Predictions for 2018 in hospitality: A blog by Know Hospitality Group CEO Steven Hesketh

It’s been an interesting 2017 in the hospitality industry and no more so interesting than in Liverpool and the North West. The Know Hospitality Group itself has seen exponential growth and is set on an upward trajectory in 2018, matching that trend seen in data from the latest hotel PWC report. It shows that the sector will continue to see positive factors to support growth at a lightly slower pace in 2018, than in 2017. Amongst a weaker pound, Brexit and changes in consumer spending, hotels are enjoying a strong top line growth despite unprecedented economic changes. The weaker pound since the Brexit vote last year has attracted overseas leisure tourists and provided an incentive for visitors to stay in the UK.

Growth and Performance

It’s great news that PwC report that the hotel industry is set to experience further growth in 2018, it’s certainly something I’ve been hearing amongst peers in the city. According to the report an anticipated growth of 2.4% RevPAR in expected from 2017’s figure of 492,000 rooms. Room supply outside of London is set to increase by a further +12,000 rooms offering an annual net supply growth of +2.4%. Excluding London, the UK has seen 52 months of consecutive growth according to STR Global (the hotel market data and benchmarking group). This has been driven by both occupancy and rate increases and remaining as a crucial benchmark for profitability for the hotel sector in many cities across the UK.

The UK is expected to maintain a high occupancy level at 76% although the growth between 2017 and 2018 is set to have slowed than the pace of that in 2016-2017. Economic factors are the main reason with inflation to increase slightly, consumer spending and real GDP projections to slow but still increase in 2018. Consumer spending is expected to be moderate during 2017 and 2018 as consumer uncertainty inflicts their spending power. However according to PWC this has been offset with higher borrowing in the short-term.

Despite the economic happenings hotels are maintaining a healthy top growth line, as many cities across the country have enjoyed further healthy trading and continued growth. Hotels outside London rely more on domestic than international demand, with conference, meetings and corporate demand acting as key drivers, but this year the weaker pound has helped to identify them as key visitor destinations away from London. This has meant that ADR (Average Daily Rate) forecast is to increase by 2.4% in 2017 and by another 2% in 2018. This would take ADR to £71 and £72 respectively.

Provincial hotel performance outside London has been closely linked to the strength within the UK and local economies. Many cities rely on UK domestic business over international business, although the weak pound has boosted other cities as key tourism destinations during 2017. Mainly the driver for cities outside of London includes conferences, meetings and a high corporate demand. A recent report by PWC analysing meetings and conference sector performance showed that the number of conferences and meetings held in the UK in 2016 (an estimated 1.45 million) rose 8% compared with the prior year.

10th anniversary of the European capital of culture 2008

Liverpool in particular has seen particular energetic growth, in 2018 the city is to welcome more than 700 new rooms, as supply continues to accelerate in cities across the UK through developers taking a keen interest in the hotel industry growth. The city is also set to see a new 5 star hotel in 2018, the Principal Liverpool, which includes 227 rooms with a pool and gym facilities.

There has been robust growth since the Capital of Culture in 2008. According to research the Liverpool European Capital of Culture programme had a total income of £130 million over six years, the highest of any European Capital of Culture at the time. It attracted 9.7 million additional visits to Liverpool, constituting 35% of all visits to the city in 2008. These visits generated an economic impact of £753.8 million (additional direct visitor spend) across Liverpool, Merseyside and the wider North West region. 2.6 million European and global visits were motivated by the Capital of Culture in 2008. 97% of these were first-time visits to the city. It generated an additional 1.14 million staying visitor nights in Liverpool hotels, 1.29 million in the rest of Merseyside and 1.7 million in the rest of the North West.

Media coverage of Liverpool’s cultural attractions doubled and for the first time in decades and positive stories outweighed negative ones focusing on social issues. Since then Liverpool has had widespread benefits to the city’s economy, employment rates and cultural sector. Liverpool’s image and identity has been transformed since 2008 and the city has now become a key tourist destination domestically and internationally.

As we look forward to 2018, the Know Hospitality Group is focusing on a strategic growth plan which includes new acquisitions, projects and further development of the Know Hospitality Academy. The New Year is sure to bring its challenges but we’re looking forward to tackling them head on – we hope you are too.