Of all the major global cities and transportation hubs, London was among the hardest hit by the COVID-19 pandemic, as lockdowns and other restrictions left the capital of the United Kingdom largely devoid of office workers and international travelers. But now the city is showing robust signs of recovery, despite the recent blip resulting from the omicron variant.
Speaking on a webinar titled “London hotel market: What’s next” hosted by business advisory HVS, Peter Anscomb, senior corporate director at Edwardian Hotels, said the recovery has started though not all pandemic-era restrictions have lifted. His company opened luxury hotel The Londoner in the city in 2021.
He noted the U.S. Centers for Disease Control & Prevention still has the U.K. listed at Level 4, signifying a “very high level of COVID-19.”
He said one urgent requirement is raising the confidence of event and corporate event planners that they can once again book London hotels.
Hoteliers in London are optimistic and see good signs developing, such as longer stays and little guest resistance to rate and cost increases.
“Last year was strong. Rooms were at 55% [occupancy compared with] 2019, F&B 65% and, amazingly, our spa, almost a small hotel in its own right, at 80%,” said Michael Izzo, the London-based chief financial officer of Corinthia Hotels, speaking of the company's London property.
“Week on week, day by day, we see demand coming back in, and I think the rebound will come in very quickly,” he said.
David Orr, CEO of Resident Hotels and co-founder and chairman of Urbanist Hotels, and Edwardian’s Anscomb sounded more of a cautious note.
Orr said forward bookings are occurring in a “semi-normal pattern.”
“We are ahead of 2019, but we should not over-read into that. We’ll all come to a conclusion as to our business-model strategy when the markets fully open up,” he said.
Anscomb said it is difficult to see a definite pattern in London trading. He said the rebound from the COVID-19 omicron variant — which had a significant impact on international travel demand — has been slower for his company than it was in the third quarter of 2021.
“It is now around 65% occupancy, maybe due to there being less pent-up demand and the lifting of occupancy caps at hotels. There is some pickup of international, but it is minor. We’re seeing 5% U.S. business, where it should be 30%,” he said.
Orr said shorter booking lead times persist, and there is an increase in leisure-based longer stays.
“The flight to quality is [focused on the need] for the stay to be meaningful for more than one person,” he said.
London Value
Russell Kett, chairman at HVS, said understanding hotel valuation in London remains problematic.
“Valuations per se are really only proven when there is a transaction, and there has been a dearth of transactions. The theoretical [differs] from the actual, held up largely as the long-term prospects are still there," he said.
“If you were to put a luxury hotel in London on the market, you will not only see queues of buyers around the block, but also across the ocean,” he added.
The focus for the London hotel market is on occupancy as workers and tourists slowly return, he said. Optimism also comes from average daily rate holding up.
“Yes, there are short-term issues, we cannot ignore those, but London is expected to return and restore,” he said.
The return of trading and the retention of economic fundamentals provides room for innovation, panelists said.
Carrie Wicks, managing director at Caw Ventures and former director of operations at Firmdale Hotels, said her new project consists of 16 separate houses on three streets on and adjacent to Denmark Street, just off Charing Cross Road where Soho meets Covent Garden. Caw Ventures also is due to open the 55-room Chateau Denmark in April.
She said the hotel has no central lobby or communal space, and staff are trained to be able to do everything.
“They can check you in and make you a cocktail, a one-stop contact,” she said.
Wicks added partnerships and revenue-sharing initiatives with local venues and businesses have community as their focus.
London Luxe
New luxury hotels are coming to the London market, including the Raffles London at the Old War Office and Admiralty Arch, which will join those opened during the pandemic, such as The Londoner.
Izzo said when Corinthia London opened in 2011, it created its own location, a development that will be replicated in other mini-markets in London.
Leicester Square, just around the corner from the Corinthia, is not a traditional spot for a luxury hotel, but it was the site chosen for The Londoner.
Anscomb said the new hotel supply adds pressure to “the already stressed labor market, and that is something that will have to be addressed.”
Another concern is inflation and price and cost increases.
“We’ve all forgotten to live with inflation. We’re not used to seeing price increases being so dramatic,” Kett said.
He added a granular approach is needed to understand how individual impacts affect operations.
“With utilities and staff costs, there are ways of mitigating these, certainly the latter. We’ll have to get used to the fact that every service we are used to will perhaps not always be offered in the future,” he added.
Orr said he is focused on what he can influence.
“That is bilateral relationships with guests, and team-building. Perhaps not enough has been said about what it means to close a restaurant or bar, certainly in terms of getting them reopened,” he said.
Izzo said intelligent thinking is required in terms of payroll.
“I think we are in version 43 of our operating budget for the next three years. It is quite a challenge, but I felt two weeks ago the lights came back on in London,” Chateau Denmark’s Wicks said.
Kett said he expects revenue per available room to rebound to pre-pandemic levels by 2023 for London’s “really good hotels."
“There will be some stragglers. Look at what the good hotels are doing and change accordingly,” he said.