London hotels kicked off 2017 with a strong start. The U.K. capital posted its highest ever Q1 revenue per available room (RevPAR) at GBP 101.50, which was the result of sharp growth in both occupancy and average daily rate (ADR).

Compared with Q1 2016, London recorded a 4.8% increase in occupancy to 76.1%, the market’s highest absolute occupancy level for Q1 since 2010. However, performance growth was mainly driven by ADR, which reached GBP 133.38, a 6.2% increase over Q1 2016.

STR analysts attribute London’s strong performance to a 7.7% spike in demand, likely driven by the devaluation of the British pound. Additionally, the Easter calendar shift from March 2016 to April 2017 moved more demand into Q1. Overall, demand was up 8.8% in March, and RevPAR rose 14.2%.

Performance increases were seen across all London submarkets, with the highest levels in the London West End, Earls Court/Kensington/Chelsea and South Central London. At the class level, performance growth was highest for the Upper Upscale (RevPAR: +14.0%) segment.

“After the struggles of early 2016, we’ve seen consistent performance growth in London,” said James Parsons, head of business development for STR. “What remains to be seen is how the market will react to an influx of new supply set to come online in the near future. London is clearly the development hotspot of Europe, with more than 13,000 rooms in the pipeline.”

STR's study for London's Q1 2017

London Q1 - source: STR

STR analysts see performance figures for U.K. areas excluding London as a sign that the rest of the country also is benefitting from the uptick in leisure visitors due to the pound devaluation. RevPAR for Regional U.K. was up 3.8% to GBP44.70 for Q1.

 

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