There has been a great deal of coverage around the trend of luxury lifestyle and experiential travel driving international tourism growth, attracting ever higher volumes and proportions of disposable income compared with luxury goods. It’s all about consumers trading up and paying a premium for experiences relating to natural landscapes, history, culture and localism.
We have had a look at the development of UK hotels over the last few years, along with the active pipeline to understand if new market supply reflects this trend and if it is indeed wide-reaching and sustained across the UK, or mainly confined to London.
There have certainly been some recent interesting developments in this space across Regional UK including Hilton’s acquisition of Graduate Hotels, the opening of the UK’s first Vignette Collection (The Halyard Liverpool, pictured) and a flurry of high-profile luxury hotels in Edinburgh. Independents (The Store Oxford, Parkgate Cardiff) and smaller lifestyle offerings (The Pig, House of Gods) have also continued to emerge and grow.
AR Hospitality Consulting is currently advising on a number of developments and repositioning projects that will further add to the luxury & upper upscale lifestyle sector including independents as well as brands such as Tribute Portfolio by Marriott, Tapestry by Hilton, Voco and Radisson Red.
Against a backdrop of new development severely constrained by cost inflation and higher interest rates, it is sometimes surprising that anything other than economy hotels are being delivered. However, “luxury lifestyle” is of course a feeling rather than a hard product and doesn’t necessarily need to involve exorbitant development costs; clever design, localism, investment in technology and a quirky operating model can deliver these experiences in smaller spaces than would once have been considered luxurious.
Our research, detailed in this article, has revealed that recent hotel openings across Regional UK have indeed been more heavily weighted towards higher quality lifestyle products than existing supply. Liverpool is a great example with a significant shift in the balance of supply away from midscale & economy products, towards luxury & upper upscale.
However, the pipeline of hotels under construction across Regional UK is once again weighted more towards the lower end of the market due to current viability and funding issues. We are certainly aware of a number of upscale and above lifestyle schemes that are on hold; however we are actively advising on a number of such schemes, and due to the appetite and resilience displayed by many developers, we believe the balance will be redressed as market conditions improve.
We also found that, whilst Liverpool’s increased proportion luxury & upper upscale hotels has been a factor in the city’s 24% ADR increase since 2019, the highest percentage increase has actually been driven by midscale & economy hotels. It seems likely that the strength of the destination and range of experiences on offer in Liverpool is the main driver, resulting in strong demand for all types of accommodation and ADR increases across the board. However, the increased choice of high-end lifestyle hotels will be a welcome addition for more discerning and affluent visitors.
Read on for further details…
What does the pattern of recent openings look like?
Based on our research, about 142 new hotels (with 50 or more bedrooms) have opened across the UK in the three years to September 2024. 42% of these openings are classed by CoStar as upscale or above, including 11% classed as luxury.
About 37% of those openings were in London, leaving 90 new hotels across the rest of the country. Interestingly 40% of these Regional UK hotel openings were upscale or above, including 9% luxury, suggesting a slightly lower weighting than in London, but closer than might be expected with a healthy string of high-quality openings across the country.
The majority of those upscale and above openings would be considered lifestyle products, including many from the multinational brand houses.
It is also worth noting that some existing hotels repositioned to this space in the last three years aren’t included in the new openings, for example The Address Glasgow and Radisson Red Liverpool.
What about the active pipeline?
According to CoStar there are 104 hotels (with 50 or more bedrooms) under construction across the UK, with the proportion of upscale and above at 42%, the same as for recent openings. Luxury hotels are very slightly lower than the recent openings at 10%.
A lower proportion of the active pipeline is in London (32%), however there are noticeably fewer upscale and above projects, comprising just 35% in Regional UK (including only one luxury hotel).
Note again that repositioning of existing hotels such as the Hoxton Edinburgh are not included in the “under construction” pipeline reported by CoStar.
How is the landscape shifting?
The graph below shows the composition of hotels, recent openings and active pipeline with 50 or more bedrooms in Regional UK (outside London) segmented by the lower and higher ends of the market.
It is apparent that new hotel openings over the last three years in Regional UK have been more weighted towards higher quality than the existing supply, indeed suggesting an influx of upscale and above lifestyle products.
However, the active pipeline leans back towards the value end of the market, in no small part due to construction cost increases, operating cost pressure and higher interest rates making it more difficult to make the development of higher end full-service hotels stack up.
Performance of the luxury & upper upscale sector
It is reasonable to assume that the higher proportion of upscale and above hotels entering the market in recent years has been a factor in the ADR growth most markets have experienced.
Liverpool is one market in particular that has seen a significant increase in higher end lifestyle hotels including The Halyard Liverpool Vignette Collection, The Municipal Hotel Liverpool MGallery and Radisson Red Liverpool; the city’s proportion of luxury & upper upscale hotel rooms increased to 20% of total supply in 2024 from 16% in 2019, with midscale & economy reducing from 40% to 33%.
Interestingly, overall Liverpool ADR according to CoStar increased by 24% to £94.82 from 2019 to 2023, however luxury & upper upscale ADR only increased by 19% to £116.83. The highest percentage increase in ADR (25% from 2019 to 2023) was driven by midscale & economy hotels, albeit a lower increase in cash terms.
It is possible that Liverpool’s rapid shift upwards in market supply quality has resulted in rate pressure on existing luxury & upper upscale hotels, stifling the overall ADR growth. Nevertheless, the change in balance is very positive for the city as one of the most sought-after lifestyle destinations in the UK.
Get in touch for further details.
Andrew Renouf – 07584 186520