LDA

has led tourism and product developments for the capital. The development of major

events in the city2, and the successful bid for the 2012 Games bodes well for London's

continued popularity amongst the world's travellers.

International visitor numbers to London are expected to continue to increase. As incomes

in developing nations rise, it is expected that travel demand will rise. Markets in China

and India offer huge potential to London as are growing incomes in other Commonwealth

countries.

Longer-term trends show that the overall number of nights spent in hotels is incre asing

but at a slower rate than number of visitor nights spent in London. In 1995, international

visitors nights spent in hotels accounted for 39.8% of the total, but by 2004 this had

declined to 30.5%. This decline could be due to an increase in international tourists

visiting London to visit family and friends.

1.3 Characteristics of the London hotel marketOn the basis of a comprehensive survey conducted by the London Tourist Board (now

Visit London), it is estimated that there were just over 93,000 serviced rooms in London

in 2002. Around 75% of these are hotel rooms, with bed and breakfast establishments

and other accommodation making up the remaining 25%. In addition, a further 29,000

non-serviced rooms (university/college rooms, serviced apartments etc) exist in London,although these do not tend to be available for the whole year.

The London accommodation sector has proved resilient despite a number of setbacks in

the past five years. New stock has been developed despite some softening in room yields

and occupancy rates. Over the past five years (2000-2004) new room build has averaged

around 3,000 per annum (above the 2,400 rooms per annum benchmark).

But taking into account the 500 rooms lost each year in London, growth in hotel rooms

has been around 2,500 extra rooms per annum. Losses in hotel and B&B stock have been

mainly in the lower end of the market, which, along with new build and refurbishment of

existing stock, has had the effect of improving the overall quality of London's servicedaccommodation stock. The reduced use of B&Bs for accommodating the homeless haspartly contributed to a reduction in demand for low quality accommodation.

2 Including the development and implementation of the London Major Events Strategy.


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Most hotels in London are concentrated in the central boroughs (with around 72% of the

total stock) but there has been considerable dispersal over the past 10 years, and further

dispersal is expected. Key areas of growth have been the east (Newham, Tower Hamlets)

and the west (Hounslow, Hillingdon).

A further aim of this study has been to consider the supply of accessible accommodation

in London. The known stock (ie. rooms that have been identified as accessible) is limited

- just 23 rooms have been verified as wheel-chair accessible rooms (only two with hoists),

and around 165 rooms verified as providing some improved level of accessibility.

Information on the rooms is also limited, with a potential role to be played by the public

sector in assisting information transfer. Information provided by hotels themselves has

also been found lacking in this study and is viewed as an area for further development.

There will also be a particular challenge around the provision of accessible rooms, and

information on accessible rooms, for the 2012 London Olympic and Paralympic Games.

A number of policy changes, including the Disability Discrimination Act 1995 and the

Building Act 2000 are likely to increase the supply of accessible rooms in London's

hotels. However, without information on these rooms and a coordinated offering to

disabled guests for the duration of their stay in London latent demand will remain unmet.

Future work is needed to ensure that hotels meet their duties under the Disability

Discrimination Act and, where they are not, the action required to ensure that they do

meet their obligations are clearly defined. The broad objectives of this more detailed

work are set out in Appendix 3.

1.4 Forward trendsIn terms of key trends in the growth of hotel and B&B supply in London, our analysisconcludes:

The geographical spread of hotels is expected to increase, with a large number of

developments planned for the east and west of London. Regeneration initiatives

around transport hubs (in line with the development of sustainable communities) are

likely to also attract accommodation developments, and these initiatives are expected

over the longer term to also lead to an increase in hotel development in the north and

south.

Planning must facilitate the development of new serviced accommodation so that the

market can respond to increases in demand. There is some concern amongstoperators and industry experts that rigid planning policy is constraining supply,

especially in central London.

Further growth in the branded budget sector as well as innovative concepts such as

pod hotels, aparthotels and 'Yotels'.

Continued demand for accommodation around key transport hubs, and providing

adequate transport linkages will be one of the key issues for determining the location

of new hotel growth in the future. Transport connections are critical for business

travellers and there is strong demand for hotels near to travel connections (for

instance, Paddington and Victoria) and airports and train stations. The ability toaccommodate parking for disabled guests and coach parking will also be important.

The 2012 Games are likely to act as a fillip to supply, particularly in the east of

London and around key transport linkages. An important post Olympics legacy is


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likely to be greater demand for accommodation to support the conference and

incentive travel industry.

Demand for accommodation from the conference and incentive travel industry isalso likely to influence the nature of future hotel supply. The present and future

demand for meeting facilities in London, and for business tourists generally, will lead

to hotels with a larger number of hotel bedrooms; greater and more flexible

conference and seminar rooms and apartments being provided within or as an adjunct

to new developments.

Demographic trends suggest an ageing of the population and a related increase in the

number of disabled people. Higher incomes and changing tastes towards travel are

likely to increase the number of disabled travellers in the future and this will be a

growing market need. London has a number of challenges to meet if it is to be adestination of choice for disabled travellers.

1.5 Future hotel room requirementsIn developing the hotel benchmark, we have taken into account the demand

characteristics identified above, and have considered the likely forward trends in visits by

both international and domestic visitors.

Econometric analysis of historical data undertaken by Grant Thornton suggests that the

number of nights spent in London by international visitors are likely to grow by 72% over

the next two decades, increasing from around 90 million in 2004 to 155 million by 2026.

This equates to growth of around 3.2% per annum over the 2007-2016 period, followedby slower growth of 1.7% per annum over the decade after.

The number of domestic visitors is also expected to increase substantially, but to a lesser

extent, amounting to 63% growth in total from 30 million in 2004 to nearly 50 million by

2026. Again, growth is faster in the first decade at an average of 2.8% per annum over

the 2007-2016 period followed by slower growth of 1.7% in the decade after.

To meet this increased domestic and international tourist demand we estimate a further

40,000 extra (or net) hotel rooms might be required over the 2007-2026 period. On an

annual basis, under the central scenario this equates to 2,000 net extra hotel rooms each

year over the 2007-2026 period.

Given the likely uncertainties involved in such a long term forecast, we estimate the

number of hotel rooms required is likely to range from 20,000 net extra hotel rooms to

82,000 net extra hotel rooms, as shown below. In annual terms, a range from 1,000 to

4,100 net extra hotel rooms per annum. The kink in demand from 2012-2020 is due to

the legacy impact of the London 2012 Olympic and Paralympic Games.


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Figure 1: Projections of total hotel rooms in London

90

100

110

120

130

140

150

160

170

180

190

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

HotelroomsinLondon(000s)

High scenario Low scenario Central scenario

40,000

'net'

82,000

'net' rooms

20,000

'net'

Taking into account the assumed loss of hotel stock of around 500 per annum, a total of

50,000 gross new hotel rooms might be required over the 2007-2026 period under the

central scenario. In annual terms, this is 2,500 gross or new rooms built each year.

There is a great deal of uncertainty about the level of loss of hotels rooms. Different

sources contain different estimates and the level of loss fluctuates considerably from yearto year. The GLA might consider whether improvements can be made in collection and

publication of these loss statistics to ensure greater consistency and robustness in the

future.

Total over 20 year period (2007 - 2026)

Scenario Gross new

rooms required

Loss of

rooms

Net extra

rooms required

Central 50,000 10,000 40,000

High 92,000 10,000 82,000

Low 30,000 10,000 20,000

Our projections are based on average guests per room remaining constant and occupancy

levels increasing to their long term average over the forecast period. If the Mayor's policy

to accommodate new demand was changed into a policy where new hotel provision was

constrained, then the supply response in the industry is likely to be increased occupancy,

higher levels of guest rates per room and/or higher room rates.

For example, if we assume that more demand is absorbed by further increases in

occupancy rates - e.g. rising to an all-time high of 84% by 2012 - then the benchmark

figure in the central scenario reduces to 1,650 rooms. Similarly, if the numbers of guests

per room increases from 1.45 to 1.6 then this has an even greater reduction on the rooms

required benchmark to 1,350 rooms.


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Sensitivity testsExtra rooms required

(new rooms minus loss)

1 Base case 2,000

2 Occupancy levels return to high of (84%) by 2012 1,650

3 Average guest per room increases from 1.45 to 1.6 by 2012 1,350

Source: Grant Thornton

1.6 Future hotel room requirements by regionForecasting trends into the future at sub-regional and borough level is difficult as hotel

development in each borough, particularly in outer London, fluctuates considerably fromyear to year. Quantitative techniques based on past growth trends will also not be able to

pick up step changes in supply due to improved transport connections, new tourist

attractions or large scale regeneration.

The approach we use is therefore a mixture of quantitative and qualitative analysis. The

starting point is the London Hotel Development Monitor which reports future expected

future hotel developments by borough over the 2006-2010 period. Quantitative

techniques are then used to forecast the hotel room requirement over the 2011-2026

period, first at the sub-regional level and then secondly at the borough level. The borough

level forecasts take into account wider factors which could contribute to a future growth

of accommodation (eg regeneration, transport links and proximity to tourist attractions).For example, improvements in infrastructure in the east of London relating to the 2012

Games may provide opportunities for the development of hotel stock in the area.

Our analysis suggests that the largest growth is expected to be in Central and West

London with net extra rooms required each year estimated to be 750 and 500 per annum.

Lower percentage growth of 1.0% per annum is forecast for the Central area, but as

growth is from a higher base, the number of extra rooms required is more significant.

The forecast is for dispersal to continue with total stock in central London falling to 60%

by 2026. The dispersal of accommodation from central London presents opportunities for

businesses and communities outside of central London, but also provides challenges for

coordinating visitor infrastructure, including transport.

Gross new

rooms required

Net extra

rooms required

Average annual growth inhotel room stock (2007-

2026)

Central 1,030 750 1.0%

West 605 500 2.7%

North 85 75 3.0%

East 525 450 3.2%

South 255 225 3.8%

Total 2,500 2,000 1.7%


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1.7 SummaryThe London Plan seeks to accommodate new demand where possible. Under this

assumption, that new demand is not constrained, a total of 2,000 net extra hotel rooms

would be required each year over the next two decades (or 2,500 gross new hotel rooms)

in our central scenario. These new hotel rooms required take into account the growth in

international and domestic tourism and visitors to the London 2012 Olympic and

Paralympic Games.


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2 Introduction and background

2.1 BackgroundThis report tests and updates the hotel supply benchmark figure for London to ensure that

it is robust in meeting London's future needs to 2026, taking into account recent trends in

the tourism market and the future demand associated with the Olympic and Paralympic

Games and concluding on whether the Games will in fact act as a stimulus to increase the

supply of hotels in London.

The report has been prepared by Grant Thornton and the Leisure and Tourism

Organisation and undertakes the following analysis:

Demand side analysis. Assessment of the hotel bedroom demand for London to

2026, taking into account strategic risks, structural changes in consumer

preferences and the impact of costs factors such as occupancy rates, exchange

rates and room rates.

Supply side analysis. Assessment of the current stock of hotels by type and

location, the development pipeline and the general market climate, including the

analysis of the demand and availability of facilities suitable for disabled people.

2.2 Previous studiesThe report reviews a number of studies and builds on research previously carried out.

In 2002 PricewaterhouseCoopers (PwC) produced a report on the 'Demand and Capacity

for Hotels and Conference Centres in London' as commissioned by the Greater London

Authority3. The PwC report covered both historic trends and forecasts to 2016 and

therefore this report has been compiled in a manner consistent with the historic trends

reported by PwC and updated to reflect trends since 2002. In addition this report has

extended the forecast period covered to the year 2026.

PwC reported continued long-term growth in London's economy and overseas and

domestic tourism. A strong relationship between world GDP and the number of nightsgenerated by overseas visitors was used in their forecasts to predict hotel demand. The

potential difference between the hotel supply in 2002 and the forecast demand in 2016

was estimated as being between 15,000 and 58,000 rooms. This report considers and

revises these forecasts, extending the predicted demand to 2026.

This report looks at the impact of the 2012 Olympic and Paralympic Games on the

tourism market both for London and the UK as a whole and the impact this will have on

hotel demand.

PwC compiled a report in 2005 on the impact of the 2012 Games, which indicated

significant increases in gross value added (GVA) to London and the UK both during and

after the Games from increases in foreign visitors, thus impacting on the need for hotels.In the longer term, the 2012 Games is likely to increase demand for Conference centres in

London, with an associated impact on hotel demand.

3 PwC, Op cit 1


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2.3 Key issues for LondonThe past 20 years has seen an overall increase in the total number of visitors to London,

despite any temporary downfalls seen intermittently in the short-term. Overseas visitor

numbers have increased from 9.6m in 1990 to around 14.9m (estimated) in 2006.

Domestic visitor numbers to London have also grown over the long-term from 6.9m in

1990 to an estimated 11.8m in 2006.

Domestic numbers however have seen the largest fluctuations (compared to overseas

visitors) in the short-term, resulting in a slight downward trend in total visitors to London

since 2002. This has been influenced by the increasing popularity and accessibility of

many countries and growing competition from other major European cities (due in part to

the ascension of no-frills airlines).

The overall London market has been buffeted by a number of issues since 2001, includingterror events, SARS and the outbreak of Foot and Mouth. However, a recovery in

demand (particularly for international visitors) is evident and the London bombings in

July have proved only a temporary setback.

Improved room yields have supported investment in new hotel rooms in London,

increasingly away from central London to the western and eastern parts of the city. The

dispersal of accommodation represents opportunities for businesses outside of Central

London, but also provides challenges for coordinating visitor infrastructure including

transport and information services.

There has been strong growth in the Budget sector of the market and this has provided

visitors to London with a greater choice of accommodation. Moves to standardise the

quality ratings for hotels will hopefully also provide visitors with greater information and

certainty regarding their accommodation experience.

Looking forward, tourism is expected to continue to grow (as forecast to 2016 in the 2002

PwC report and extended in this report to 2026) and when considered in combination

with the additional impact of the 2012 Olympic and Paralympic Games (whose influence

was not included in the PwC report), and the planned development of major tourism

facilities, such as the International Convention Centre, it can be seen that substantial

additional demand for accommodation on an on-going basis could be generated. New

accommodation is planned to meet future demand, closing the gap between the current

room stock and the demand forecast in 2016 as reported by PwC, and the hotel market isupbeat about London's prospects.

Demographic change is expected to provide a market opportunity for the provision of

accommodation to the accessible accommodation market, although evidence suggests that

London is not servicing this market as well as other destinations, which provides

challenges for the future.

2.4 Report structureThis report is structured as follows:

Chapter 3 - The London Tourism market: Provides an overview of trends in

international and domestic visitors to London and the use of hotels and other serviced

accommodation.


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Chapter 4 - Trends in London hotel supply: Considers the supply baseline and

reviews recent completions, reductions in stock and expected future developments.

Chapter 5 - Hotel market characteristics: This chapter reviews recent trends in hotel

development by type, brand and location and looks at recent occupancy, room rates

and room yields.

Chapter 6 - Provision for the disabled: Chapter 6 outlines the current supply of

accessible accommodation, including for the Olympic and Paralympic Games and

looks at issues related to the current provision. The chapter reviews demographic

changes and considers the likely implications on demand for accessible

accommodation. Appendix 3 sets out the broad objectives of future work around

improving accessibility for disabled visitors.

Chapter 7 - Forecasting hotel demand: This chapter sets out our econometric

forecasting model and considers high, medium and low demand scenarios.

Chapter 8 - Conclusions on the future supply benchmark.

The Appendices provide a detailed description of the econometric methodology

(Appendix 1), hotel supply by borough under the new proposed sub-regional definition

(Appendix 2), the broad objectives of future work around improving accessibility for

disabled visitors (Appendix 3), the national accessible scheme (Appendix 4) and a

bibliography (Appendix 5).


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3 The London tourism market

3.1 London Tourism Vision to 2016The Mayor of London's London Tourism Vision for the period 2006 to 2016 is currently

out for public consultation. The Vision builds on the achievements of the Mayor's Plan

for Tourism and Tourism Action Plan 2003-06 which included the reorganisation and

repositioning of the key support agency (to create Visit London) and effective resourcing

for London's tourism industry.

The Vision sees the key challenges facing the tourism industry over the next 10 years to

be:

Use of the internet in booking and planning trips

Cash rich and time poor

New and emerging markets placing different demands

4 IPS, Travel Trends 2004, 2005

Key points

The growth in the number of international and domestic visitors to London has been

relatively modest since 2000, with the number of visits only now returning to the

high point reached at the Millennium.

However, over the long term there has been a steady increase in visitors to London.

Nights stayed in London by international visitors have risen on average by 3.1% eachyear since 1993 (compared to 1.6% each year for the UK as a whole). Similarly

visitor nights spent by UK residents in London has increased from 19.1 million in

1990 to 29.7 million in 2004, an average increase of 3.2% per annum.

Although there has been an increase in the number of international arrivals in

London, the rate of growth is lagging behind other emerging cities (for instance,

Dublin, Berlin, Barcelona and Budapest). London's share of overseas arrivals dipped

from 2.3% in 1995 to 1.65% in 2002, but has since increased to 1.75% in 2004 with

recent growth ahead of other established tourist cities (such as Paris, Madrid,

Amsterdam and Rome).

In 2004, 33% of overseas tourist trips to London were for holiday, 27% were for

business and 28% were for the purpose of visiting family and friends4.

Trips to London by UK residents are thought to have declined significantly, with the

UKTS suggesting a fall of 41% evident since the peak in trips in 2000 (although it

should be noted that there are some concerns with the quality of the UKTS data).

However, UK residents are becoming increasingly likely to use a hotel in their visits

to the capital.


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Global competition

Integration with inward investment

Emergence of new technology (e.g. mobile phones, ticket-less travel)

Ageing society

The ten-year Vision for London will evolve to incorporate the challenges faced above and

it is envisaged that by 2016, 'London will be recognised as the leading global city for

tourism and as a constantly evolving destination'.

3.2 International visitors marketThe past 25 years has seen steady growth in the number of overseas visitors to the UK,

with visits by overseas residents increasing from 12.4m in 1980 to 30.0m in 20055

.Visitors to London have also increased, with international visitors to London increasing

from 9.6m in 1993 to an estimated 14.3m in 20056.

Growth has been particularly strong in 2004 and 2005, with growth of over 14% in 2004

and estimated growth of 6% in 2005. However, growth was relatively modest in the earlypart of the 2000s with a number of circumstances (such as low cost airlines, exchange

rates, terror events) reducing overall tourist arrivals, impacting on both overseas and

domestic tourists. The events of September 11th had a similar effect on tourism, with the

number of visits only returning to their 2000 high point in 2004. The London bombings in

July 2005 had only a short term impact on overseas visitor numbers with visitor numbers

rebounding in the latter part of 2005.7 It should be noted that the PwC report produced in

2002 did not include the short-term downward trends noted above since these trends were

only just in the cycle at this point.

Despite the overall long-term growth of overseas visitor numbers to London, London's

market share in the number of worldwide International Arrivals has decreased marginally

from 2.3% in 1995 to 1.8% in 2004 (UNWTO). 2002 saw the market share dip to the

lowest level in the past decade of 1.65% and has since begun to rise again steadily.

Given that the number of International Arrivals worldwide has grown significantly in the

past decade (from 569m in 1995 to over 760m in 2004), it seems logical that there would

be a marginal decline in London's market share arising from increased competition from

new holiday destinations. In view of the increased competition, London's position asshown in Table 3.1 is still relatively healthy compared to some of its rivals.

5 Office of National Statistics, IPS March 2006, Visit London, Visit London: Prospects for 2006, 20066 Office of National Statistics, IPS 20057 Visit London, Visit London: Prospects for 2006, 2006


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Table 3.1: Major city destinations share of international arrivals 1990-2004

% share of internationalarrivals

1990 1995 2000 2001 2002 2003 2004

Amsterdam - - 0.5 0.5 0.5 0.5 0.5

Dublin - 0.4 0.5 0.5 0.5 0.5 0.5

Hong Kong - - 1.3 1.35 1.3 1.0 1.25

New York - - 1.0 0.8 0.7 0.7 0.7

Madrid 0.2 0.3 0.4 0.4 0.35 0.4 -

Paris 1.8 1.3 1.3 1.3 1.3 1.2 1.1

Rome 0.6 0.6 0.6 0.6 0.5 0.5 -

London 2.2 2.3 1.9 1.7 1.65 1.7 1.75

Source: UNWTO, Tourist Offices, European Cities Tourism

The average number of nights stayed by international visitors to London has however

remained stable, generally averaging between 6 and 7 over the period from 1994 to

2005.8

Figure 3.1: Annual international visitors to London

60

65

70

75

80

85

90

95

100

Jun-94 Jun-95 Jun-96 Jun-97 Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05

9

10

11

12

13

14

15

Intl Visitor Nights (LHS)Intl Visitor Trips (RHS)

International visitor nights (million) International visitor trips (million)

Source: IPS 2005

London has long been a 'Gateway' to the UK, with over 72% of overseas visitors arriving

via one of London's airports9. Visitors also spend time in the capital, with around 40% of

all nights spent in the UK by international visitors in 2004 spent in London. This is up

from 34% in 1993. It must be recognised that the success of London as a tourism

destination is linked to the success of the UK as a whole as a tourist destination, with

many tourists visiting London prior to travelling to other parts of the UK. As such,

London is a national asset, which must be invested in as a tourist destination, with

8 Office of National Statistics, International Passenger Survey, 20059 IPS, Travel Trends 2004, 2005 (arrivals through London City A irport and Luton are not included in thebreakdown contained in the report and hence international arrivals through London's network of airports is more than

72%).


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investment flowing out to the regions as well as vice versa. This will help to secure

continued growth in the international visitors market.

Figure 3.2: Annual international visitors to the UK visiting London

0.30

0.32

0.34

0.36

0.38

0.40

0.42

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

London visitor nights as % of UK nights

London visitor nights as a proportion of UK nights

Source: IPS 2005

Taking a longer-term view of visitor trends, there is a clear upward trend evident in

visitors to the UK over the past 20 years. Data for visitors to London has only been

available more recently, but as can be seen, the overall trend is likely to be similar. As

can be seen in Figure 3.3, international visitors to London follow a similar pattern asvisitors to the whole of the UK. Both have been rising gradually over time despite some

volatility in certain years.

Figure 3.3: Annual international visitors to the UK and London

0

50

100

150

200

250

300

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

0

10

20

30

40

50

60

70

80

90

100

UK nights London nights

UK nights (m) London nights (m)

Source: IPS

Within the inbound market, visitor numbers from the US (which continues to be the most

important source market) have remained below 2000 levels. However, strong increases inthe number of tourists arriving from other important source markets, such as Spain and

the Republic of Ireland, have helped to sustain the sector:


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The leading overseas markets in 2004 were the USA (2.4m visits), France (1.3m

visits), Germany (1.2m visits);

International tourist arrivals worldwide grew by 11% in 2004 from 2003 with

particularly strong growth in Asia Pacific (+28%), Middle East (+18%) and the

Americas (+11%); 10

There has been a 65% increase in arrivals to the UK by Chinese residents

between 2000 and 200411

, and despite the relatively small base, given the huge

Chinese population there is high growth potential for the future with any modest

percentage growth having a significant impact on the rest of the world. In

addition, the UK gained 'Approved Destination Status' from China in January

200512

and the Mayor of London and the Mayor of Beijing signed an agreement

to mutually promote their cities in April 200613. Both agreements are likely tofurther encourage Chinese visitors to London.

Growing wealth in India and strong cultural links may also contribute to growth

in visits to London by Indian nationals over the next decade and longer.

Tourists are spending less and staying for shorter periods of time than previously. (Since

1979, the number of inbound tourists has grown 122% however spending has only risen

40%). This is largely due to a changing mix of purposes of visits, including increasing

numbers of visitors visiting friends or relatives14

as illustrated in Table 3.2.

Table 3.2: Purpose of international visit trips

1984 2004

Visiting Family or Relatives 19% 28%

Holiday 47% 33%

Business 21% 27%

Other 13% 12%

Total 100% 100%

Source: IPS Travel Trends 2004

Worldwide, the majority of international tourist trips in 2004 were for the purpose of

leisure and holidays (52%) with only16% being for business travel15.

3.3 Domestic visitors to LondonPrior to 2000, the domestic visitor market in London had grown strongly (albeit with a

short term decrease in 1999). The millennium celebrations in London saw a "one-off"

level of visitors to London, with the number of visits peaking at 18.5m visits. Key

attractions opened in the City during this period, including the Millennium Dome and theLondon Eye driving an increase in visits to the capital. The number of visits has returned

to just 12.3m over the year to March 200516

. Total nights and spending have also

10 World Tourism Organisation, Tourism Market Trends, 2005 Edition - Annex, 200511 IPS, Travel Trends 2004, 200512 GLA Press Release, London and Beijing Mayors sign agreement to promote cities, 10-4-200613 China Briefing for Partners, Visit London 2005.14 IPS Travel Trends 2004, 200515 WTO, World Tourism Highlights 2005, 2005.16UK Tourism Survey, time series data, 2000 to 2005


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declined since their peaks in 2000 (nights are down by 35.4% and spending is down by

16.3%). However, Visit Britain and the DCMS have expressed concerns about the way in

which the survey was conducted, and therefore the robustness of the results. The UKTS

is currently reviewing the survey methodology as a result of these concerns.

It is worth noting that there have also been fewer UK resident visitors to England over the

period as well suggesting it is not just London that is out of favour with UK touri sts17.

The increased availability of cheap flights to the continent from regional airports, rail

disruptions, higher petrol prices and Foot-and-Mouth disease, have been some factors

behind the decrease in the domestic market (in some cases even inhibiting visits to other

parts of the country), with specific events such as the London bombings having further

short term effects. Anecdotal evidence suggests that domestic visits to London declined

by as much as 30% in July and August 2005 as result of the London bombings18

although

activity has bounced back somewhat since then as evidenced by occupancy rates forLondon hotels

19.

Over the longer term, the total number of domestic visitor nights spent in London has

increased, 19m in 1990 to 31m in 200420

. The average number of nights per visit has also

increased, rising from 0.8 nights in 1990 to 1.24 in 2004.21

Information on visitor

attractions visits paints a broadly positive picture for the past few years with the overall

trend being positive.

Figure 3.4: Annual UK resident visitors to London

Source: UKTS

In terms of the key characteristics of domestic visitors to London:

17 UK Tourism Survey (UKTS), England 2003, 2004; UKTS, England 2004, 2005.18Visit London: Prospects for 200619 A ccording to the UK occupancy survey for Serviced A ccommodation, London occupancy rates were 73% and 63% inJuly and August 2005, but quickly recovered to 78% by September 2005.20 UKTS, Time series data, 1990 to 200521 UKTS, Time series data, 1990 to 2005

0

2

4

6

8

10

12

14

16

1820

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

0

5

10

15

20

25

30

35

40

45

London visits London nights

London visits (m) London nights (m)


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17

The majority of domestic visits to during 2004 London were from the South East

(14%) followed by the South West (12%), North West and West Midlands (both

11%), East of England (10%) and East Midlands (8%). 22

In 2003, the purpose 38% of domestic visits to London was to visit family and

friends, 34% for holidays in 2003 and 25% for business. Key changes since 2001

have been an increase in holiday and business at the expense of trips to visit

family and friends.

The average number of nights stayed in London per visitor between 1994 and

2004 was 2.3 nights23

.

3.4 Total visitors to LondonCombining information on international and domestic visitors to London shows asubdued performance for visitor nights and trips to London since 2000.

Annual trips to London by domestic and international visitors peaked at 31.6 million in

2000 (as mentioned above, trips were buoyed by the millennium celebrations in that

year). In 2004, trips fell to 26.1 million, representing a fall of around 20% on the 2000

peak. Similarly, total annual visitor nights have fallen over the period, albeit with a more

moderate decline of 4% recorded (due to an increase in the average length of trip). Over

the long-term there has been a steady rise in annual visitor nights, as illustrated in Figure

3.5.

Figure 3.5: Total Visitors to London

Source: IPS, UKTS, Visit London, Visit London: Prospects for 2006

3.5 Business and conferencesUntil recently there has not been a proper understanding within central or local

government of the importance of business tourism or its contribution to the local and

national economies. One business tourist is worth at least three times the amount of one

leisure tourist in employment and economic terms and business tourism is worth 3.2bn

to London, making the business tourism sector an important area for London to invest in.This investment is particularly key given London (and the UK's) weakening share of

22 UKTS, London 2004, 200523 UKTS, time series data

0

20

40

60

80

100

120

140

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

International Domestic

Million Nights


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18

international tourism arrivals and increasingly competitive conditions in the tourism

market.

The conference and incentive travel industry has evolved over the past few decades into a

mature business sector. It is increasingly clear that businesses and associations cannot

function effectively without face-to-face meetings. Over the ten years to 2004, there was

a 50% increase in all business trips (with 27% of overseas visitors travelling on

businesses to the UK in 2004) exceeding the overall tourism growth rate24

. On a global

scale, 16% of International tourist arrivals worldwide were for the purpose of business in

2004.

A key part of the business tourist market is from conference/events attendance. London is

already a strong convention destination, with 2004 statistics from the Meeting Industry

Association (MIA) indicating it accounted for 60% of the UK corporate conventionmarket. In 2003, 3% of domestic visits to the UK were for attending conferences and

exhibitions (approximately 0.4m visits)25

. In 2001, UK residents made 2.0m trips for

conference and exhibitions comprising some 4.9m nights away from home and an

associated spend of 420m. Conference and exhibition trips accounted for 10% of all

business trips (including overseas visitors)26

.

2005 saw optimism in UK conference venues with sales up and 65% expecting further

growth ahead. A survey conducted across all conference desks and venues in the UK

reported an average of 421 conferences per venue in 2004 (an increase of over 10% from

the prior year)27, with venue income estimated to have grown 67% from 2003 to 12.9bn.London in particular saw a 21% growth in the corporate sector

28.

London leads the UK market with 60% of corporate organisers holding an event in the

capital (30% Birmingham, 27% Manchester)29

. However London is currently failing to

attract its fair share of larger events with the business that London can handle being

limited by the lack of purpose-built facilities. Investment in an International Conference

Centre (ICC) in London would help meet this need and support London and the UK's

position as a major visitor destination. Investment in business tourism can stimulate

future inward investments where business people return to London on holiday or to visit

family and friends or to establish business operations here. In addition, it is less subject to

the fluctuations that can be caused by exchange rate changes and other factors that tend to

affect leisure tourism to a greater degree. Business visitors also become ambassadors for

the city by communicating to colleagues their experiences in the city. The ICC would alsoexploit London's role as a 'gateway' to the rest of the UK, with many business visitors to

London extending their trips both in the capital and outside it.

Quantifiable data in a report by Grant Thornton, showed that an ICC in London has the

potential to contribute significantly to the Government's objective and DCMS target to

'maximise the economic contribution tourism can make to the UK economy'. The

London ICC Commission has strongly supported this conclusion and stated in their final

report: 'The ICC Commission is of the unanimous view that the business case for

developing an ICC in London is clear and unambiguous'.30

24 International Passenger Survey 200125 Visit London, London Visitor Statistics, 2004/2005, 200526TRI hospitality, ICC27British Association of Conference Destinations, British Conference Venues Survey 2004, 200428British Association of Conference Destinations, British Conference Market Trends Survey, 200329 British Association of Conference Destinations, British Conference Market Trends Survey, 200330 ICC Commission, Final Report- October 2005, 2005


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19

In addition, the 2012 London Olympics will have a positive effect on London's position

in the international conference market, giving international meeting planners the

confidence that London can host large-scale events.

In 2002 and 2001, the percentage of total rooms that were sold to the

conference/incentive sector in London was 10.4% and 10.9% demonstrating the

importance to the hotel industry of business tourism. Comparatives for Birmingham

(highest ranking city in Europe) were 30.3% and 28.0%, though occupancy was slightly

higher for London at 72% on average versus 65% for Birmingham. Statistics gathered in

2003 showed that of 107 London hotels, conference/convention business accounted for

6.9% of rooms sold.31

In 2002, International Trade Forum magazine reported a growing number of businesstravellers bringing their families on business trips creating opportunities for hotels and

conference centres to develop new offerings for children and spouses during business

meetings.

There have been recent trends towards meetings/conferences being held more frequentlywith companies understanding that they must communicate more frequently with their

staff and other stakeholders.

The corporate segment commands higher rates than leisure/group segment, therefore most

large hotels are willing to allocate approximately one third of room stock to in-house

conference and banqueting events. However, when located in business destinations,

hotels are unlikely to allocate all their room stock to either in-house or City events

(conferences) if it means displacing regular corporate business.

While the overall corporate segment has grown, there are now fewer long-haul corporate

Conference and Incentive events due to32

:

wish for better work-life balance

need for comfort i.e. avoiding 10 hour plus flights

increased perceived levels of insecurity, linked to air travel

expense

loss of productivity having staff away for longer.

Therefore, London's central position to Europe and America makes it well placed to

capture the event market.

A reasonable assumption seems that the conference/incentive sector will grow in line

with the business tourism sector as a whole. This is partly dependent on the extent to

which regions develop and maintain the necessary infrastructure. The recent report by

Grant Thornton on the proposed construction of an international convention centre in

31 TRI hospitality,32 EIBTM, 2005 Industry Trends and Market Share, 2005


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London33

estimated that some 170,000 delegate-days will be additional to the London

economy. These are largely big international association meetings, equating to an

additional 0.2% of visitor nights spent in London by overseas residents.

Forecasts carried out in 2001 projected a growth in all business tourism trips of 39%

between 2001 - 2011 with growth in real spend of 16%34

, with further expansion likely

(as mentioned above), as a result of the Olympic Games.

On an international basis, leisure travel previously growing at a superior rate to that of

business is predicted to grow at 4.4% annually on average between 1998 and 2020

compared to 5.5% for business travel which is set be to more competitive, driving the

tourism market and reflecting the slower maturity in the business market35

. The loss of

events to destinations outside the UK appears to have stemmed in 2005, with only 6.5%

of corporates holding events overseas (down from 8% in the prior year)36

.

Barcelona reported a 64% increase in convention and incentive business annually from

1993 to 1996 after promoting the city as an excellent venue for international conferences

(after hosting the Olympic Games, a legacy effect that is hoped will follow the London

Games). The proposed London International Conference Centre may do well in this

capacity to keep hotel demand high.

There will be a number of implications for serviced accommodation from this growth in

business travel:

The present and future demand for meeting facilities in London will lead to: hotelswith a larger number of hotel bedrooms; greater and more flexible conference and

seminar rooms; and apartments being provided within or as an adjunct to new

developments.

Transport connections are critical for business travellers and there will be a tendency

to stay near to transport connections including rail links to airports (for instance near

to Victoria or Paddington) or near to international rail links (for instance St

Pancras/King s Cross). There has been a trend for the development of hotels near to

airports (for instance, a new 155 room Travelodge at London City Airport was

completed in 2005) which is likely to continue.37

3.6 Demand for serviced accommodation by visitors

Figure 3.6 below shows the proportion of international visitor nights in the UK spent in

serviced accommodation by type of international visitor. Business visitors to the UK are

most likely to use a hotel or other serviced accommodation38

(with over 50% of business

visitors staying in serviced accommodation). International visitors to the UK for the

purposes of studying or visiting family and friends are least likely to use a hotel for their

trip with less than 5% of all visitors for these purposes using hotels.

33 Grant Thornton, International Convention Centre Market and Funding Assessment, Final Report, April 200534 British Association of Conference Destinations, British Conference Market Trends Survey35 The Department of the E nvironment, Transport and the Regions, A ir Traffic Forecasts for the United Kingdom2000, June 200036British Association of Conference Destinations, British Conference Market Trends Survey37Visit London, London Hotel Development Monitor December/ January 2006, 2006.38Serviced accommodation includes hotels, bed and breakfast establishments and guesthouses.


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21

A similar breakdown is not available for visitors to London, although proportions are

likely to be higher with the total proportion of visitor nights in a hotel in London in 2004

(at 30.5%) greater than that for the UK as a whole (23.7%).39

Figure 3.6: International visitors to the UK staying in a hotel or B&B

0%

10%

20%

30%

40%

50%

60%

Holiday Business Visit ing Relativesor Friends

Study Other Total

2001 2004

Proportion visitor nights in hotel

Source: International Passenger Survey

Longer-term trends for international visitors show a decline in the propensity to use a

hotel, which is linked to an increase in international tourists visiting London to visit

family and friends. Between 1995 and 2004 the proportion of international visitors

staying in a hotel declined from 39.8% in 1995 to 30.6% in 2004.

Conversely, UK domestic visitors to London are increasingly likely to stay in a hotel.

Over the period 2001 to 2004 the portion of trips spent in a hotel or B&B increased from

34% to 42%. This coincides with a reduction in trips to London to visit family and

friends and an increase in UK residents visiting London for a holiday.

39 IPS, Time series data, Various 1995 to 2004


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Figure 3.7: UK visitor resident visitors to London

Source: UKTS

Note: The categories of purposes of visit have changed between 2003 and 2004. The category "Visiting friends andrelatives" has beensplit to include anadditional category " Visitingfriendsandrelatives, mainly asaholiday". Therefore,it is possible that there is some overlap between this new category and visitors on "Holiday" (ie. some visitors thatpreviously classified their tripasa "holiday"prior to2004, wouldhaveusedthis newcategory (VFR, mainlyasa Holiday)if given this option). Therefore, direct comparisons between 2003 and 2004 may be misleading.

The overall trend has been a reduction in the propensity to stay in a hotel (withinternational visitors far outnumbering domestic visitors).

3.7 SummaryThe Mayor is committed to London s growth as a tourism destination, as a way to create

jobs and increase contribution to the capital s economy. However, London s visitor

economy is reliant on high-value overseas markets and on leisure tourism, although not to

the extent it was in previous decades. Visitors from overseas can be affected and for

longer periods than domestic tourists by global and domestic events and crises and

naturally by currency fluctuations. Greater concentration on growing business tourism,

broader overseas markets and the domestic market can help to alleviate such effects.

Visit London s increased marketing budgets should help to broaden its overseas markets.

0%

10%

20%

30%

40%

50%

60%

2001 2002 2003 2004

Holiday Business Relative/Friends Hotel/B&B

Proportion


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4 Trends in London hotel supply

In this section, we examine the existing data sources on the level of the hotel stock; the

type and location of accommodation; changes to the stock - additions and reductions; and

the development pipeline. We consider both the number of rooms and the type of rooms,and analyse published historical data and use information available from Visit London

and other relevant sources.

4.1 The number of existing hotel rooms in LondonWhile there is not one single database of serviced accommodation

40in London, there

have been two key stock estimates that have been undertaken.

Firstly, the 1991 Census estimated that there were 87,439 bedrooms in serviced

accommodation establishments in 1991. Unfortunately changes to the question asked

regarding accommodation in the 2001 Census has meant that this data does not provide

an updated estimate of the accommodation stock.

PricewaterhouseCoopers (PwC) in their August 2002 study on the stock of serviced

accommodation in London for the Greater London Authority41

, has escalated the 1991

stock using data from Visit London on hotel completions. Using this methodology, PwC

estimated that there were 107,428 hotel rooms in London in 2002. However, this method

has not captured reductions in the stock over time from change of use (often from small

hotels or bed and breakfast establishments to residential use) and may therefore over-

estimate the stock. The PwC report also estimated the stock of serviced accommodation

(and did not include non-serviced accommodation).

The second estimate of the serviced accommodation stock was undertaken by the London

Tourist Board (now Visit London). The Tourist Board conducted a comprehensive

40 Serviced accommodation includes hotels, B& B establishments and guesthouses. It does not include accommodationhousing refugees.41 Greater London A uthority/ PwC, Demand and Capacity for Hotels and Conference Centres in London, A ugust2002.

Key points

Visit London estimates that there were 93,248 serviced rooms in London in 2002.

Hotels rooms comprise around 75% of the total room stock, with bed and breakfast

establishments and other accommodation making up the remaining 25%.

Hotel completions have risen in recent years, with over 3,100 new rooms added per

annum in 2003 and 2004.

It is difficult to obtain robust estimates of reductions in hotel stock, although it

appears that there were around 440 hotel rooms lost each year over the past five

years. Around one-third of these are currently lost in the borough of Westminster.


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survey of serviced accommodation in London in 2002. This survey used the Visit

London database, information from Boroughs and information from other various

sources: (Yellow Pages, AA, RAC, Martin Information, PFK). This data was collated to

estimate the stock of serviced and non-serviced accommodation in London. The survey

suggested that in 2002 there were 93,248 bedrooms for serviced accommodation in

London and 28,745 bedrooms providing non-serviced accommodation.

Table 4.1: Estimates of serviced accommodation

Year Estimate Source

1981 88,100 1981 Census

1988 72,239 ETB/LTB Accommodation Services

1991 87,439 1991 Census

2002 93,248 London Tourist Board (now Visit London)

2002 107,428 PricewaterhouseCoopers estimate (2002 report)

Note: Census data between 1981 and 1991 cannot be compared directly as it is on an inconsistent basis.

For this report, we have based our estimates on the 2002 London Tourist Board study,

being the most up-to-date survey of the stock of serviced accommodation in London.

This estimate of hotel stock for 2002 can be extrapolated backwards to derive a time

series estimate of hotel stock (ie. serviced accommodation) by adjusting for new stock

and losses of hotel stock (Table 4.2). According to the estimates, serviced

accommodation has grown modestly over the period from 1991 to 2002, with annual

growth averaging just over 1% per annum.

The London Hotel Development Monitor produced by Visit London estimates all new

hotels opened in London with 20 bedrooms or more. The Monitor provides the basis for

the estimates of new stock below, and suggests that between 1991 and 2002 21,000 new

rooms (gross) were added to London's room stock (c1,750 bedrooms pa). The London-

New York Study (Corporation of London et al 2000) is broadly consistent with this

estimate, suggesting that between 1989 and 1998 approximately 16,040 new bedrooms

(gross) had been provided (1,800 pa).

Loss of stock estimates (ie. reductions in the number of hotel rooms due to demolition or

closure) are based on information received from Westminster City Council, and the basis

for the estimate is outlined in more detail below (cf. Stock Reductions). Stock losses

were not included in the 2002 PwC report.


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Table 4.2: Estimated stock of serviced accommodation in London, 1991 to 2002

Hotel Stock (end periodestimate)

New Stock (Visit London)(1) Loss of stock (2)

1991 75,686 1,365 100

1992 77,634 2,048 100

1993 78,328 881 187

1994 78,389 76 15

1995 78,541 347 195

1996 79,212 725 54

1997 80,405 1,279 86

1998 83,179 2,839 65

1999 86,323 3,374 2302000 89,863 3,651 111

2001 91,270 1,644 237

2002 93,248 2,357 379Source: Visit London, Visit London Development Monitor, Westminster City CouncilNotes: (1) Visit London data for new stock for 2002 have been updated to reflect newly published data from WestminsterCity Council (Annual Monitoring Report 2004-05).(2) Loss of stock between 2002 and 2004 published by Westminster City Council (the largest provider ofaccommodation). This data has been averaged to arrive at a rough loss estimates for other years. Data on losses arenot published by other Boroughs, although it is acknowledged that there are losses to the hotel stock over time.

Trends in accommodation over time are illustrated in Figure 4.1 below. Solid rises in

hotel stock between 1998 and 2001 saw a period of strong growth in stock. As can be

seen, the estimated loss of stock (the basis for this estimate is provided below) is small incomparison with the overall stock of serviced accommodation.

Figure 4.1: Hotel stock London, 1991 to 2002

(20,000)

0

20,000

40,000

60,000

80,000

100,000

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Hotel Stock New Stock Loss of stock

Bedrooms

Source: Visit London, Visit London Development Monitor, Westminster City Council

4.2 Type of hotels and accommodation

There is a range of accommodation provided in London to suit almost all visitor needs .

The only exception is the apparent lack of accessible accommodation for disabled

visitors. Visit London (Table 4.3) estimates that serviced accommodation (including


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hotels, bed & breakfast establishments and guesthouses) accounts for around 76% of all

bedrooms (with the remainder comprising self-catering, hostels and university

accommodation). Classifications for 5 star, 4 star etc are those awarded by national

inspection schemes (eg AA and Visit Britain) while other categories are defined by Visit

London.

Table 4.3: Accommodation by type in London (2002)

Type Establishments Rooms Bedspace

5 Star Hotels 54 9,274 18,005

4 Star Hotels 146 32,939 65,064

3 Star Hotels 86 14,071 26,748

2 Star Hotels 29 1,795 3,822

Hotels with no rating 18 3,028 6,276

Inn & Pub Accommodation 44 776 1,597

Guest Houses & B&Bs 1,058 22,896 46,038

Branded Services Hotels 73 8,469 18,451

Total Serviced 1,508 93,248 186,001

Self-Catering Holiday Homes 145 3,257 9,739

Serviced Apartments 64 2,944 8,350

Holiday Parks 6 833 2,517

University/College 46 16,396 18,332

Youth Group 83 5,315 10,598

Total Non-Serviced 344 28,745 49,536GRAND TOTAL 1,852 121,993 235,537

Source: Visit London

More recent data is available from Visit Britain (Table 4.4). This information

summarises Visit Britain's known stock of establishments and bedspaces in 2004. The

key difference between this data and that outlined above is a lower number of Bed and

Breakfast and Guesthouse establishments and bedspaces. This is likely to be due to the

more limited nature of the Visit Britain survey.


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Table 4.4: Accommodation by type in London, 2004

Number Bedspaces

Bed & Breakfast 553 18,610

Guesthouse 57 1,438

Hotel 529 142,875

Country House Hotel 8 1,004

Motor Lodge/Motel 34 3,514

Townhouse Hotel 55 4,929

Inn 25 1,115

Youth and Group* 131 30,403

Total 1,392 203,888

Source: VisitBritainNote: The figures are for 'known stock' - i.e those establishments which agree to abide by the NationalTourist Boards Code of Conduct, those which have ever agreed to abide by it and those which haveotherwise become known to VisitBritain. *Youth & Group includes campus accommodation.

4.3 Completions over 2003-2005 periodThere are two key sources of data on completions, with both the GLA and Visit London

collecting data on hotel room completions (Table 4.5). The data differs slightly due to a

difference in the timing of the data collected and slightly different definitions used (the

GLA includes all establishments with over 10 rooms, whilst Visit London includes all

establishments with more than 20 rooms).

Table 4.5: Number of hotel room completions

Year Visit London GLA

1998 2,839 3,255

1999 3,374 2,559

2000 3,651 3,661

2001 1,644 3,258

2002 2,357 2,504

2003 3,155 3,978

2004 3,134 1,444

2005 2,177 N/A

Source: Visit London, GLANote: GLA data for 2004 is only part year.

According to the average of the GLA database and Visit London figures42

, new room

stock has averaged approximately 3,000 new rooms over the past five years (1999-2004),

above the 2002 PwC benchmark of 2,400 rooms per annum. However, it does not take

into account any stock reductions (eg smaller hotels and guest houses turning into

residential use). We estimate that stock reductions are likely to be in the region of 500 per

annum which means that netnew stock is therefore 2,500 over the past five years.

There has been an increase in the geographical spread of hotel stock across London as the

number of hotel completions outside the central sub-region has exceeded those in the

central sub-region. This dispersal is explored in greater detailed in Section 4.5.

42 Excluding the GLA data for 2004 which is currently only for part of the year.


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4.4 Loss to hotel stockIn looking at changes to the total stock, it is necessary to consider the number of closures

of hotels and other accommodation establishments. Reductions to the hotel stock appear

to have not been estimated in previous studies on hotel demand and supply (including the

2002 PwC study). No doubt this has been due to a lack of information readily available

on stock losses, and data problems continue to be an issue.

Information was obtained from the GLA London Development Database which contains

an indication of the level of hotel stock by borough over the 1991 to 2005 period, see

table below. The data provided is most complete for the 2004 and 2005 years - for these

years the data covers all hotel losses for all properties which are bigger than 10 bedrooms.

In 2004, there was a loss of 1,000 rooms in London, although 390 rooms were accounted

for by the loss of one hotel (ie the Thistle hotel in Lancaster Gate Westminster whichwas sold to a developer for conversion to residential). Over the 1995-2003 period, the

data is partial in the sense that it does not cover losses of rooms to residential use where

the number of residential units created is less than 10 units.

Table 4.6: Loss of hotel stock

Year GLA database

1995 195

1996 54

1997 86

1998 65

1999 2302000 111

2001 237

2002 379

2003 109

2004 1007

2005 476

5 year average 442

10 year average 275

Source: GLA database

Information was then sought from each of the London boroughs to test robustness of the

data. Data was obtained from Barking, Camden, Hounslow, Redbridge and Westminster.

The discrepancies between the different sources were most significant for Westminster,

largely because this borough already has the most number of hotels. The following are the

key findings from our details analysis of the Westminster data:

On an annual basis it was not possible to reconcile the two data series. The reason is

because the two sources apparently measure losses at different stages of the planning

process. The GLA database measure the losses at the time of permission whereas the

borough data covers losses when they are actually completed. For example, in 2001,the GLA database identifies 151 rooms lost compared to 33 identified by

Westminster. While in 2002, the situation is reversed, with Westminster identifying


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154 losses compared to the GLA database of 82 losses. Similar large differences

occur in every other year over the 1991 to 2005 period43

.

While the data on an annual basis is difficult to reconcile the overall aggregate total

is more comparable. According to the GLA database there were 933 bedroom lost in

Westminster over the 1991-2005 period which is slightly less than the number

reported by the borough of 1,068. The GLA database is smaller because it excludes

losses of hotels where the number of bedrooms is less than 10.

The losses experienced by Westminster tend to be smaller (ie around 20-30 rooms) and

lower quality hotels. They also tend to be located outside of the Central Activities Zone

(CAZ)44

. Loss of hotel rooms outside this area is of less concern as the strategy of the

Unitary Development Plan is focused on encouraging new hotel developments in the

CAZ as well as maintaining the existing stock (ie reduce loss) in the CAZ. There are tworeasons for these losses. Firstly, developers are turning hotels into residential use and,

secondly, constructing higher quality hotels which typically have less rooms than than

before.

On the basis of all of this information, we have broadly estimated that there are

potentially around 500 rooms lost from the hotel stock each year. This is based on a 5

year moving average figure of 440 with a 10% additional allowance for loss which is not

covered by the GLA database45

. This figure will fluctuate with changes in planning and

broader policies (for instance those related to housing homeless, which is discussed later

in the report).

Indeed, there is a great deal of uncertainty about the level of loss of hotels rooms. Not

only does the level of loss fluctuates considerably from year to year but different sources

contain different estimates. The GLA might consider whether improvements can be made

to data collection to ensure that there is a consistent measure of loss across different

boroughs.

4.5 Development pipeline - estimates of future completionsThe GLA London Development Database and the Visit London pipeline provide

estimates of future hotel completions.

The GLA London Development Database estimates that there were 6,764 rooms under

construction in 2004 and 9,286 rooms approved but not yet built. The LondonDevelopment Monitor produced by Visit London summarises expected hotel

developments in London and includes all new hotels with more than 20 rooms. The

expected pipeline is summarised in Table 4.7 below.

43 Another source confuses the picture even more. The Westminster annual monitoring report showed total rooms lost was613 in 2002, 370 in 2003 and 495 in 2004. This is again different from thetwo sources above, with thereason cited

beingthat not all of theserooms are lost as the figures includeexistinghotels which are destroyed and then replaced withnewer more modern hotels.44 The Central Activities Zone covers around one-third of the central part of the borough of Westminster.45 This 10% figure is very broadly on theexperience of Westminster. In particular thenumber of hotel losses recorded byWestminster at 1,068 over the 1991-2006 period is around 14% higher than the number recorded in the GLAdatabase of 933.


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Table 4.7: Development pipeline

Year Visit London

2006 1,610

2007 3,143

2008 2,501

2009 1,866

2010 1,750

2011 2,427

Source: Visit London, GLA

The information collected on the supply baseline and development pipeline issummarised in Table 4.8 below.

Table 4.8: Supply baseline and projections

Sources: Visit London 2002, Westminster City Council 2005, Grant Thornton estimates.

4.6 Trends in geographyThe Central London sub-region accounted for around 77% of hotel bedrooms in 1996,

and this share has declined to 69% in 2005. Over the 2000- 2005 period, there have been

5,000 new rooms developed in the central sub-region, despite suggested pressures on site

and land availability in the central boroughs. This compares to around 3,600 and 2,700

new rooms in the Eastern and Western sub-region respectively over the same period.

While more rooms are being built in the central sub-region, the share is declining as the

5,000 new rooms built in the central sub-region account for only 41% of the total built

over the 2000-2005 period.

Year Room supply Stock Additionsand Pipeline

Stock Reductions % AnnualGrowth

1991 75,686 1,365 100

1992 77,634 2,048 100 2.6%

1993 78,328 881 187 0.9%

1994 78,389 76 15 0.1%

1995 78,541 347 195 0.2%

1996 79,212 725 54 0.9%1997 80,405 1,279 86 1.5%

1998 83,179 2,839 65 3.5%

1999 86,323 3,374 230 3.8%

2000 89,863 3,651 111 4.1%

2001 91,270 1,644 237 1.6%

2002 93,248 2,357 379 2.2%

2003 96,294 3,155 109 3.3%

2004 98,421 3,134 1,007 2.2%

2005 100,122 2,177 476 1.7%

2006 101,232 1,610 500 1.1%

2007 103,875 3,143 500 2.6%

2008 105,876 2,501 500 1.9%


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This trend is expected to continue with the share of total hotel room stock in central

London reducing to around 67% by 2008. New hotel stock development in the central

region over the 2006-2010 period is expected to be around 5,500 rooms, some 51% of the

total 10,900 new rooms predicted by the Visit London Hotel Development Monitor.

Given that this central sub-region was responsible for around 77% of the capital s bed

stock in 1996, this change is significant. With the continued development in Docklands,

increasing hotel bedrooms in the west and eastern boroughs is a trend that is likely to

continue.

Such activity will encourage GLA, LDA and Visit London s overall objectives for

dispersal or spreading the benefits of tourism, but the polarisation between the central

sub-region which will retain much of London s four/ five star stock and the rest of the

capital, with its two star and budget hotels, will continue.

As well as the dispersal from the central sub-region to the other sub-regions there is also

dispersal happening within the central sub-region itself. Hotel developments are springing

up around the outer part of the central area. For example, the number of rooms expected

to be development in Lambeth, Southwark and Wandsworth over the next five years are

currently expected to be greater than Westminster.

The eastern region comprised 6% of the hotel stock in 1996 and this share is expected to

grow to 12% by 2008 with strong recent activity expected to continue. In the west of

London, the stock of hotels made up 12% of the capital's hotels and this share is

anticipated to rise to 15% by 2008. These broad trends are illustrated in Figure 4.2

below.

Figure 4.2: Hotel stock by region

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1996 1998 2000 2002 2004 2006 2008

West

South

North

East

Central

% Share total bedrooms

Source: Visit London, London Hotel Development Monitor

Trends within the sub-regions are described below and are summarised in Table 4.9 andFigure 4.3.


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CentralWestminster leads the supply of serviced accommodation with its share of London's stock

estimated at 38.7% in 2005. Camden and Kensington and Chelsea are next with 13.9%

and 12.0% of the stock respectively. Overall the central sub-region (ie Camden,

Islington, Kensington & Chelsea, Lambeth, Southwark, Wandsworth and Westminster) is

estimated to hold 69% of London's hotel stock in 2005.

Looking forward, Lambeth is expected to lead increases in stock with almost 1,800 new

rooms planned over the 2006-10 period. This will raise Lambeth's share of the total

London stock from 1.3% in 2005 to 2.7% by 2010. Substantial increases are also

expected for Southwark and Wandsworth suggesting a dispersal of accommodation

within the sub-region, as well as across Greater London.

EastNewham has led the expansion of stock in the east (as well as across the capital), with

2,168 rooms built in the period from 2001 to 2005 - more than any other Borough.

Newham now comprises 2.0% of the capital's stock. Strong growth is expected for the

Tower Hamlets and Greenwich over the period to 2010. This will raise the share of

bedrooms in these boroughs to 2.8% and 1.6% of London's total respectively. The east

has been the star performer, with the total stock growing by around 52% over the 2000-5

period. In 2005 the east comprised 10.2% of the capital's stock and this share is expected

to grow further to 12% by the end of the decade.

WestOutside of the central zone, other areas with considerable stock include Hillingdon and

Hammersmith and Fulham in the west with 7.3% and 3.5% of London's total stock of

serviced bedrooms in 2005. Over the next five years, the key growth areas are expected

to by Brent, Hillingdon and Hounslow. The growth in Brent will more than double the

current estimated stock, while growth in Hounslow will build on healthy growth to date.

NorthHotel stock is the smallest in the north with just 1.9% of the total stock. There has been

modest growth of just 400 new bedrooms over the period to 2005, and at this stage, no

new developments are planned for the area.

South

Croydon has the largest stock of serviced accommodation in the south accounting for1.7% of the total stock in London and has had the greatest level of growth over the period

to 2005. Over the 2005-2010 period modest growth of 521 new bedrooms are currently

in the pipeline.

These trends are summarised in Figure 4.3 below.


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Figure 4.3: Changes in hotel stock by region

0 500 1,000 1,500 2,000 2,500 3,000 3,500

CamdenIslington

Kensington & ChelseaLambeth

SouthwarkWandsworth

WestminsterBarking & Dagenham

BexleyCity

GreenwichHackneyHavering

LewishamNewham

RedbridgeTower Hamlets

BarnetEnfield

HaringeyWaltham Forest

BromleyCroydonKingston

MertonRichmond

SuttonBrent

EalingHammersmith &

HarrowHillingdon

Hounslow

Change 2001 to 2005

Change 2006 to 2010

West

North

South

East

Central

Source: Visit London, London Hotel Development Monitor


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A full summary of the hotel stock by region and changes over time is provided in table

4.9 below.

Table 4.9: Hotel stock by region

EstimatedStock 2005

% Total Supply New Stock 2001to 2005

New stock inpipeline, 2006 to

2010

CENTRALCamden 13,875 14% 623 405Islington 1,788 2% 417 407Kensington & Chelsea 12,043 12% 618 24Lambeth 1,277 1% 489 1,675Southwark 1,414 1% 320 1,126

Wandsworth 302 0% 0 1,220Westminster 38,785 39% 2,588 653Total Central 69,483 69% 5,055 5,510

EASTBarking & Dagenham 219 0% 0 0Bexley 294 0% 0 5City 2,592 3% 695 440Greenwich 1,118 1% 151 639Hackney 563 1% 175 184Havering 335 0% 60 78Lewisham 287 0% 0 0Newham 2,022 2% 1,930 201

Redbridge 544 1% 76 123Tower Hamlets 2,209 2% 504 927Total East 10,183 10% 3,593 2,596

NORTHBarnet 1,081 1% 116 0Enfield 265 0% 179 0Haringey 150 0% 0 0Waltham Forest 368 0% 102 0Total North 1,863 2% 397 0

SOUTHBromley 333 0% 24 10Croydon 1,637 2% 338 84Kingston 345 0% 180 53Merton 402 0% 143 0Richmond 1,119 1% 77 149Sutton 264 0% 0 259Total South 4,101 4% 761 556WESTBrent 747 1% 314 905Ealing 1,444 1% 298 22Hammersmith & Fulham 3,467 3% 382 18Harrow 507 1% 134 0Hillingdon 7,358 7% 819 665Hounslow 968 1% 713 597Total West 14,492 14% 2,660 2,208

GRAND TOTAL 100,122 100% 12,467 10,870Source: Visit London, London Hotel Development MonitorNote: Sub regions are based on the existing London Plan sub-regions.


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