Rocco Forte came to Manchester to tell the staff at the that it was for sale. The personal touch is, after all, what five-star luxury is all about.
What they thought of his decision to sell the 165-bed, five-star Lowry Hotel is not recorded. Given that the deal could mean handing over the management contract to somebody else, they might not have been delighted.
The Lowry’s £40m price tag makes it the chocolate on the pillow of Manchester’s massive and increasingly valuable hotel sector.
The revenue generated by Manchester hotel beds is – compared to other UK regional cities – remarkably good. The latest figures from PwC show that the average daily room rate rose by 3.3% between January 2013 and January 2014. Revenue per available room (RevPAR), a more important measure in many ways, rose even faster, at 7.7%. Occupancy is up, too.
And because Manchester hotel beds pay well, developers and operators have been piling into the city with a vengeance for the past 10 years.
Data from Visit Manchester suggests the number of hotel rooms in the city centre has risen from 4,990 in 2006 to 7,860 today – a jump of 58%.
Cut the numbers another way – this time according to data source AM:PM – and Manchester has 13,376 rooms in a total of 107 hotels. With 2,433 city centre rooms due to enter the market in the next two years, and almost 7,500 additional rooms at various stages of planning and with varying degrees of likelihood of proceeding, the sector is in the midst of a massive expansion. Another 50% leap could easily be on the cards.
But can the party go on much longer? According to some observers it’s difficult to imagine this rate of growth being sustained. The 10-year growth spurt in Manchester hotel development could take a three- or four-year pause, they say.
Chris Moore, director at JLL, applauds a decade of growth but adds: “About a third of the city’s stock is now budget space, and the city centre has reached saturation point. I don’t think that is going to be a huge growth area. And we’re adding another 1,800 rooms in deliverable schemes by the end of 2015 – that’s a very high growth rate for the next two years. There will still be opportunities for new operators bringing something new, and for infill, but we have a pretty heavy addition to supply in progress.
“Once we complete the current pipeline, it’s going to be all about filling the gaps for the next three to five years.”
Sometime after 2017, Moore reckons, Manchester’s inexorable growth as a business and cultural location will be ready to justify another phase of hotel development.
The sense that the market has reached a plateau, especially in some sectors, is widely shared.
Ian Marsden, head of PwC’s property team in the North, warns: “There are also still pockets of oversupply in the city with budget chains adding to hoteliers’ pricing pressures. And for the consumer, new supply and new brands means more choice and more price competition.”
ES Group’s Hugh Anderson says: “Careful management will be required to ensure that the balance in the market is maintained.”
However, Anderson thinks there are opportunities for high-end hotels. “Despite the prospect of a number of new entrants to the market and development pipeline, there are still a number of outstanding requirements for high-end hotels. Indeed Manchester is seen by some hotel operators and investors as one of the few provincial locations that can support a new five-star hotel.
Tom Cunningham, associate director at Savills, also sees scope for growth, thanks to the arrival in Manchester of new hotel brands. “Thanks to the constant development of styles/brands, we would expect continuing growth. The supply pipeline is really only filling the void created over the past five years and the future of the market is determined by the continued growth of Manchester.”
Marc Finney, director of hotels at Colliers International, thinks a few chic brands wouldn’t go amiss. “Manchester is well represented by branded hotel chains and most of the major international chains are in the city. The offer could, however, be considered a little staid compared with that of other major European cities and some of its UK rivals,” he says.
Today, nobody is prepared to call the top of the market. Paul Simpson, managing director at Visit Manchester, captures the mood. He says: “For the year ending December 2013 we reported annual average occupancy rates of 77% – on par with pre-recession 2006 figures despite a 58% growth in the number of rooms from 2006-13 – so it is important that as a city, we continue to meet this level of demand head on and new hotels are essential for that.”
Manchester’s hotel boom isn’t quite over yet.
Changing gloved hands: the Lowry Hotel
Christie & Co says it is “reviewing” multiple bids for the Lowry Hotel. Rocco Forte will soon decide which to explore further.
The £40m asking price is regarded as the top end of expectations. The hotel has been on the market before, albeit quietly, and did not sell at this price. Rocco Forte Hotels hopes to overcome resistance by offering the management contract as well as the building, if that’s what the buyer needs.
The hotel was first placed on the market in 2007 with a £50m price tag. It was taken off the market last July and re-appeared at £40m.
Hugh Anderson, the partner who heads ES Group’s Manchester Hotels team, says: “The Lowry has previously been marketed with a higher price. Perhaps its Salford location may for many be regarded as being “off pitch”. The hotel, which opened in 2001, hasChanging gloved hands: the Lowry Hotel
