Major players increase activity but market remains unstable

Hilton recently announced it intends to open more than 20 hotels in the UK between now and 2014, a strong vote of confidence in the UK market. Indeed, as market analysts anticipate that the market’s period of decline is now coming to an end, will more hoteliers follow in Hilton’s footsteps and invest in increasing their share of the UK market?

Murmurings from a couple of leading players, particularly those at the budget end of the market, suggest the answer to this is yes. Premier Inn, accounting for approximately 6% of the UK hotel market, plans to grow by nearly 40% by 2016.

Hotels, however, are a fragmented market that is prone to demand fluctuation, as non-essential travel can be easily sacrificed if confidence or business conditions deteriorate. Securing new development finance is therefore a significant issue. The CPA/Barbour ABI hotels index rose by 1% month-on-month in January to 75 but remained 8% lower compared with a year ago. An increase in the development activity of the largest hoteliers is failing to compensate for a lower level elsewhere.

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