The latest data on the Manchester hotel sector shows both revenue per room and occupancy rates sliding, just a little, for the first time after 5 years of steady growth. Is this a turning point in the city’s hotel sector? Will all the 6,000 city centre beds now in the hotel development pipeline get built, or – as some experts predict – will some marginal hotel sites be abandoned, or lost to office or residential use?
Manchester’s hotel development sector checked into boom-time activity levels in 2013 and it hasn’t checked out yet. This growth is underpinned by an increasingly busy weekday business customers base and a thriving weekend tourist economy.
Greater Manchester hotel occupancy levels rose from 2016 to 2017, despite the Arena bombing, matching the previous record levels of 80% set in 2015, according to data supplied by STR (via Marking Manchester).
Even so, there are signs of change. For the first time in 5 years the Manchester hotel sector is showing signs of (whisper the words) not actually growing. Marketing Manchester/STR data for the first half of 2018 showed a 1% slide in occupancy, and £1 off revenue per room, after a strong June 2018 rebound.
Data from other, fractionally earlier, sources show a more dramatic shift. Occupancy rates fell 2.8% in May, according to Hotstats, which said revenue per room slipped back by 4.8% to £80.71. Combine this slide in revenue with rising costs and Manchester hotels suffered an acute drop in profitability, down 12.7% in May, taking profit per room to £44.56.
This cannot be blamed on nationwide trends – Leeds, for instance, was sharply up – and you need only share a few words with Manchester’s hotel general managers to understand this is not a statistical blip.
“The market has maybe plateaued,” Jenics Director Jeremy Collins said “But the city has had to take on board a lot of new stock and Manchester’s had a very good run for the last 4-5 years. This isn’t negative, it’s a pause. Given that Manchester’s economy is still growing and diversifying, on a good day, I’d say the hotel sector looked rosy, and on a bad day, I’d say it was stable.”
Some Hotels Will Never Get Built
So nothing very much changes and the Manchester hotel sector rolls onwards? Not quite. A large wave of new hotel development is about to hit the city. Visit Manchester say that at the close of 2017 there were more than 9,350 rooms in Manchester city centre and by the end of 2018 this room count is expected to reach 10,540 rooms. In Manchester city centre, 3,915 rooms are due to be added that would increase the current supply by 42%. That means 1,053 more rooms in 2018. Of the roughly 10,540 rooms in the city centre, nearly 7,000 are in the 3-4 star category and it is this central rump that might be vulnerable. It’s the mid-market (3 star) that is feeling the pressure. Corporate mid-range is the vulnerable sector.
“Some of the hotels in the mixed-use residential led schemes are just not going to happen”, Jenics Jeremy Collins said “Perhaps they put them in to help the planning process along, but clearly the locations will never work. Those plots will become residential again.”
Older hotel sites will drop out of the market. The pressure of new entrants will force older or poorly located hotels off the map.
A Softer Market, But By No Means a Bad Market
If barely a quarter of planned hotels ever make it to opening day, then the city’s hotel sector will soon recover a Ritzy feel. In the meantime new investment from international operators shows they regard Manchester as a good long term bet.
Earlier this summer Property Alliance Group secured full planning consent for a new 17 storey hotel at 55 Portland St – a 4 star 329 bed hotel by Dalata Hotel Group – completion by 2021.
Japanese hotelier Tokyo Inn has confirmed that it has chosen Manchester’s former Barclays Bank, Piccadilly for its UK debut.
The Hospitality Group, which already has 2 hotels on the European mainland, plans a 22 storey tower at 12-16 Piccadilly, the Grade II Listed bank building site.