The average price of a hotel room has reached record highs as hoteliers seek to pass on soaring costs to guests.
According to figures from BNP Paribas Real Estate, the average daily room rate climbed to £122.86 in the second quarter of this year, a 70% increase on the first quarter, while revenue per available room has increased to an all-time high of £98.
Rebecca Shafran, senior associate director of alternative markets research at BNP PRE said: “The latest ADR growth figures are a reflection of the current confidence of hotel operators to raise their rates in light of high demand levels and in spite of the challenging economic backdrop.”
Shafran added: “However, with the Office for Budget Responsibility forecasting a 2.2% per person reduction in real household disposable incomes in 2022-23 – the biggest fall in living standards in any single financial year since ONS records began – we do anticipate some downward rate pressure during Q4.”
However, transactions have slowed down amid increased economic uncertainty and the rising cost of capital in Q2. But in spite of this, and largely as a result of the £420m purchase of a majority interest in Point A hotels by Tristan Capital Partners, investment volumes totalled £1.2bn, making it the strongest Q2 since £1.9bn was recorded in 2018.
Richard Talbot-Williams, senior director of hotels at BNP PRE said: “Increased interest rates have led to a reduction of transactional market pace with hotel deals agreed while rates were lower currently taking longer in due diligence as pricing is reanalysed by buyers.
“The UK still has a substantial hotel development pipeline, and while in some markets, new openings can be expected to dampen market RevPAR initially, the newest product with the strongest ESG credentials is anticipated to remain relatively more attractive to the majority of investors.”
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