UK hotels record ADR growth of 23 per cent in H1 2023

Hotels in London and the regions recorded a 23 per cent growth in average daily rate (ADR) during the first half of 2023 compared with the same period in 2019, research from Knight Frank has found.

The recovery was driven by an influx of overseas visitors, robust seasonal demand and high inflation.

In the first six months of the year, luxury hotels in London achieved ADR growth of 38 per cent  compared with 2019, with regional golf & spa hotels recording a 40 per cent increase in the same period on the back of strong leisure demand.

This comes as London hotels achieved an occupancy rate of 82 per cent in June 2023, up 3.2 per cent year-on-year, while hotels outside the capital saw occupancy rise 4 per cent to 81 per cent.

Positively, despite rising costs, the strong revenue growth has seen resilience in terms of departmental operating income, with London recording a first half growth of 37 per cent compared to H1 2022, and the regions seeing 17 per cent growth over the same period.

UK hotels across both London and the regions, are recording departmental operating income ahead of H1 2019, up by 7 per cent and 12 per cent respectively.

Both London and the wider UK made a full recovery in GOPPAR versus H1 2019, with the regions ahead by 3 per cent and London recording a 2 per cent uplift. London achieved H1 2023 GOPPAR of £82, whilst regional UK secured a GOPPAR of £29.

What they said

Karen Callahan, head of hotel valuation & partner at Knight Frank said: “London’s performance during the first half of the year has seen ADR growth continue to trend upwards and along with much improved occupancy levels, this strong occupational performance is supporting profit margins and GOPPAR growth. This is a welcome counterbalance to the softening of yields that has resulted from the increasing cost of debt, and with hotels acting as an inflation hedge, investor appetite for the sector remains strong.”

Philippa Goldstein, senior analyst, hotels and leisure at Knight Frank added: “Given these trading results, it is not surprising that inflation levels, whilst on a downward trajectory, continue to be elevated by services and in particular hotels and travel spend. Whilst the second half of 2023 will see ADR growth more stimulated by demand than inflationary pressures, the pace of ADR growth is likely to remain strong over the next quarter.

London is set to benefit from the continued uplift in overseas arrivals, whilst revenue growth for the regions will come from a well-balanced mix of demand drivers and the focus on channelling a high-yielding segmentation mix.”