London Hotels, implications for the wider leisure market:

Background:

• Staffed as we are by mean, northern accountants, price-gouging is anathema to Langton
• We prefer ELP but gouging is a feature subject to the following rule: you gouge when you can
• Ask RTN or any London hotelier where the market was in an upcycle until c-mid last year
• But now it’s not. It shouldn’t mean 7 lean years – but directionally, it does

Current evidence:

• WTB said last week that the London market was soft, STR has been making similar noises
• MLC said Thursday REVPAR Q1 was down ‘driven by lower occupancy and room rates in most regions, including the key gateway cities of New York, London and Singapore.’
• IHG said today ‘flat RevPAR in the UK reflects a solid performance in the provinces, offset by softer industry-wide trading in London, predominantly due to supply increases.’

Conclusion on hotels:

• Here’s a radical thought; there are too many beds in London
• No doubt demand will catch up – but when?

Implications for the wider leisure market:

• Oversupply will adversely impact London hoteliers’ margins but what about wider leisure?
• More hotel beds may not be bad news overall – in fact, it may be good news.
• Because (ask the airlines), when you have a costly asset, you need to fill it
• You may delay discounting to avoid customers comparing prices over the breakfast table
• But somebody will crack and industry prices will fall – volumes, however, may not
• London visitor numbers are running at record levels – here
• And, if a larger number of visitors spend less on their hotel rooms, they have spare cash
• We would suggest the outlook for MERL (also Sterling lower) remains bright