Hotel Demand Studyaa

Hotel Demand Study
June 2006
Hotel Demand Study
Prepared by Grant Thornton and The Leisure & Tourism Organisation for the Greater London Authority
June 2006
copyright
Greater London Authority June 2006 Published by Greater London Authority City Hall The Queens Walk London SE1 2AA www.london.gov.uk enquiries: 020 7983 4100 minicom 020 7983 4458 ISBN 1 85261 872 8 This publication is printed on recycled paper
Grant Thornton Grant Thornton House Melton Street Euston Square LONDON NW1 2EP T 020 7383 5100 F 020 7383 4715 The Leisure & Tourism Organisation The Leisure & Tourism Organisation 112 Manor Road North Esher Surrey KT10 OAG T 0208 339 2591 The views expressed in this report are those of the consultants and do not necessarily represent those of the Greater London Authority.
Greater London Authority Hotel Demand Study
Contents
Page 1 2 3 4 5 6 7 8 Executive Summary Introduction and background The London tourism market Trends in London hotel supply Hotel market characteristics Provision of accessible accommodation Forecasting hotel demand Conclusions on the supply benchmark 1 8 11 23 36 43 56 65 76 83 86 89 90
Appendix 1: Econometric analysis and scenarios Appendix 2: Sub-regional analysis Appendix 3: Future work on accessible accommodation Appendix 4: National Accessible Scheme Appendix 5: Sources
1 Executive Summary
1.1 Key points
The London Plan 2004 is currently being revised. It contains policies to secure and enhance the economic benefits of London s visitor industry and provides guidance on the nature and geographical distribution of new provision. A key policy tool in the London Plan is the benchmark target for the provision of new hotel bedroom supply. The current benchmark is for an extra 36,000 rooms over the 2001-2016 period, the equivalent of 2,400 new rooms per annum in total. This benchmark was developed in a 2002 study by PricewaterhouseCoopers (PwC)1. This new study undertaken by Grant Thornton and the Leisure and Tourism Organisation tests and updates this benchmark to ensure that it is robust in meeting London's future needs to 2026. This study concludes that 2,000 extra ("net") rooms will be required per annum over the period to 2026. To meet this target, a total of around 2,500 new ("gross") hotel rooms will be required each year, as we also expect a loss of 500 rooms each year. Stronger growth is expected in the first decade. We estimate that around 2,800 gross new rooms will be required each year over the 2007-2016 period. This is slightly higher than the PwC annual benchmark of 2,400 over the 2001-2016 period. The key reason is that our figures have an allowance for a loss of hotel stock, which appears not to have been allowed for in previous studies.
Estimates of rooms "required" Gross new Net extra rooms required rooms required (Gross rooms minus loss) 2007-2016 2,800 2,300 2017-2026 2,200 1,700 2007-2026 2,500 2,000 Note: Includes all serviced accommodation, including hotels, bed and breakfast establishments (B&Bs) and guesthouses.
To arrive at this benchmark, this study has: reviewed long-term trends in the tourist market in London; considered current trends in the provision of serviced accommodation and likely trends for the future; considered the impact of the London 2012 Olympic and Paralympic Games and demand for Conference and Business travel; reviewed the supply and demand of accessible accommodation; and examined the pipeline of new hotel bedrooms and estimated the expected loss.
PricewaterhouseCoopers, Demand and Capacity for Hotels and Conference Centres in London: SDS Technical Report Thirteen, August 2001
Greater London Authority - Hotel Demand Study Grant Thornton and The Leisure and Tourism Organisation
1.2 London's tourist market

London is the most visited city in the world by international tourists, with 1.75% of the world's international arrivals visiting London. International visitor numbers to London have been growing solidly over the past 20 years. Despite a slowing in growth in the early part of the 2000s, London's share of international arrivals has increased again in the past three years. International arrivals grew by over 14% in 2004, and a further strong increase of around 6% was estimated in 2005. Domestic visitor numbers to London have risen over the long term, but have declined slightly in recent years. Low cost airlines flying from regional capitals have increased competition with London. London's profile has been developed and raised in recent years. The establishment of Visit London has contributed greater marketing and promotion of London, while the LDA has led tourism and product developments for the capital. The development of major events in the city2, and the successful bid for the 2012 Games bodes well for London's continued popularity amongst the world's travellers. International visitor numbers to London are expected to continue to increase. As incomes in developing nations rise, it is expected that travel demand will rise. Markets in China and India offer huge potential to London as are growing incomes in other Commonwealth countries. Longer-term trends show that the overall number of nights spent in hotels is increasing but at a slower rate than number of visitor nights spent in London. In 1995, international visitors nights spent in hotels accounted for 39.8% of the total, but by 2004 this had declined to 30.5%. This decline could be due to an increase in international tourists visiting London to visit family and friends.
1.3 Characteristics of the London hotel market

On the basis of a comprehensive survey conducted by the London Tourist Board (now Visit London), it is estimated that there were just over 93,000 serviced rooms in London in 2002. Around 75% of these are hotel rooms, with bed and breakfast establishments and other accommodation making up the remaining 25%. In addition, a further 29,000 non-serviced rooms (university/college rooms, serviced apartments etc) exist in London, although these do not tend to be available for the whole year. The London accommodation sector has proved resilient despite a number of setbacks in the past five years. New stock has been developed despite some softening in room yields and occupancy rates. Over the past five years (2000-2004) new room build has averaged around 3,000 per annum (above the 2,400 rooms per annum benchmark). But taking into account the 500 rooms lost each year in London, growth in hotel rooms has been around 2,500 extra rooms per annum. Losses in hotel and B&B stock have been mainly in the lower end of the market, which, along with new build and refurbishment of existing stock, has had the effect of improving the overall quality of London's serviced accommodation stock. The reduced use of B&Bs for accommodating the homeless has partly contributed to a reduction in demand for low quality accommodation.
2
Including the development and implementation of the London Major Events Strategy.
Most hotels in London are concentrated in the central boroughs (with around 72% of the total stock) but there has been considerable dispersal over the past 10 years, and further dispersal is expected. Key areas of growth have been the east (Newham, Tower Hamlets) and the west (Hounslow, Hillingdon). A further aim of this study has been to consider the supply of accessible accommodation in London. The known stock (ie. rooms that have been identified as accessible) is limited - just 23 rooms have been verified as wheel-chair accessible rooms (only two with hoists), and around 165 rooms verified as providing some improved level of accessibility. Information on the rooms is also limited, with a potential role to be played by the public sector in assisting information transfer. Information provided by hotels themselves has also been found lacking in this study and is viewed as an area for further development. There will also be a particular challenge around the provision of accessible rooms, and information on accessible rooms, for the 2012 London Olympic and Paralympic Games. A number of policy changes, including the Disability Discrimination Act 1995 and the Building Act 2000 are likely to increase the supply of accessible rooms in London's hotels. However, without information on these rooms and a coordinated offering to disabled guests for the duration of their stay in London latent demand will remain unmet. Future work is needed to ensure that hotels meet their duties under the Disability Discrimination Act and, where they are not, the action required to ensure that they do meet their obligations are clearly defined. The broad objectives of this more detailed work are set out in Appendix 3.
1.4 Forward trends

In terms of key trends in the growth of hotel and B&B supply in London, our analysis concludes: The geographical spread of hotels is expected to increase, with a large number of developments planned for the east and west of London. Regeneration initiatives around transport hubs (in line with the development of sustainable communities) are likely to also attract accommodation developments, and these initiatives are expected over the longer term to also lead to an increase in hotel development in the north and south. Planning must facilitate the development of new serviced accommodation so that the market can respond to increases in demand. There is some concern amongst operators and industry experts that rigid planning policy is constraining supply, especially in central London. Further growth in the branded budget sector as well as innovative concepts such as pod hotels, aparthotels and 'Yotels'. Continued demand for accommodation around key transport hubs, and providing adequate transport linkages will be one of the key issues for determining the location of new hotel growth in the future. Transport connections are critical for business travellers and there is strong demand for hotels near to travel connections (for instance, Paddington and Victoria) and airports and train stations. The ability to accommodate parking for disabled guests and coach parking will also be important. The 2012 Games are likely to act as a fillip to supply, particularly in the east of London and around key transport linkages. An important post Olympics legacy is
likely to be greater demand for accommodation to support the conference and incentive travel industry. Demand for accommodation from the conference and incentive travel industry is also likely to influence the nature of future hotel supply. The present and future demand for meeting facilities in London, and for business tourists generally, will lead to hotels with a larger number of hotel bedrooms; greater and more flexible conference and seminar rooms and apartments being provided within or as an adjunct to new developments. Demographic trends suggest an ageing of the population and a related increase in the number of disabled people. Higher incomes and changing tastes towards travel are likely to increase the number of disabled travellers in the future and this will be a growing market need. London has a number of challenges to meet if it is to be a destination of choice for disabled travellers.
1.5 Future hotel room requirements

In developing the hotel benchmark, we have taken into account the demand characteristics identified above, and have considered the likely forward trends in visits by both international and domestic visitors. Econometric analysis of historical data undertaken by Grant Thornton suggests that the number of nights spent in London by international visitors are likely to grow by 72% over the next two decades, increasing from around 90 million in 2004 to 155 million by 2026. This equates to growth of around 3.2% per annum over the 2007-2016 period, followed by slower growth of 1.7% per annum over the decade after. The number of domestic visitors is also expected to increase substantially, but to a lesser extent, amounting to 63% growth in total from 30 million in 2004 to nearly 50 million by 2026. Again, growth is faster in the first decade at an average of 2.8% per annum over the 2007-2016 period followed by slower growth of 1.7% in the decade after. To meet this increased domestic and international tourist demand we estimate a further 40,000 extra (or net) hotel rooms might be required over the 2007-2026 period. On an annual basis, under the central scenario this equates to 2,000 net extra hotel rooms each year over the 2007-2026 period. Given the likely uncertainties involved in such a long term forecast, we estimate the number of hotel rooms required is likely to range from 20,000 net extra hotel rooms to 82,000 net extra hotel rooms, as shown below. In annual terms, a range from 1,000 to 4,100 net extra hotel rooms per annum. The kink in demand from 2012-2020 is due to the legacy impact of the London 2012 Olympic and Paralympic Games.
Figure 1: Projections of total hotel rooms in London
190 Hotel rooms in London (000s) 180 170 160 150 140 130 120 110 100 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 90
40,000 'net' rooms 20,000 'net' rooms 82,000 'net' rooms
High scenario
Low scenario
Central scenario
Taking into account the assumed loss of hotel stock of around 500 per annum, a total of 50,000 gross new hotel rooms might be required over the 2007-2026 period under the central scenario. In annual terms, this is 2,500 gross or new rooms built each year. There is a great deal of uncertainty about the level of loss of hotels rooms. Different sources contain different estimates and the level of loss fluctuates considerably from year to year. The GLA might consider whether improvements can be made in collection and publication of these loss statistics to ensure greater consistency and robustness in the future.
Total over 20 year period (2007 - 2026) Loss of Net extra rooms rooms required 10,000 40,000 10,000 82,000 10,000 20,000
Scenario Central High Low
Gross new rooms required 50,000 92,000 30,000
Our projections are based on average guests per room remaining constant and occupancy levels increasing to their long term average over the forecast period. If the Mayor's policy to accommodate new demand was changed into a policy where new hotel provision was constrained, then the supply response in the industry is likely to be increased occupancy, higher levels of guest rates per room and/or higher room rates. For example, if we assume that more demand is absorbed by further increases in occupancy rates - e.g. rising to an all-time high of 84% by 2012 - then the benchmark figure in the central scenario reduces to 1,650 rooms. Similarly, if the numbers of guests per room increases from 1.45 to 1.6 then this has an even greater reduction on the rooms required benchmark to 1,350 rooms.
Sensitivity tests 1 Base case 2 Occupancy levels return to high of (84%) by 2012 3 Average guest per room increases from 1.45 to 1.6 by 2012 Source: Grant Thornton
Extra rooms required (new rooms minus loss) 2,000 1,650 1,350
1.6 Future hotel room requirements by region

Forecasting trends into the future at sub-regional and borough level is difficult as hotel development in each borough, particularly in outer London, fluctuates considerably from year to year. Quantitative techniques based on past growth trends will also not be able to pick up step changes in supply due to improved transport connections, new tourist attractions or large scale regeneration. The approach we use is therefore a mixture of quantitative and qualitative analysis. The starting point is the London Hotel Development Monitor which reports future expected future hotel developments by borough over the 2006-2010 period. Quantitative techniques are then used to forecast the hotel room requirement over the 2011-2026 period, first at the sub-regional level and then secondly at the borough level. The borough level forecasts take into account wider factors which could contribute to a future growth of accommodation (eg regeneration, transport links and proximity to tourist attractions). For example, improvements in infrastructure in the east of London relating to the 2012 Games may provide opportunities for the development of hotel stock in the area. Our analysis suggests that the largest growth is expected to be in Central and West London with net extra rooms required each year estimated to be 750 and 500 per annum. Lower percentage growth of 1.0% per annum is forecast for the Central area, but as growth is from a higher base, the number of extra rooms required is more significant. The forecast is for dispersal to continue with total stock in central London falling to 60% by 2026. The dispersal of accommodation from central London presents opportunities for businesses and communities outside of central London, but also provides challenges for coordinating visitor infrastructure, including transport.
Gross new rooms required Central West North East South Total 1,030 605 85 525 255 2,500 Net extra rooms required 750 500 75 450 225 2,000 Average annual growth in hotel room stock (20072026) 1.0% 2.7% 3.0% 3.2% 3.8% 1.7%
1.7 Summary
The London Plan seeks to accommodate new demand where possible. Under this assumption, that new demand is not constrained, a total of 2,000 net extra hotel rooms would be required each year over the next two decades (or 2,500 gross new hotel rooms) in our central scenario. These new hotel rooms required take into account the growth in international and domestic tourism and visitors to the London 2012 Olympic and Paralympic Games.
2 Introduction and background

2.1 Background
This report tests and updates the hotel supply benchmark figure for London to ensure that it is robust in meeting London's future needs to 2026, taking into account recent trends in the tourism market and the future demand associated with the Olympic and Paralympic Games and concluding on whether the Games will in fact act as a stimulus to increase the supply of hotels in London. The report has been prepared by Grant Thornton and the Leisure and Tourism Organisation and undertakes the following analysis: Demand side analysis. Assessment of the hotel bedroom demand for London to 2026, taking into account strategic risks, structural changes in consumer preferences and the impact of costs factors such as occupancy rates, exchange rates and room rates. Supply side analysis. Assessment of the current stock of hotels by type and location, the development pipeline and the general market climate, including the analysis of the demand and availability of facilities suitable for disabled people.
2.2 Previous studies

The report reviews a number of studies and builds on research previously carried out. In 2002 PricewaterhouseCoopers (PwC) produced a report on the 'Demand and Capacity for Hotels and Conference Centres in London' as commissioned by the Greater London Authority3. The PwC report covered both historic trends and forecasts to 2016 and therefore this report has been compiled in a manner consistent with the historic trends reported by PwC and updated to reflect trends since 2002. In addition this report has extended the forecast period covered to the year 2026. PwC reported continued long-term growth in London's economy and overseas and domestic tourism. A strong relationship between world GDP and the number of nights generated by overseas visitors was used in their forecasts to predict hotel demand. The potential difference between the hotel supply in 2002 and the forecast demand in 2016 was estimated as being between 15,000 and 58,000 rooms. This report considers and revises these forecasts, extending the predicted demand to 2026. This report looks at the impact of the 2012 Olympic and Paralympic Games on the tourism market both for London and the UK as a whole and the impact this will have on hotel demand. PwC compiled a report in 2005 on the impact of the 2012 Games, which indicated significant increases in gross value added (GVA) to London and the UK both during and after the Games from increases in foreign visitors, thus impacting on the need for hotels. In the longer term, the 2012 Games is likely to increase demand for Conference centres in London, with an associated impact on hotel demand.
3
PwC, Op cit 1
2.3 Key issues for London

The past 20 years has seen an overall increase in the total number of visitors to London, despite any temporary downfalls seen intermittently in the short-term. Overseas visitor numbers have increased from 9.6m in 1990 to around 14.9m (estimated) in 2006. Domestic visitor numbers to London have also grown over the long-term from 6.9m in 1990 to an estimated 11.8m in 2006. Domestic numbers however have seen the largest fluctuations (compared to overseas visitors) in the short-term, resulting in a slight downward trend in total visitors to London since 2002. This has been influenced by the increasing popularity and accessibility of many countries and growing competition from other major European cities (due in part to the ascension of no-frills airlines). The overall London market has been buffeted by a number of issues since 2001, including terror events, SARS and the outbreak of Foot and Mouth. However, a recovery in demand (particularly for international visitors) is evident and the London bombings in July have proved only a temporary setback. Improved room yields have supported investment in new hotel rooms in London, increasingly away from central London to the western and eastern parts of the city. The dispersal of accommodation represents opportunities for businesses outside of Central London, but also provides challenges for coordinating visitor infrastructure including transport and information services. There has been strong growth in the Budget sector of the market and this has provided visitors to London with a greater choice of accommodation. Moves to standardise the quality ratings for hotels will hopefully also provide visitors with greater information and certainty regarding their accommodation experience. Looking forward, tourism is expected to continue to grow (as forecast to 2016 in the 2002 PwC report and extended in this report to 2026) and when considered in combination with the additional impact of the 2012 Olympic and Paralympic Games (whose influence was not included in the PwC report), and the planned development of major tourism facilities, such as the International Convention Centre, it can be seen that substantial additional demand for accommodation on an on-going basis could be generated. New accommodation is planned to meet future demand, closing the gap between the current room stock and the demand forecast in 2016 as reported by PwC, and the hotel market is upbeat about London's prospects. Demographic change is expected to provide a market opportunity for the provision of accommodation to the accessible accommodation market, although evidence suggests that London is not servicing this market as well as other destinations, which provides challenges for the future.
2.4 Report structure

This report is structured as follows: Chapter 3 - The London Tourism market: Provides an overview of trends in international and domestic visitors to London and the use of hotels and other serviced accommodation.
10
Chapter 4 - Trends in London hotel supply: Considers the supply baseline and reviews recent completions, reductions in stock and expected future developments. Chapter 5 - Hotel market characteristics: This chapter reviews recent trends in hotel development by type, brand and location and looks at recent occupancy, room rates and room yields. Chapter 6 - Provision for the disabled: Chapter 6 outlines the current supply of accessible accommodation, including for the Olympic and Paralympic Games and looks at issues related to the current provision. The chapter reviews demographic changes and considers the likely implications on demand for accessible accommodation. Appendix 3 sets out the broad objectives of future work around improving accessibility for disabled visitors. Chapter 7 - Forecasting hotel demand: This chapter sets out our econometric forecasting model and considers high, medium and low demand scenarios. Chapter 8 - Conclusions on the future supply benchmark. The Appendices provide a detailed description of the econometric methodology (Appendix 1), hotel supply by borough under the new proposed sub-regional definition (Appendix 2), the broad objectives of future work around improving accessibility for disabled visitors (Appendix 3), the national accessible scheme (Appendix 4) and a bibliography (Appendix 5).
11
3 The London tourism market
Key points
The growth in the number of international and domestic visitors to London has been relatively modest since 2000, with the number of visits only now returning to the high point reached at the Millennium. However, over the long term there has been a steady increase in visitors to London. Nights stayed in London by international visitors have risen on average by 3.1% each year since 1993 (compared to 1.6% each year for the UK as a whole). Similarly visitor nights spent by UK residents in London has increased from 19.1 million in 1990 to 29.7 million in 2004, an average increase of 3.2% per annum. Although there has been an increase in the number of international arrivals in London, the rate of growth is lagging behind other emerging cities (for instance, Dublin, Berlin, Barcelona and Budapest). London's share of overseas arrivals dipped from 2.3% in 1995 to 1.65% in 2002, but has since increased to 1.75% in 2004 with recent growth ahead of other established tourist cities (such as Paris, Madrid, Amsterdam and Rome). In 2004, 33% of overseas tourist trips to London were for holiday, 27% were for business and 28% were for the purpose of visiting family and friends4. Trips to London by UK residents are thought to have declined significantly, with the UKTS suggesting a fall of 41% evident since the peak in trips in 2000 (although it should be noted that there are some concerns with the quality of the UKTS data). However, UK residents are becoming increasingly likely to use a hotel in their visits to the capital.
3.1 London Tourism Vision to 2016

The Mayor of London's London Tourism Vision for the period 2006 to 2016 is currently out for public consultation. The Vision builds on the achievements of the Mayor's Plan for Tourism and Tourism Action Plan 2003-06 which included the reorganisation and repositioning of the key support agency (to create Visit London) and effective resourcing for London's tourism industry. The Vision sees the key challenges facing the tourism industry over the next 10 years to be: Use of the internet in booking and planning trips Cash rich and time poor New and emerging markets placing different demands
4
IPS, Travel Trends 2004, 2005
12
Global competition Integration with inward investment Emergence of new technology (e.g. mobile phones, ticket-less travel) Ageing society The ten-year Vision for London will evolve to incorporate the challenges faced above and it is envisaged that by 2016, 'London will be recognised as the leading global city for tourism and as a constantly evolving destination'.
3.2 International visitors market

The past 25 years has seen steady growth in the number of overseas visitors to the UK, with visits by overseas residents increasing from 12.4m in 1980 to 30.0m in 20055. Visitors to London have also increased, with international visitors to London increasing from 9.6m in 1993 to an estimated 14.3m in 20056. Growth has been particularly strong in 2004 and 2005, with growth of over 14% in 2004 and estimated growth of 6% in 2005. However, growth was relatively modest in the early part of the 2000s with a number of circumstances (such as low cost airlines, exchange rates, terror events) reducing overall tourist arrivals, impacting on both overseas and domestic tourists. The events of September 11th had a similar effect on tourism, with the number of visits only returning to their 2000 high point in 2004. The London bombings in July 2005 had only a short term impact on overseas visitor numbers with visitor numbers rebounding in the latter part of 2005.7 It should be noted that the PwC report produced in 2002 did not include the short-term downward trends noted above since these trends were only just in the cycle at this point. Despite the overall long-term growth of overseas visitor numbers to London, London's market share in the number of worldwide International Arrivals has decreased marginally from 2.3% in 1995 to 1.8% in 2004 (UNWTO). 2002 saw the market share dip to the lowest level in the past decade of 1.65% and has since begun to rise again steadily. Given that the number of International Arrivals worldwide has grown significantly in the past decade (from 569m in 1995 to over 760m in 2004), it seems logical that there would be a marginal decline in London's market share arising from increased competition from new holiday destinations. In view of the increased competition, London's position as shown in Table 3.1 is still relatively healthy compared to some of its rivals.
5 6
Office of National Statistics, IPS March 2006, Visit London, Visit London: Prospects for 2006, 2006 Office of National Statistics, IPS 2005 7 Visit London, Visit London: Prospects for 2006, 2006
13
Table 3.1: Major city destinations share of international arrivals 1990-2004
% share of international arrivals Amsterdam Dublin Hong Kong New York Madrid Paris Rome London
1990 0.2 1.8 0.6 2.2
1995 0.4 0.3 1.3 0.6 2.3
2000 0.5 0.5 1.3 1.0 0.4 1.3 0.6 1.9
2001 0.5 0.5 1.35 0.8 0.4 1.3 0.6 1.7
2002 0.5 0.5 1.3 0.7 0.35 1.3 0.5 1.65
2003 0.5 0.5 1.0 0.7 0.4 1.2 0.5 1.7
2004 0.5 0.5 1.25 0.7 1.1 1.75
Source: UNWTO, Tourist Offices, European Cities Tourism
The average number of nights stayed by international visitors to London has however remained stable, generally averaging between 6 and 7 over the period from 1994 to 2005.8
Figure 3.1: Annual international visitors to London
International visitor nights (million) International visitor trips (million)
100 95
15
14 90 13 85 80 75 70 65 60
Jun-94 Jun-95 Jun-96 Jun-97 Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04
12
Intl Visitor Nights (LHS) Intl Visitor Trips (RHS)
11
10
9
Jun-05
Source: IPS 2005
London has long been a 'Gateway' to the UK, with over 72% of overseas visitors arriving via one of London's airports9. Visitors also spend time in the capital, with around 40% of all nights spent in the UK by international visitors in 2004 spent in London. This is up from 34% in 1993. It must be recognised that the success of London as a tourism destination is linked to the success of the UK as a whole as a tourist destination, with many tourists visiting London prior to travelling to other parts of the UK. As such, London is a national asset, which must be invested in as a tourist destination, with
8 9
Office of National Statistics, International Passenger Survey, 2005 IPS, Travel Trends 2004, 2005 (arrivals through London City A irport and Luton are not included in the breakdown contained in the report and hence international arrivals through London's network of airports is more than 72%).
14
investment flowing out to the regions as well as vice versa. This will help to secure continued growth in the international visitors market.
Figure 3.2: Annual international visitors to the UK visiting London
London visitor nights as a proportion of UK nights
0.42 0.40 0.38 0.36 0.34 0.32

London visitor nights as % of UK nights
0.30 1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Source: IPS 2005
Taking a longer-term view of visitor trends, there is a clear upward trend evident in visitors to the UK over the past 20 years. Data for visitors to London has only been available more recently, but as can be seen, the overall trend is likely to be similar. As can be seen in Figure 3.3, international visitors to London follow a similar pattern as visitors to the whole of the UK. Both have been rising gradually over time despite some volatility in certain years.
Figure 3.3: Annual international visitors to the UK and London
300 250 200 150 100 50 0 UK nights (m) London nights (m) 100 90 80 70 60 50 40 30 20 10 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 0
UK nights
London nights
Source: IPS
Within the inbound market, visitor numbers from the US (which continues to be the most important source market) have remained below 2000 levels. However, strong increases in the number of tourists arriving from other important source markets, such as Spain and the Republic of Ireland, have helped to sustain the sector:
15
The leading overseas markets in 2004 were the USA (2.4m visits), France (1.3m visits), Germany (1.2m visits); International tourist arrivals worldwide grew by 11% in 2004 from 2003 with particularly strong growth in Asia Pacific (+28%), Middle East (+18%) and the Americas (+11%); 10 There has been a 65% increase in arrivals to the UK by Chinese residents between 2000 and 200411, and despite the relatively small base, given the huge Chinese population there is high growth potential for the future with any modest percentage growth having a significant impact on the rest of the world. In addition, the UK gained 'Approved Destination Status' from China in January 200512 and the Mayor of London and the Mayor of Beijing signed an agreement to mutually promote their cities in April 200613. Both agreements are likely to further encourage Chinese visitors to London. Growing wealth in India and strong cultural links may also contribute to growth in visits to London by Indian nationals over the next decade and longer. Tourists are spending less and staying for shorter periods of time than previously. (Since 1979, the number of inbound tourists has grown 122% however spending has only risen 40%). This is largely due to a changing mix of purposes of visits, including increasing numbers of visitors visiting friends or relatives14 as illustrated in Table 3.2.
Table 3.2: Purpose of international visit trips
1984 Visiting Family or Relatives Holiday Business Other Total Source: IPS Travel Trends 2004 19% 47% 21% 13% 100%
2004 28% 33% 27% 12% 100%
Worldwide, the majority of international tourist trips in 2004 were for the purpose of leisure and holidays (52%) with only16% being for business travel15.
3.3 Domestic visitors to London

Prior to 2000, the domestic visitor market in London had grown strongly (albeit with a short term decrease in 1999). The millennium celebrations in London saw a "one-off" level of visitors to London, with the number of visits peaking at 18.5m visits. Key attractions opened in the City during this period, including the Millennium Dome and the London Eye driving an increase in visits to the capital. The number of visits has returned to just 12.3m over the year to March 200516. Total nights and spending have also
10 11
World Tourism Organisation, Tourism Market Trends, 2005 Edition - Annex, 2005 IPS, Travel Trends 2004, 2005 12 GLA Press Release, London and Beijing Mayors sign agreement to promote cities, 10-4-2006 13 China Briefing for Partners, Visit London 2005. 14 IPS Travel Trends 2004, 2005 15 WTO, World Tourism Highlights 2005, 2005. 16 UK Tourism Survey, time series data, 2000 to 2005
16
declined since their peaks in 2000 (nights are down by 35.4% and spending is down by 16.3%). However, Visit Britain and the DCMS have expressed concerns about the way in which the survey was conducted, and therefore the robustness of the results. The UKTS is currently reviewing the survey methodology as a result of these concerns. It is worth noting that there have also been fewer UK resident visitors to England over the period as well suggesting it is not just London that is out of favour with UK tourists17. The increased availability of cheap flights to the continent from regional airports, rail disruptions, higher petrol prices and Foot-and-Mouth disease, have been some factors behind the decrease in the domestic market (in some cases even inhibiting visits to other parts of the country), with specific events such as the London bombings having further short term effects. Anecdotal evidence suggests that domestic visits to London declined by as much as 30% in July and August 2005 as result of the London bombings18 although activity has bounced back somewhat since then as evidenced by occupancy rates for London hotels19. Over the longer term, the total number of domestic visitor nights spent in London has increased, 19m in 1990 to 31m in 200420. The average number of nights per visit has also increased, rising from 0.8 nights in 1990 to 1.24 in 2004.21 Information on visitor attractions visits paints a broadly positive picture for the past few years with the overall trend being positive.
Figure 3.4: Annual UK resident visitors to London
London visits (m) London nights (m)
20 18 16 14 12 10 8 6 4 2
45 40 35 30 25 20 15 10 5
London visits
London nights
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Source: UKTS
In terms of the key characteristics of domestic visitors to London:
17 18
UK Tourism Survey (UKTS), England 2003, 2004; UKTS, England 2004, 2005. Visit London: Prospects for 2006 19 A ccordingto the UK occupancy survey for Serviced A ccommodation, London occupancy rates were 73% and 63% in July and August 2005, but quickly recovered to 78% by September 2005. 20 UKTS, Time series data, 1990 to 2005 21 UKTS, Time series data, 1990 to 2005
2004
17
The majority of domestic visits to during 2004 London were from the South East (14%) followed by the South West (12%), North West and West Midlands (both 11%), East of England (10%) and East Midlands (8%). 22 In 2003, the purpose 38% of domestic visits to London was to visit family and friends, 34% for holidays in 2003 and 25% for business. Key changes since 2001 have been an increase in holiday and business at the expense of trips to visit family and friends. The average number of nights stayed in London per visitor between 1994 and 2004 was 2.3 nights23.
3.4 Total visitors to London

Combining information on international and domestic visitors to London shows a subdued performance for visitor nights and trips to London since 2000. Annual trips to London by domestic and international visitors peaked at 31.6 million in 2000 (as mentioned above, trips were buoyed by the millennium celebrations in that year). In 2004, trips fell to 26.1 million, representing a fall of around 20% on the 2000 peak. Similarly, total annual visitor nights have fallen over the period, albeit with a more moderate decline of 4% recorded (due to an increase in the average length of trip). Over the long-term there has been a steady rise in annual visitor nights, as illustrated in Figure 3.5.
Figure 3.5: Total Visitors to London
Million Nights International Domestic
140 120 100 80 60 40 20 0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Source: IPS, UKTS, Visit London, Visit London: Prospects for 2006
3.5 Business and conferences

Until recently there has not been a proper understanding within central or local government of the importance of business tourism or its contribution to the local and national economies. One business tourist is worth at least three times the amount of one leisure tourist in employment and economic terms and business tourism is worth 3.2bn to London, making the business tourism sector an important area for London to invest in. This investment is particularly key given London (and the UK's) weakening share of
22 23
UKTS, London 2004, 2005 UKTS, time series data
2004
18
international tourism arrivals and increasingly competitive conditions in the tourism market. The conference and incentive travel industry has evolved over the past few decades into a mature business sector. It is increasingly clear that businesses and associations cannot function effectively without face-to-face meetings. Over the ten years to 2004, there was a 50% increase in all business trips (with 27% of overseas visitors travelling on businesses to the UK in 2004) exceeding the overall tourism growth rate24. On a global scale, 16% of International tourist arrivals worldwide were for the purpose of business in 2004. A key part of the business tourist market is from conference/events attendance. London is already a strong convention destination, with 2004 statistics from the Meeting Industry Association (MIA) indicating it accounted for 60% of the UK corporate convention market. In 2003, 3% of domestic visits to the UK were for attending conferences and exhibitions (approximately 0.4m visits)25. In 2001, UK residents made 2.0m trips for conference and exhibitions comprising some 4.9m nights away from home and an associated spend of 420m. Conference and exhibition trips accounted for 10% of all business trips (including overseas visitors)26. 2005 saw optimism in UK conference venues with sales up and 65% expecting further growth ahead. A survey conducted across all conference desks and venues in the UK reported an average of 421 conferences per venue in 2004 (an increase of over 10% from the prior year)27, with venue income estimated to have grown 67% from 2003 to 12.9bn. London in particular saw a 21% growth in the corporate sector28. London leads the UK market with 60% of corporate organisers holding an event in the capital (30% Birmingham, 27% Manchester)29. However London is currently failing to attract its fair share of larger events with the business that London can handle being limited by the lack of purpose-built facilities. Investment in an International Conference Centre (ICC) in London would help meet this need and support London and the UK's position as a major visitor destination. Investment in business tourism can stimulate future inward investments where business people return to London on holiday or to visit family and friends or to establish business operations here. In addition, it is less subject to the fluctuations that can be caused by exchange rate changes and other factors that tend to affect leisure tourism to a greater degree. Business visitors also become ambassadors for the city by communicating to colleagues their experiences in the city. The ICC would also exploit London's role as a 'gateway' to the rest of the UK, with many business visitors to London extending their trips both in the capital and outside it. Quantifiable data in a report by Grant Thornton, showed that an ICC in London has the potential to contribute significantly to the Government's objective and DCMS target to 'maximise the economic contribution tourism can make to the UK economy'. The London ICC Commission has strongly supported this conclusion and stated in their final report: 'The ICC Commission is of the unanimous view that the business case for developing an ICC in London is clear and unambiguous'.30
24 25
International Passenger Survey 2001 Visit London, London Visitor Statistics, 2004/2005, 2005 26 TRI hospitality, ICC 27 British Association of Conference Destinations, British Conference Venues Survey 2004, 2004 28 British Association of Conference Destinations, British Conference Market Trends Survey, 2003 29 British Association of Conference Destinations, British Conference Market Trends Survey, 2003 30 ICC Commission, Final Report - October 2005, 2005
19
In addition, the 2012 London Olympics will have a positive effect on London's position in the international conference market, giving international meeting planners the confidence that London can host large-scale events. In 2002 and 2001, the percentage of total rooms that were sold to the conference/incentive sector in London was 10.4% and 10.9% demonstrating the importance to the hotel industry of business tourism. Comparatives for Birmingham (highest ranking city in Europe) were 30.3% and 28.0%, though occupancy was slightly higher for London at 72% on average versus 65% for Birmingham. Statistics gathered in 2003 showed that of 107 London hotels, conference/convention business accounted for 6.9% of rooms sold.31 In 2002, International Trade Forum magazine reported a growing number of business travellers bringing their families on business trips creating opportunities for hotels and conference centres to develop new offerings for children and spouses during business meetings. There have been recent trends towards meetings/conferences being held more frequently with companies understanding that they must communicate more frequently with their staff and other stakeholders. The corporate segment commands higher rates than leisure/group segment, therefore most large hotels are willing to allocate approximately one third of room stock to in-house conference and banqueting events. However, when located in business destinations, hotels are unlikely to allocate all their room stock to either in-house or City events (conferences) if it means displacing regular corporate business. While the overall corporate segment has grown, there are now fewer long-haul corporate Conference and Incentive events due to32: wish for better work-life balance need for comfort i.e. avoiding 10 hour plus flights increased perceived levels of insecurity, linked to air travel expense loss of productivity having staff away for longer. Therefore, London's central position to Europe and America makes it well placed to capture the event market. A reasonable assumption seems that the conference/incentive sector will grow in line with the business tourism sector as a whole. This is partly dependent on the extent to which regions develop and maintain the necessary infrastructure. The recent report by Grant Thornton on the proposed construction of an international convention centre in
31 32
TRI hospitality, EIBTM, 2005 Industry Trends and Market Share, 2005
20
London33 estimated that some 170,000 delegate-days will be additional to the London economy. These are largely big international association meetings, equating to an additional 0.2% of visitor nights spent in London by overseas residents. Forecasts carried out in 2001 projected a growth in all business tourism trips of 39% between 2001 - 2011 with growth in real spend of 16%34, with further expansion likely (as mentioned above), as a result of the Olympic Games. On an international basis, leisure travel previously growing at a superior rate to that of business is predicted to grow at 4.4% annually on average between 1998 and 2020 compared to 5.5% for business travel which is set be to more competitive, driving the tourism market and reflecting the slower maturity in the business market35. The loss of events to destinations outside the UK appears to have stemmed in 2005, with only 6.5% of corporates holding events overseas (down from 8% in the prior year)36. Barcelona reported a 64% increase in convention and incentive business annually from 1993 to 1996 after promoting the city as an excellent venue for international conferences (after hosting the Olympic Games, a legacy effect that is hoped will follow the London Games). The proposed London International Conference Centre may do well in this capacity to keep hotel demand high. There will be a number of implications for serviced accommodation from this growth in business travel: The present and future demand for meeting facilities in London will lead to: hotels with a larger number of hotel bedrooms; greater and more flexible conference and seminar rooms; and apartments being provided within or as an adjunct to new developments. Transport connections are critical for business travellers and there will be a tendency to stay near to transport connections including rail links to airports (for instance near to Victoria or Paddington) or near to international rail links (for instance St Pancras/King s Cross). There has been a trend for the development of hotels near to airports (for instance, a new 155 room Travelodge at London City Airport was completed in 2005) which is likely to continue.37
3.6 Demand for serviced accommodation by visitors

Figure 3.6 below shows the proportion of international visitor nights in the UK spent in serviced accommodation by type of international visitor. Business visitors to the UK are most likely to use a hotel or other serviced accommodation38 (with over 50% of business visitors staying in serviced accommodation). International visitors to the UK for the purposes of studying or visiting family and friends are least likely to use a hotel for their trip with less than 5% of all visitors for these purposes using hotels.
33 34
Grant Thornton, International Convention Centre Market and Funding Assessment, Final Report, April 2005 British Association of Conference Destinations, British Conference Market Trends Survey 35 The Department of the Environment, Transport and the Regions, A ir Traffic Forecasts for the United Kingdom 2000, June 2000 36 British Association of Conference Destinations, British Conference Market Trends Survey 37 Visit London, London Hotel Development Monitor December/ January 2006, 2006. 38 Serviced accommodation includes hotels, bed and breakfast establishments and guesthouses.
21
A similar breakdown is not available for visitors to London, although proportions are likely to be higher with the total proportion of visitor nights in a hotel in London in 2004 (at 30.5%) greater than that for the UK as a whole (23.7%).39
Figure 3.6: International visitors to the UK staying in a hotel or B&B
Proportion visitor nights in hotel
60%
50%
2001
40%
2004
30%
20%
10%
0% Holiday Business Visiting Relatives or Friends Study Other Total
Source: International Passenger Survey
Longer-term trends for international visitors show a decline in the propensity to use a hotel, which is linked to an increase in international tourists visiting London to visit family and friends. Between 1995 and 2004 the proportion of international visitors staying in a hotel declined from 39.8% in 1995 to 30.6% in 2004. Conversely, UK domestic visitors to London are increasingly likely to stay in a hotel. Over the period 2001 to 2004 the portion of trips spent in a hotel or B&B increased from 34% to 42%. This coincides with a reduction in trips to London to visit family and friends and an increase in UK residents visiting London for a holiday.
39
IPS, Time series data, Various 1995 to 2004
22
Figure 3.7: UK visitor resident visitors to London

Proportion
60%
Holiday
50%
Business
Relative/Friends
Hotel/B&B
40%
30%
20%
10%
0% 2001 2002 2003 2004
Source: UKTS
Note: The categories of purposes of visit have changed between 2003 and 2004. The category "Visiting friends and relatives" has been split to include an additional category " Visiting friends and relatives, mainly as a holiday". Therefore, it is possible that there is some overlap between this new category and visitors on "Holiday" (ie. some visitors that previously classified their trip as a "holiday" prior to 2004, would have used this new category (VFR, mainly as a Holiday) if given this option). Therefore, direct comparisons between 2003 and 2004 may be misleading.
The overall trend has been a reduction in the propensity to stay in a hotel (with international visitors far outnumbering domestic visitors).
3.7 Summary
The Mayor is committed to London s growth as a tourism destination, as a way to create jobs and increase contribution to the capital s economy. However, London s visitor economy is reliant on high-value overseas markets and on leisure tourism, although not to the extent it was in previous decades. Visitors from overseas can be affected and for longer periods than domestic tourists by global and domestic events and crises and naturally by currency fluctuations. Greater concentration on growing business tourism, broader overseas markets and the domestic market can help to alleviate such effects. Visit London s increased marketing budgets should help to broaden its overseas markets.
23
4 Trends in London hotel supply
Key points
Visit London estimates that there were 93,248 serviced rooms in London in 2002. Hotels rooms comprise around 75% of the total room stock, with bed and breakfast establishments and other accommodation making up the remaining 25%. Hotel completions have risen in recent years, with over 3,100 new rooms added per annum in 2003 and 2004. It is difficult to obtain robust estimates of reductions in hotel stock, although it appears that there were around 440 hotel rooms lost each year over the past five years. Around one-third of these are currently lost in the borough of Westminster.
In this section, we examine the existing data sources on the level of the hotel stock; the type and location of accommodation; changes to the stock - additions and reductions; and the development pipeline. We consider both the number of rooms and the type of rooms, and analyse published historical data and use information available from Visit London and other relevant sources.
4.1 The number of existing hotel rooms in London

While there is not one single database of serviced accommodation40 in London, there have been two key stock estimates that have been undertaken. Firstly, the 1991 Census estimated that there were 87,439 bedrooms in serviced accommodation establishments in 1991. Unfortunately changes to the question asked regarding accommodation in the 2001 Census has meant that this data does not provide an updated estimate of the accommodation stock. PricewaterhouseCoopers (PwC) in their August 2002 study on the stock of serviced accommodation in London for the Greater London Authority 41, has escalated the 1991 stock using data from Visit London on hotel completions. Using this methodology, PwC estimated that there were 107,428 hotel rooms in London in 2002. However, this method has not captured reductions in the stock over time from change of use (often from small hotels or bed and breakfast establishments to residential use) and may therefore overestimate the stock. The PwC report also estimated the stock of serviced accommodation (and did not include non-serviced accommodation). The second estimate of the serviced accommodation stock was undertaken by the London Tourist Board (now Visit London). The Tourist Board conducted a comprehensive
40
Serviced accommodation includes hotels, B& B establishments and guesthouses. It does not include accommodation housing refugees. 41 Greater London A uthority/ PwC, Demand and Capacity for Hotels and Conference Centres in London, A ugust 2002.
24
survey of serviced accommodation in London in 2002. This survey used the Visit London database, information from Boroughs and information from other various sources: (Yellow Pages, AA, RAC, Martin Information, PFK). This data was collated to estimate the stock of serviced and non-serviced accommodation in London. The survey suggested that in 2002 there were 93,248 bedrooms for serviced accommodation in London and 28,745 bedrooms providing non-serviced accommodation.
Table 4.1: Estimates of serviced accommodation Year Estimate Source 1981 88,100 1981 Census 1988 72,239 ETB/LTB Accommodation Services 1991 87,439 1991 Census 2002 93,248 London Tourist Board (now Visit London) 2002 107,428 PricewaterhouseCoopers estimate (2002 report) Note: Census data between 1981 and 1991 cannot be compared directly as it is on an inconsistent basis.
For this report, we have based our estimates on the 2002 London Tourist Board study, being the most up-to-date survey of the stock of serviced accommodation in London. This estimate of hotel stock for 2002 can be extrapolated backwards to derive a time series estimate of hotel stock (ie. serviced accommodation) by adjusting for new stock and losses of hotel stock (Table 4.2). According to the estimates, serviced accommodation has grown modestly over the period from 1991 to 2002, with annual growth averaging just over 1% per annum. The London Hotel Development Monitor produced by Visit London estimates all new hotels opened in London with 20 bedrooms or more. The Monitor provides the basis for the estimates of new stock below, and suggests that between 1991 and 2002 21,000 new rooms (gross) were added to London's room stock (c1,750 bedrooms pa). The LondonNew York Study (Corporation of London et al 2000) is broadly consistent with this estimate, suggesting that between 1989 and 1998 approximately 16,040 new bedrooms (gross) had been provided (1,800 pa). Loss of stock estimates (ie. reductions in the number of hotel rooms due to demolition or closure) are based on information received from Westminster City Council, and the basis for the estimate is outlined in more detail below (cf. Stock Reductions). Stock losses were not included in the 2002 PwC report.
25
Table 4.2: Estimated stock of serviced accommodation in London, 1991 to 2002 Hotel Stock (end period New Stock (Visit London) estimate) (1) Loss of stock (2) 75,686 1,365 100 77,634 2,048 100 78,328 881 187 78,389 76 15 78,541 347 195 79,212 725 54 80,405 1,279 86 83,179 2,839 65 86,323 3,374 230 89,863 3,651 111 91,270 1,644 237 93,248 2,357 379
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Source: Visit London, Visit London Development Monitor, Westminster City Council Notes: (1) Visit London data for new stock for 2002 have been updated to reflect newly published data from Westminster City Council (Annual Monitoring Report 2004-05). (2) Loss of stock between 2002 and 2004 published by Westminster City Council (the largest provider of accommodation). This data has been averaged to arrive at a rough loss estimates for other years. Data on losses are not published by other Boroughs, although it is acknowledged that there are losses to the hotel stock over time.
Trends in accommodation over time are illustrated in Figure 4.1 below. Solid rises in hotel stock between 1998 and 2001 saw a period of strong growth in stock. As can be seen, the estimated loss of stock (the basis for this estimate is provided below) is small in comparison with the overall stock of serviced accommodation.
Figure 4.1: Hotel stock London, 1991 to 2002
Bedrooms 100,000
Hotel Stock
80,000
New Stock
Loss of stock
60,000
40,000
20,000
0 1991 (20,000) 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Source: Visit London, Visit London Development Monitor, Westminster City Council
4.2 Type of hotels and accommodation

There is a range of accommodation provided in London to suit almost all visitor needs. The only exception is the apparent lack of accessible accommodation for disabled visitors. Visit London (Table 4.3) estimates that serviced accommodation (including
26
hotels, bed & breakfast establishments and guesthouses) accounts for around 76% of all bedrooms (with the remainder comprising self-catering, hostels and university accommodation). Classifications for 5 star, 4 star etc are those awarded by national inspection schemes (eg AA and Visit Britain) while other categories are defined by Visit London.
Table 4.3: Accommodation by type in London (2002) Type 5 Star Hotels 4 Star Hotels 3 Star Hotels 2 Star Hotels Hotels with no rating Inn & Pub Accommodation Guest Houses & B&Bs Branded Services Hotels Total Serviced Self-Catering Holiday Homes Serviced Apartments Holiday Parks University/College Youth Group Total Non-Serviced GRAND TOTAL Source: Visit London Establishments 54 146 86 29 18 44 1,058 73 1,508 145 64 6 46 83 344 1,852 Rooms 9,274 32,939 14,071 1,795 3,028 776 22,896 8,469 93,248 3,257 2,944 833 16,396 5,315 28,745 121,993 Bedspace 18,005 65,064 26,748 3,822 6,276 1,597 46,038 18,451 186,001 9,739 8,350 2,517 18,332 10,598 49,536 235,537
More recent data is available from Visit Britain (Table 4.4). This information summarises Visit Britain's known stock of establishments and bedspaces in 2004. The key difference between this data and that outlined above is a lower number of Bed and Breakfast and Guesthouse establishments and bedspaces. This is likely to be due to the more limited nature of the Visit Britain survey.
27
Table 4.4: Accommodation by type in London, 2004 Number Bedspaces
Bed & Breakfast 553 18,610 Guesthouse 57 1,438 Hotel 529 142,875 Country House Hotel 8 1,004 Motor Lodge/Motel 34 3,514 Townhouse Hotel 55 4,929 Inn 25 1,115 Youth and Group* 131 30,403 Total 1,392 203,888 Source: VisitBritain Note: The figures are for 'known stock' - i.e those establishments which agree to abide by the National Tourist Boards Code of Conduct, those which have ever agreed to abide by it and those which have otherwise become known to VisitBritain. *Youth & Group includes campus accommodation.
4.3 Completions over 2003-2005 period

There are two key sources of data on completions, with both the GLA and Visit London collecting data on hotel room completions (Table 4.5). The data differs slightly due to a difference in the timing of the data collected and slightly different definitions used (the GLA includes all establishments with over 10 rooms, whilst Visit London includes all establishments with more than 20 rooms).
Table 4.5: Number of hotel room completions Year Visit London GLA 1998 2,839 3,255 1999 3,374 2,559 2000 3,651 3,661 2001 1,644 3,258 2002 2,357 2,504 2003 3,155 3,978 2004 3,134 1,444 2005 2,177 N/A Source: Visit London, GLA Note: GLA data for 2004 is only part year.
According to the average of the GLA database and Visit London figures42, new room stock has averaged approximately 3,000 new rooms over the past five years (1999-2004), above the 2002 PwC benchmark of 2,400 rooms per annum. However, it does not take into account any stock reductions (eg smaller hotels and guest houses turning into residential use). We estimate that stock reductions are likely to be in the region of 500 per annum which means that net new stock is therefore 2,500 over the past five years. There has been an increase in the geographical spread of hotel stock across London as the number of hotel completions outside the central sub-region has exceeded those in the central sub-region. This dispersal is explored in greater detailed in Section 4.5.
42
Excluding the GLA data for 2004 which is currently only for part of the year.
28
4.4 Loss to hotel stock

In looking at changes to the total stock, it is necessary to consider the number of closures of hotels and other accommodation establishments. Reductions to the hotel stock appear to have not been estimated in previous studies on hotel demand and supply (including the 2002 PwC study). No doubt this has been due to a lack of information readily available on stock losses, and data problems continue to be an issue. Information was obtained from the GLA London Development Database which contains an indication of the level of hotel stock by borough over the 1991 to 2005 period, see table below. The data provided is most complete for the 2004 and 2005 years - for these years the data covers all hotel losses for all properties which are bigger than 10 bedrooms. In 2004, there was a loss of 1,000 rooms in London, although 390 rooms were accounted for by the loss of one hotel (ie the Thistle hotel in Lancaster Gate Westminster which was sold to a developer for conversion to residential). Over the 1995-2003 period, the data is partial in the sense that it does not cover losses of rooms to residential use where the number of residential units created is less than 10 units.
Table 4.6: Loss of hotel stock
Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 5 year average 10 year average Source: GLA database
GLA database 195 54 86 65 230 111 237 379 109 1007 476 442 275
Information was then sought from each of the London boroughs to test robustness of the data. Data was obtained from Barking, Camden, Hounslow, Redbridge and Westminster. The discrepancies between the different sources were most significant for Westminster, largely because this borough already has the most number of hotels. The following are the key findings from our details analysis of the Westminster data: On an annual basis it was not possible to reconcile the two data series. The reason is because the two sources apparently measure losses at different stages of the planning process. The GLA database measure the losses at the time of permission whereas the borough data covers losses when they are actually completed. For example, in 2001, the GLA database identifies 151 rooms lost compared to 33 identified by Westminster. While in 2002, the situation is reversed, with Westminster identifying
29
154 losses compared to the GLA database of 82 losses. Similar large differences occur in every other year over the 1991 to 2005 period43. While the data on an annual basis is difficult to reconcile the overall aggregate total is more comparable. According to the GLA database there were 933 bedroom lost in Westminster over the 1991-2005 period which is slightly less than the number reported by the borough of 1,068. The GLA database is smaller because it excludes losses of hotels where the number of bedrooms is less than 10. The losses experienced by Westminster tend to be smaller (ie around 20-30 rooms) and lower quality hotels. They also tend to be located outside of the Central Activities Zone (CAZ)44. Loss of hotel rooms outside this area is of less concern as the strategy of the Unitary Development Plan is focused on encouraging new hotel developments in the CAZ as well as maintaining the existing stock (ie reduce loss) in the CAZ. There are two reasons for these losses. Firstly, developers are turning hotels into residential use and, secondly, constructing higher quality hotels which typically have less rooms than than before. On the basis of all of this information, we have broadly estimated that there are potentially around 500 rooms lost from the hotel stock each year. This is based on a 5 year moving average figure of 440 with a 10% additional allowance for loss which is not covered by the GLA database45. This figure will fluctuate with changes in planning and broader policies (for instance those related to housing homeless, which is discussed later in the report). Indeed, there is a great deal of uncertainty about the level of loss of hotels rooms. Not only does the level of loss fluctuates considerably from year to year but different sources contain different estimates. The GLA might consider whether improvements can be made to data collection to ensure that there is a consistent measure of loss across different boroughs.
4.5 Development pipeline - estimates of future completions

The GLA London Development Database and the Visit London pipeline provide estimates of future hotel completions. The GLA London Development Database estimates that there were 6,764 rooms under construction in 2004 and 9,286 rooms approved but not yet built. The London Development Monitor produced by Visit London summarises expected hotel developments in London and includes all new hotels with more than 20 rooms. The expected pipeline is summarised in Table 4.7 below.
43
Another source confuses the picture even more. The Westminster annual monitoring report showed total rooms lost was 613 in 2002, 370 in 2003 and 495 in 2004. This is again different from the two sources above, with the reason cited beingthat not all of these rooms are lost as the figures include existinghotels which are destroyed and then replaced with newer more modern hotels. 44 The Central Activities Zone covers around one-third of the central part of the borough of Westminster. 45 This 10% figure is very broadly on the experience of Westminster. In particular the number of hotel losses recorded by Westminster at 1,068 over the 1991-2006 period is around 14% higher than the number recorded in the GLA database of 933.
30
Table 4.7: Development pipeline
Year 2006 2007 2008 2009 2010 2011 Source: Visit London, GLA
Visit London 1,610 3,143 2,501 1,866 1,750 2,427
The information collected on the supply baseline and development pipeline is summarised in Table 4.8 below.
Table 4.8: Supply baseline and projections
Year 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Room supply 75,686 77,634 78,328 78,389 78,541 79,212 80,405 83,179 86,323 89,863 91,270 93,248 96,294 98,421 100,122 101,232 103,875 105,876
Stock Additions and Pipeline 1,365 2,048 881 76 347 725 1,279 2,839 3,374 3,651 1,644 2,357 3,155 3,134 2,177 1,610 3,143 2,501
Stock Reductions 100 100 187 15 195 54 86 65 230 111 237 379 109 1,007 476 500 500 500
% Annual Growth 2.6% 0.9% 0.1% 0.2% 0.9% 1.5% 3.5% 3.8% 4.1% 1.6% 2.2% 3.3% 2.2% 1.7% 1.1% 2.6% 1.9%
Sources: Visit London 2002, Westminster City Council 2005, Grant Thornton estimates.
4.6 Trends in geography

The Central London sub-region accounted for around 77% of hotel bedrooms in 1996, and this share has declined to 69% in 2005. Over the 2000- 2005 period, there have been 5,000 new rooms developed in the central sub-region, despite suggested pressures on site and land availability in the central boroughs. This compares to around 3,600 and 2,700 new rooms in the Eastern and Western sub-region respectively over the same period. While more rooms are being built in the central sub-region, the share is declining as the 5,000 new rooms built in the central sub-region account for only 41% of the total built over the 2000-2005 period.
31
This trend is expected to continue with the share of total hotel room stock in central London reducing to around 67% by 2008. New hotel stock development in the central region over the 2006-2010 period is expected to be around 5,500 rooms, some 51% of the total 10,900 new rooms predicted by the Visit London Hotel Development Monitor. Given that this central sub-region was responsible for around 77% of the capital s bed stock in 1996, this change is significant. With the continued development in Docklands, increasing hotel bedrooms in the west and eastern boroughs is a trend that is likely to continue. Such activity will encourage GLA, LDA and Visit London s overall objectives for dispersal or spreading the benefits of tourism, but the polarisation between the central sub-region which will retain much of London s four/ five star stock and the rest of the capital, with its two star and budget hotels, will continue. As well as the dispersal from the central sub-region to the other sub-regions there is also dispersal happening within the central sub-region itself. Hotel developments are springing up around the outer part of the central area. For example, the number of rooms expected to be development in Lambeth, Southwark and Wandsworth over the next five years are currently expected to be greater than Westminster. The eastern region comprised 6% of the hotel stock in 1996 and this share is expected to grow to 12% by 2008 with strong recent activity expected to continue. In the west of London, the stock of hotels made up 12% of the capital's hotels and this share is anticipated to rise to 15% by 2008. These broad trends are illustrated in Figure 4.2 below.
Figure 4.2: Hotel stock by region
% Share total bedrooms
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1996 1998 2000 2002 2004 2006 2008
West South North East Central
Source: Visit London, London Hotel Development Monitor
Trends within the sub-regions are described below and are summarised in Table 4.9 and Figure 4.3.
32
Central
Westminster leads the supply of serviced accommodation with its share of London's stock estimated at 38.7% in 2005. Camden and Kensington and Chelsea are next with 13.9% and 12.0% of the stock respectively. Overall the central sub-region (ie Camden, Islington, Kensington & Chelsea, Lambeth, Southwark, Wandsworth and Westminster) is estimated to hold 69% of London's hotel stock in 2005. Looking forward, Lambeth is expected to lead increases in stock with almost 1,800 new rooms planned over the 2006-10 period. This will raise Lambeth's share of the total London stock from 1.3% in 2005 to 2.7% by 2010. Substantial increases are also expected for Southwark and Wandsworth suggesting a dispersal of accommodation within the sub-region, as well as across Greater London.
East
Newham has led the expansion of stock in the east (as well as across the capital), with 2,168 rooms built in the period from 2001 to 2005 - more than any other Borough. Newham now comprises 2.0% of the capital's stock. Strong growth is expected for the Tower Hamlets and Greenwich over the period to 2010. This will raise the share of bedrooms in these boroughs to 2.8% and 1.6% of London's total respectively. The east has been the star performer, with the total stock growing by around 52% over the 2000-5 period. In 2005 the east comprised 10.2% of the capital's stock and this share is expected to grow further to 12% by the end of the decade.
West
Outside of the central zone, other areas with considerable stock include Hillingdon and Hammersmith and Fulham in the west with 7.3% and 3.5% of London's total stock of serviced bedrooms in 2005. Over the next five years, the key growth areas are expected to by Brent, Hillingdon and Hounslow. The growth in Brent will more than double the current estimated stock, while growth in Hounslow will build on healthy growth to date.
North
Hotel stock is the smallest in the north with just 1.9% of the total stock. There has been modest growth of just 400 new bedrooms over the period to 2005, and at this stage, no new developments are planned for the area.
South
Croydon has the largest stock of serviced accommodation in the south accounting for 1.7% of the total stock in London and has had the greatest level of growth over the period to 2005. Over the 2005-2010 period modest growth of 521 new bedrooms are currently in the pipeline. These trends are summarised in Figure 4.3 below.
33
Figure 4.3: Changes in hotel stock by region

Hounslow Hillingdon Harrow Hammersmith & Ealing Brent Sutton Richmond Merton Kingston Croydon Bromley Waltham Forest Haringey Enfield Barnet Tower Hamlets Redbridge Newham Lewisham Havering Hackney Greenwich City Bexley Barking & Dagenham Westminster Wandsworth Southwark Lambeth Kensington & Chelsea Islington Camden
West
South
Change 2001 to 2005 Change 2006 to 2010
North
East
Central
500
1,000
1,500
2,000
2,500
3,000
3,500
Source: Visit London, London Hotel Development Monitor
34
A full summary of the hotel stock by region and changes over time is provided in table 4.9 below.
Table 4.9: Hotel stock by region Estimated Stock 2005 CENTRAL Camden Islington Kensington & Chelsea Lambeth Southwark Wandsworth Westminster Total Central EAST Barking & Dagenham Bexley City Greenwich Hackney Havering Lewisham Newham Redbridge Tower Hamlets Total East NORTH Barnet Enfield Haringey Waltham Forest Total North SOUTH Bromley Croydon Kingston Merton Richmond Sutton Total South WEST Brent Ealing Hammersmith & Fulham Harrow Hillingdon Hounslow Total West % Total Supply New Stock 2001 to 2005 New stock in pipeline, 2006 to 2010 405 407 24 1,675 1,126 1,220 653 5,510 0 5 440 639 184 78 0 201 123 927 2,596 0 0 0 0 0 10 84 53 0 149 259 556 905 22 18 0 665 597 2,208 10,870
13,875 1,788 12,043 1,277 1,414 302 38,785 69,483 219 294 2,592 1,118 563 335 287 2,022 544 2,209 10,183 1,081 265 150 368 1,863 333 1,637 345 402 1,119 264 4,101 747 1,444 3,467 507 7,358 968 14,492
14% 2% 12% 1% 1% 0% 39% 69% 0% 0% 3% 1% 1% 0% 0% 2% 1% 2% 10% 1% 0% 0% 0% 2% 0% 2% 0% 0% 1% 0% 4% 1% 1% 3% 1% 7% 1% 14%
623 417 618 489 320 0 2,588 5,055 0 0 695 151 175 60 0 1,930 76 504 3,593 116 179 0 102 397 24 338 180 143 77 0 761 314 298 382 134 819 713 2,660 12,467
GRAND TOTAL 100,122 100% Source: Visit London, London Hotel Development Monitor Note: Sub regions are based on the existing London Plan sub-regions.
35
New developments in boroughs with the largest increases in stock - actual and expected are summarised in the figure below.
Figure 4.4: New hotel stock by borough (boroughs with greatest growth in rooms)
Westminster Lambeth Newham Hillingdon Southwark Tower Hamlets Hounslow Wandsworth Brent City Camden Islington Greenwich Kensington & Chelsea 0 Bedrooms 500 1,000 1,500
New Stock 2000 to 2005 New Stock 2006 to 2010

2,000 2,500 3,000 3,500
Source: Visit London, Visit London Development Monitor
36
5 Hotel market characteristics
Key points
The main branded hotels comprise 12% of the total stock of serviced accommodation and 38% of the number of bedrooms. In terms of hotel supply trends, there has been greatest growth in the budget sector (including branded budget hotels such as Holiday Inn Express and Travelodge), which has increased consumer choice. Terror events have had only short-lived impacts on hotel occupancy in London with occupancy and yields in London rebounding strongly following a modest initial downturn in the aftermath of the 7 July bombings. Nevertheless, average room rates have fallen since their peak in 2000. Hotels in London are concentrated in the central area, but are increasingly being distributed more evenly across London.
This section sets out trends in hotel types and brands and reviews key metrics such as occupancy, room rates and room yields.
5.1 Hotels by type and brand in London

Visit London has indicated that the percentage of branded budget hotels in London has increased to around 13% of the total supply in the capital, with chains such as Whitbread s Premier Travel Inn, Travelodge, IHG s Express by Holiday Inn, Accor s Ibis, Choice s Comfort Inn and Quality Hotels increasing their exposure. This growth in the budget hotel market throughout all parts of the capital, as elsewhere, has been the key trend in this industry over the last decade. In London, particularly, it has to some extent, replaced the traditional three-star hotels which were more in evidence in previous decades46. The cost of building a three-star establishment, with its higher specifications, service and food requirement is generally considered to be prohibitive in London. The gradual erosion of the mid-market three-star brands in London has possibly contributed to accusations that the capital is expensive and does not provide value- for money , Given that budget hotels have only been so evident in recent years and that central London prices are (like most major cities) high, this is unsurprising. However, as we will see later, both Paris and Geneva recorded higher average room rates than London in 2005. It is perhaps the perception of expensive that has to be addressed. In the central sub-region, it is still difficult to find cheap accommodation, unlike say Paris or Amsterdam and it is unrealistic to expect budget hotel developers to invest in the more expensive areas of the central sub-region, such as Westminster or Kensington and Chelsea, to any great extent. The dynamics of hotel demand and this industry s development and operation economics will mean that future upmarket hotel development will continue to be more viable centrally. The international business visitor and highspending US, Arab and Japanese leisure tourists for example, will still choose to be
46
In this context it should be recognised that a branded budget hotel , with limited service may still be awarded a two star grading, the same as a quality inn in the regions with good service, but limited facilities
37
located where the main attractions, retail and restaurants are located. Indeed Visit London in one of its London Development Monitors in 2005 indicated that the luxury sector is one of the fastest growing sectors across the London hotel market, with over 4,000 luxury rooms set to open over the next five years , the equivalent of 800 rooms per annum. Thistle is the largest provider of hotels and hotel bedrooms in London. The company has some 5,969 bedrooms, which equates to 6.4% of the total London supply of serviced accommodation. Hilton follows closely with 4,662 bedrooms. Both these groups operate in the upper tier category. The Inter-Continental Group operates across the tiers with its 5-star hotel in Park Lane, 4-star Holiday Inns and the budget brand Express by Holiday Inn. Accor, with its range of brands, provides bedrooms in each category, from the 5-star Sofitel to the 4-star Novotel, 3-star Ibis and budget Formula 1. The main branded hotels comprise 12% of the total number of serviced establishments and 38% of the number of bedrooms in serviced accommodation. The identified branded hotels are most dominant in the high-end of the market, comprising over half of all 4 and 5 star establishments in London. We summarise below the leading suppliers of branded hotel bedrooms in London, segmented by quality of accommodation.
Table 5.1: Branded hotel supply in London, 2005, +1,000 rooms
Rank Brand/Group Establishments Rooms
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Thistle Hilton Premier Travel Inn Holiday Inn Travelodge Novotel (Accor) Express by Holiday Inn Marriott Radisson Edwardian Jurys/Jurys Inn Etap, F1, Ibis (Accor) Millenium Park Plaza Best Western Grange Hotels Total
21 14 27 12 17 8 17 8 10 7 9 4 4 13 13 184
5,969 4,662 3,658 3,164 2,495 2,072 1,998 1,920 1,768 1,603 1,571 1,392 1,277 1,103 1,097 35,749
Source: Martin Info, Visit London Note: There have been recent changes in branding of hotels by Thistle since this data was compiled and the total number of hotels for this chain is thought to now be 19 hotels in London.
5.2 Recent new openings and proposed hotel projects by leading brands
Key openings in 2004 include the 590-bedroom Heathrow Travel Inn and around 1,300 new bedrooms in the Docklands/ExCel area. These hotels have been opened by leading international brands including Marriott, Accor, Inter-Continental (Holiday Inn brands), Whitbread (Travel Inn) and Ramada. These hotels cover the spectrum from budget to full- service 4-star hotels.
38
Recent increases to the boutique hotel market in central London include new openings by Firmdale Hotels (The Soho Hotel) and Malmaison in Clerkenwell. City Inn made its first opening in the capital with a 460-bedroom hotel in Westminster and Marriott opened a 216-room hotel in Kensington. Accor increased its presence on the south bank with a new 181-bedroom Novotel in Southwark. In 2005, the majority of developments were in the budget related market. Accor led the way with its 348 room Ibis at Aldgate. Other chains with openings were Travelodge (Kingston, London City Airport), Holiday Inn (Earls Court, Swiss Cottage, Brentford Lock) and Premier Travel Inn (Abbey Mills). There were also some new openings at the 4 and 5 star end of the market, with the 475 room River Park Plaza in Lambeth and the 191 room The Knightsbridge in Chelsea.
5.3 Corporate trends in London hotels

There have been a number of changes in hotel ownership in recent years with some chains downsizing and also an increase in the incidence of sale and leaseback transactions in the buoyant London property market. Such activities have enabled hotel groups to reduce their debts by freeing up equity; investors now certainly appear to be more comfortable with the risk profile of non - guaranteed profit related income streams from this sector. Transaction activity in hotels has seen Permira undertaking a 400m sale and leaseback of the entire Travelodge portfolio to Prestbury Hotels Ltd; InterContinental Hotels Group (IHG) involved in a 1bn sale of 73 hotels to LRG Acquisitions Lt; Whitbread selling its Courtyard by Marriott hotels and more recently, Hilton selling 400 hotels to Hilton Hotels Corporation of the US for 3.3 bn in order to focus on its Ladbrokes betting division. London, unsurprisingly, was also heavily involved in major transaction activity. Thistle Hotels sold off six of its properties in the capital in July 2004 as part of its general rebranding from a 3/4 to a 4/5 star hotel group and IHG sold two of its InterContinental properties to Hyatt and Radisson Edwardian. The capital s existing and future potential, both as a business and tourist centre of excellence will doubtless generate greater involvement from some of the major global players, as evidenced by the proposals for developments by Hyatt (Battersea Power Station) and Shangri-La (London Bridge Tower). In addition, the capital will continue to attract operators with new concepts such as easyHotel and Yotel.
5.4 Emerging and future trends and issues

The growth of the budget hotel market and the increasing investment in upmarket hotels has led to a polarization in supply and gradual erosion of the three-star serviced hotels previously provided by Thistle and Marriott amongst others. It is possible that a situation could occur in the short- to medium-term where hotel grading and quality/service provision at the budget end of the market, could become blurred to some buyers. With the new grading system agreed by VisitBritain from January 200647, the latter organisation will only promote accommodation that has signed up to be quality assessed. This harmonisation of registration and grading will doubtless bring much needed benefits to the consumer eventually. For London in the short term, the plethora of one/two/ three star establishments and budget hotel stock may appear confusing. With brands such as Travel Inn, Travelodge, Express by Holiday Inn, Ibis, Comfort, Days Inn, Campanile and Sleep Inn with different service level offerings, all likely to increase their exposure in the
47
The RAC is no longer involved in grading, but the new system was jointly agreed by VB/AA/RAC
39
capital over the next decade, clarity of grading and marketing of this budget stock will be a key consumer issue. Nevertheless, this trend has increased consumer choice including greater choice of location. This trend is likely to continue in the future as hotel groups seek to exploit the burgeoning demand, in the east and western boroughs particularly. With the near saturation of roadside and motorway sites, greater flexibility will need to be shown by both planners and developers if this demand is to be satisfied. For example some solutions may include the alteration or refurbishment of redundant buildings into hotels, rather than completely new build, as well as the development of sites around the M25 corridor and other key transport corridors. In this context, there may well be tensions between planning policies, which do not encourage such developments adjacent to main highways and roads and the interests of local boroughs and developers whom they wish to support. As Table 5.1 above showed, nearly 43% of London s hotel bedrooms are provided by major hotel groups and/ or brands. With the increasing trend of sale and leaseback transactions and the greater involvement of private equity and other funding institutions, such major corporate activity is unlikely to decrease. In such circumstances and with most of the major groups well represented throughout the boroughs with their various brands, the following areas will need to be considered when future developments are contemplated: Major groups (such as IHG with four well known brands, i.e. Express, Holiday Inn, Crowne Plaza and InterContinental), will be aware of the impact of further development within certain geographical areas if existing coverage is already reasonably extensive. Planning regimes, especially in central London, where authorities have in the past often failed to be flexible when developers/ operators have requested changes to existing guidelines (e.g. incorporation of apartments). The continued growth of London s financial sector will mean more developments geared to this market and the meetings/ business tourism market generally. This is likely to include larger developments with leisure facilities, more bedrooms, but also with more flexible meeting facilities and (subject to planning), apartments, aparthotels, or even hotels with apartments located very close by that can enjoy the hotel s facilities ( e.g. Capital, St James and Ritz Hotels).
5.5 Hotel occupancy

Following the recession of the early 1990s and the first Gulf War in 1991, demand at London s hotels steadily improved over the decade. By 1997 London hotels reached a peak level of performance. An average occupancy level of almost 84% was recorded coupled with, for the first time, an average room rate of over 100. Rates growth continued into the new decade and occupancies stabilised at around 81% in 2000. The Millennium Effect was apparent in the high occupancy and average room rates in the first year of the new century. There was dramatic change in 2001 as the capital s hotel sector was affected by significant and largely unforeseen global events. These were the Foot and Mouth disease outbreak, the economic slowdown in the United States and the terrorist attacks of 11 September.
40
2002 saw subdued conditions in the London hotel market with strength in the domestic tourism marketing preventing an even worse performance. 2003 did not start well with the build up and outbreak of the Iraq war, the SARS virus and generally sluggish world economies. April saw the lowest point for London hotels - the worst month on record at 60% occupancy. Demand levels steadily improved in 2004 and the upturn supported improved performances by the leading hotel groups. The London bombings threatened to derail the recovery taking shape in the sector. After a hit to occupancy in August 2005, the sector has shown considerable resilience and occupancy has gradually improved. London's market strength with international visitors has been underpinned by intervention marketing by Visit London and the Totally London campaigns. Occupancy rates for London's main sources of data are summarised in the Figure below. There are substantial seasonal variations evident in occupancy rates. Smoothing the series for seasonal variations shows three distinct dips in occupancy over the past three years related to terror events, or the war on terror.
Figure 5.1: Hotel occupancy
% Occupancy
90 85 80 75 70 65 60 55 50 45 40 Jan-00
Impact of September 11 Impact of War on Terror and SARS Impact of London bombings
Seasonally Adjusted Series
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Source: Press releases from PKF, Deloitte, TRI Consulting
Average room rates have been subdued over the past five years. In real terms, room rates fell by around 17% between 2000 and 2003. Occupancy was also subdued over this period. More recently room rates have made a modest recovery, increasing by 8% in the last two years. Occupancy has also grown slightly over this period. In the five years prior to 2000, strong growth of 4.5% per annum was achieved by the sector. Perhaps surprisingly, this was accompanied by a period of falling occupancy.
5.6 Room rate trends

Real average room rates and average room yields (adjusted for seasonal variations and inflation) have generally followed the same pattern. However, in the period prior to 2000, Figure 5.2 suggests the absence of widespread discounting amongst chains to fill rooms. Between 2001 and 2003 hotels have reduced room rates in response to weak demand conditions, and a modest recovery has been evident over 2004 and 2005.
41
The relationship between average room rates, the average revenue per room (both in real terms, ie. adjusted for inflation) and occupancy levels are summarised in Figure 5.2 below.
Figure 5.2: Hotel occupancy and average room rates, seasonally adjusted
%,
120 110 100 90 80 70 60 50 40 Nov-96
Occupancy (%) Real Room Rate (/night/room) Real RevPAR (/room/night)

Nov-97 Nov-98 Nov-99 Nov-00 Nov-01 Nov-02 Nov-03 Nov-04 Nov-05
Source: PKF, Deutche Bank, ONS, Grant Thornton
London's resilience in 2005 is evident, with both the room rate and average room yields recording growth over the year. An up-tick in occupancy is evident following the events of July 7, and the real room rate has held up (albeit it at lower rates than the peak in late 2000).
5.7 International competitiveness

Deloitte monitors the performance of some 3,500 hotel bedrooms across a number of European capitals. The ranking and performance of these cities is detailed below:
Table 5.2: Hotel performance in leading European cities City Room occupancy % Average room Rate 2005* 69.3 57.7 75.2 76.8 69.1 67.8 64.1 Change 3.3% 1.7% -2.9% 2.2% 7.0% 1.0% -3.6% 2005* 186 212 151 125 115 96 87 Change 7.7% -3.4% 3.5% -0.4% 1.7% 5.0% -1.2%
Paris Geneva London Amsterdam Stockholm Brussels Berlin Source: Deloitte Note: Year to September 2005 (ie. October 2004 to September 2005).
Revpar (revenue per available room) 2005* Change 130 11.4% 124 -0.5% 114 0.6% 97 1.6% 80 9.5% 66 5.7% 56 -5.0%
Paris headed the Deloitte rankings in the year to September 2005 with healthy rises in occupancy and room rates. The resultant revpar (room yield) was 130, up 11.4% on the year to September 2004. Paris also achieved the highest average room rate of 186.
42
Geneva hotels achieved the second highest revpar due to the highest room rate of all cities at 212 per night, and despite the lowest occupancy rate of all cities. London posted the second highest room occupancy of the sampled cities despite a decline in average occupancy over the year. Although occupancy decline, average room rates in London rose over the year leading to an increase in revpar - hotel operators probably responded to falling occupancy by raising prices. Among the seven cities surveyed, London was ranked as the 3rd most highest in revpar performance, slightly behind Paris and Geneva. Berlin was the only city to record a decline in all indicators with falls in both room occupancy and the average room rate leading to a 5.0% decline in the overall revpar performance, which was the weakest of all cities.
43
6 Provision of accessible accommodation
Key points
Information on the supply of accessible rooms in the capital is extremely limited. There is a very limited number of rooms in the capital that have been assessed for accessibility. There are just 23 rooms verified as being wheelchair accessible (by Holiday Care/English Tourist Board) with only two of these including a hoist, and a total of 165 rooms formally verified as having some improved level of accessibility. A dearth of information on accessible rooms and other hotel facilities and other nonaccommodation related barriers to disabled people are limiting visits to the capital. It is likely that the Olympic and Paralympic Games will require a much greater stock of accessible accommodation, accompanied by clear information on room and facility accessibility. Greater training and awareness of the needs of disabled people for all aspects of their hotel experience will also be important in achieving an inclusive Olympics. There have been some policy interventions that have helped to improve London's offering of accessible accommodation although much remains to be done. Demographic trends suggest that demand for accessible accommodation is likely to increase in the future. Nevertheless, there is the potential for continued latent demand remaining unmet if facilities are not provided, with other destinations offering a better service for disabled people.
An important part of the study is considering the supply and demand of accessible accommodation for disabled visitors and this is the focus of this section. The intention for this study is to cover only the key issues in order that a more detailed study can be completed. The broad objectives of this more detailed study around improving accessibility for disabled visitors is set out in Appendix 3.
6.1 Supply of accessible rooms in London

In undertaking this part of the study we have met with and held discussions with a number of stakeholders and policy makers. These consultations have elicited valuable information on the stock of accessible accommodation and issues regarding the provision of accessible accommodation in London. There are two key issues regarding the supply of accessible rooms. The first, and most important issue is the scarcity of rooms. The second issue is the lack of information available to disabled people on accessible rooms in London.
44
Accessible accommodation is graded according to its suitability to people with different levels of disabilities48. Category 1 hotels are accessible to a wheelchair-user travelling independently (and refer to a 1 NAS or 1 ETB grading as carried out by Holiday Care (now Tourism for All) or the English Tourism Board respectively). Category 2 hotels are accessible to a wheelchair-user travelling with assistance (2 NAS or 2 ETB grading) Category 3 hotels are accessible to someone with limited mobility, but able to walk a few paces and up to a maximum of three steps (3 NAS or 3 ETB). Information received from Stephen Springer (John Broom Holidays) and Tourism for All suggest that there are 165 hotel rooms in London that have been formally assessed as accessible. Of these, only 23 are verified as being wheelchair accessible rooms in London, with just 2 of these providing a hoist in the bedroom49. Information on the known (verified) hotel stock of accessible accommodation is summarised in the table below.
Table 6.1: Verified (known) stock of accessible hotel rooms in London Accessible Category Number of Hotels Category 1 4 Category 2 4 Category 3 24 Total 32 Source: Stephen O'C Springer (unpublished), Tourism for All Number of Rooms 23 15 127 165
This is clearly a small number, but it should also be noted that this is only the 'known' stock of accessible hotel rooms. There may or may not be other accessible rooms in London which have not yet been identified. A key action from this study is to undertake a more detailed audit of accessible accommodation in London
The 2012 Olympic and Paralympic Games

To ensure that the 2012 Olympic and Paralympic Games is an inclusive event, the current stock of accessible accommodation will need to be assessed and likely increased. Action will need to be taken to identify the current stock and its characteristics, capture planned upgrades and compare this with expected demand for accessible rooms. According to the Bid documents, some of the capital's most prestigious 5 star hotels on Park Lane have signed the appropriate undertakings and guarantees with London 2012 and will offer fully accessible rooms and facilities for officials. Currently only the Hotel Inter-Continental and London Mews Hilton have accessible rooms as assessed by Holiday Care and only to a Category Three standard (accessible to someone with limited mobility). Therefore, further accessible rooms will be required at these and other hotels in the area and these hotels will be upgrading their facilities accordingly.
48 49
See Appendix 2 for a detailed description of the categories. As assessed by Tourism for All or the English Tourism Board
45
Action will also be required to ensure sufficient accessible accommodation for other Olympic and Paralympic visitors. In addition to demand from 2012 Olympic and Paralympic Games spectators, press, coaches and volunteers, there is likely to be demand for accessible accommodation following the completion of the London Games, with Paralympic athlete and officials and their families potentially staying on in London (travelling can be difficult for disabled people and, anecdotally, once they arrive at a destination they may spend more time there). There is a need to improve the quantity and quality of London s accessible accommodation. There will be a need to improve the available information on accessible rooms in London - for visitors to the Games as well as visitors more broadly - with current information thought to only capture a small proportion of accessible rooms in London. Further work will need to be undertaken to identify the likely demand for accessible rooms during and immediately after the London Games and the likely supply of rooms. Hotels could be encouraged to upgrade facilities by linking accessibility with promotional activities as was the case with the Manchester Games. Physical alterations to hotels take time (from planning to completion to marketing) and so an early assessment of the potential requirement for accessible rooms needs to be undertaken. The London 2012 Olympic and Paralympic Games provide an opportunity for London to improve its offering of accessible accommodation, and equally importantly, information on this offering.
6.2 Key issues with provision of accessible rooms

In conducting our interviews it became apparent that even those hotels providing accessible rooms are falling short of meeting customers needs. Some of the issues identified include some hotels: not marketing accessible rooms actively or having them assessed under the new National Accessibility Scheme); not fully understanding the needs of disabled people; not always providing comprehensive and accurate information on their facilities; not providing their staff with adequate training; not considering provision of high quality accessible rooms with the accompanying level of service as a way of increasing revenue. These issues are discussed below, with the assistance of quotes from our consultations (which were conducted on an anonymous basis) to illustrate the issues with the provision of accessible accommodation in London.
Information provision to the market

Our research has found that there is no definitive guide to accessible bedrooms in London with only a portion of accessible rooms formally assessed. Nevertheless, even including an estimate for the number of accessible rooms that have not been assessed suggests there is a very limited supply of accessible rooms in London.
46
This lack of information is a key issue. Shoregate Consulting and the LDA undertook a study on Improving Accessibility for London's Visitor Economy in 200450. The paper noted that "if information is not easily accessible, factual and free then visitors will not be engaged". Currently, information is not easily accessible or free, and a large portion of accessible stock is not graded or included in accommodation guides. The most comprehensive guides to accessible accommodation in London are produced by Tourism for All (a national charity) and by the Pauline Hephaistos Survey Projects (PHSP). These guides list all accessible accommodation that it has assessed by region in London and provides contact details. Tourism for All also offers a booking service for its members. The Tourism for All guide (London)51 is available from Tourism for All for a cost of 5. The PHSP guide (Access in London)52 has a description of facilities in rooms to enable disabled visitors to ensure that they will meet their needs. The guide is available from PHSP for a suggested donation of 10. The Visit London website provides web links to 12 hotels that it terms are a "selection of the accommodation providers who have secured an accessibility rating". These links provide general information on the hotel and only some links have any information on accessible services available. To find out about accessibility, it is necessary to contact hotels directly.
You just have to ring each hotel individually to find out. Many helplines such as Tripscope are closing down I arrange holidays for disabled people in France and sometimes get asked by French contacts to recommend a hotel in London which has accessible rooms and I cant. I only really know of the Copthorne Tara beyond that I wouldnt have the confidence to make a recommendation
In reviewing websites providing hotel information, it is not possible to search according to accessibility categories. Best Practice case studies for hotels on improving their facilities and providing comprehensive information may assist hotels in understanding and meeting the requirements of all visitors.
Hotel facilities - information and provision

As noted above, there is a stock of accessible rooms that have not been assessed as accessible and little information is known about this stock. It is thought that there are a number of hotels that are new, or recently upgraded, that have introduced or extended their offering for disabled people. Some examples of hotels not included in the Tourism for All guide include the Great Eastern Hotel, the Landmark Hotel and the City Inn (potentially referred to below). These hotels need to be encouraged to be graded and marketed through the Tourism for All publication.
I heard that a new hotel behind the Tate called London One had some accessible rooms. They apparently have 20 but after meeting the concierge it was clear that they dont understand this market at all
Interviewees stated that they believe that it is mainly 5-star hotels which have accessible rooms and these are likely to be too expensive for most disabled people (although our
50
London Development Agency and Shoregate Consulting Ltd, Improving A ccessibility for London s Visitor Economy, April 2004 51 Tourism for All, London, 2005 52 Crouch, G., Forrester, W. & McGauchey, D., A ccess in London: Essential for anyone who has difficulty getting around, 4th Edition, 2003.
47
research has found some budget chains offer accessible rooms, which highlight the issue of the lack of easily accessible information on accessible rooms).
I suspect that there is little provision for disabled people at the 3* and 4* level which is the category of hotel most likely to be affordable for disabled people I knowthe Copthorne has rooms but they are very expensive
Interviewees acknowledge that the age and style of many London buildings hinders their adaptation for improved accessibility. Nevertheless, there are examples of listed hotels, which have successfully upgraded their facilities to increase access for disabled people. For instance the Great Eastern Hotel in Liverpool Street was refurbished in 2000 and during this process it increased the number of accessible rooms at the hotel and improved accessibility to the main facilities. Another problem identified through the consultation is the maintenance of accessible facilities and rooms. For instance, accessible WCs are sometimes used as cleaner's stores and facilities installed in rooms are not maintained, or staff trained in their use, so that the room becomes inaccessible. One example was found of a wheelchair accessible room being upgraded to an executive suite given its larger dimensions, which made the room more expensive to disabled guests. The provision of car parking can be an important issue for disabled people visiting the capital and dedicated parking bays for disabled guests at hotels are required. Clearly, greater information on the accessibility of accommodation available in London may encourage disabled people to visit the capital by giving them the confidence that their needs will be understood and met. The dearth of free information on accessible accommodation may represent a barrier to disabled people.
Staff training
Interviewees expressed the opinion that most hotel staff need training in how to deal with reservation enquiries from disabled people. Training is also required for all aspects of the customer journey, from enquiries, to bookings, to arrival, the destination experience and departure. There is evidence, however, that the DDA is having a positive effect on this.
The Disability Discrimination Act has had and will continue to have an impact in creating accessible rooms but it is a stick effect rather than carrot. Accessible rooms are being offered out of fear rather than anything else. There is an impression that many hotels are fulfilling the requirement of providing accessible accommodation but they do not really want disabled people as guests
The Landmark Hotel stated that since the DDA they have introduced a detailed rolling training programme for all 400 staff in how to understand the needs of disabled people better and how to make them feel relaxed and at ease during their stay. The Hilton employs an external consultant as its Dis-Ability Champion which shows that the larger hotels are taking the issue seriously. Key progress in this area has been the Welcome to All programme which has been completed by over 1,500 London Industry Members. The programme provides practical advice and guidance on how to interact with disabled people and deliver service in a non-
48
discriminatory way. It also ensures that participants are aware of the key provisions of the Disability Discrimination Act.
6.3 Policy interventions

There have been a number of recent policy interventions designed to improve the supply and information on accessible accommodation.
Legislative changes
The UK's Disability Discrimination Act (DDA) 1995, which requires 'the same level of service and opportunity' for all citizens, is likely to lead to a change in provision in the future. Also, since 1 October 2004, service providers have had new duties under the DDA. Service providers are required to take reasonable steps to tackle physical features of premises, like steps or narrow doorways, that prevent, or make it unreasonably difficult for, a disabled person to access their services. Therefore, hotels are now subject to the provisions of the Disability Discrimination Act and consequently should already be providing services accessible to disabled people. Building Regulations under the Building Act 2000 provide for access and facilities for disabled people. Their aim is that, in the main, all new buildings are accessible to and useable by disabled people, which means the making key facilities accessible and providing a stock of accessible rooms. Part M, Section 4.24 of the Building Regulations require that for every 20 rooms, 1 wheelchair accessible room must be provided. Changes introduced in May 2004 extend the provisions to include alterations on existing buildings so that buildings undergoing alteration must adhere to the same requirements. However, the Regulations only cover hotels that are new or have undergone alteration, with no impact on the rest of the existing stock. These changes are thought to have increased the stock of accessible rooms in London, but as noted above, there is little known about the size of this stock. Visit London's London Hotel Development Monitor shows the development of over 25,000 new hotel rooms in London over the past 10 years, suggesting that there could be over 1,280 wheelchair accessible rooms in London. Clearly more work needs to be done to identify the stock of wheelchair accessible rooms in London's hotels. The changes are expected to lead to a greater provision of accessible accommodation and complementary tourist services in the future. However, the extent to which these legislative changes lead to an increase in accessible accommodation will depend on these facilities being maintained over time and other 'softer' enhancements, such as staff training, offering disabled people a truly accessible hotel room and visitor experience. In addition, if information on this accessible accommodation is not provided then it may not assist to unlock latent demand for accessible rooms. Nevertheless, as we will see in the section on accommodation demand below that further work must be done in this area to unlock latent demand.
Accessibility standards
New accessibility standards (through the revised National Accessible Scheme) have been developed by VisitBritain and introduced to provide more information on room facilities in a nationally consistent way.
49
The scheme allows accommodation providers to display a rating to show that their property has been independently assessed and found to be meeting rigorous standards of accessibility. Properties can be assessed under any one, two or three categories Mobility, Visual and Hearing - and therefore provide improved information to guests about the facilities included in the hotels. The full list of accessible criteria is included at Appendix 4. A guide of accessible hotels is to be produced by VisitBritain later in 2006. However, so far there has been a relatively low take-up of accessible reviews (with only four in the capital)53 and so it is uncertain whether or not this will assist to provide a more comprehensive guide to accessible accommodation. There is a perception amongst interviewees that since London hotels tend to have high occupancy rates, there is a reluctance to invest time and money in improving accessibility.
Few hotels in London are joining the National Access Scheme. The ones joining are mainly the large chains. We definitely notice a higher resistance from London hotels to both the quality and accessibility ratings due to the fact that can be full the whole time without trying too hard. We are working to get more London hotels into the scheme
6.4 Current demand for accommodation

Although there is a general view that the stock of accessible accommodation has grown in recent years driven by the Disability Discrimination Act (DDA), there is a lack of knowledge on the part of the accommodation providers as to occupancy rates of their accessible rooms as the following statements by two London hotels illustrate.
We have 4 accessible rooms but I have absolutely no idea what the occupancy rate of those rooms is. Although they are accessible they are probably occupied more frequently by non-disabled guests as demand for rooms is always high and we dont keep these rooms only for disabled guests We have 4 rooms which are suites which we have adapted to make accessible. They are frequently used by non-disabled guests and are often used as upgrades for guests as they are amongst the largest rooms. It is impossible for us to say what the occupancy rate is for accessible rooms. We havent invested too much money in making changes as we dont see huge demand
Accommodation providers are likely to be missing a business opportunity by not upgrading their rooms to provide accessibility and marketing their accessibility offering. Disabled people are thought to be more likely to return to the same hotel every time if they feel well provided for rather than non-disabled customers who are more likely to seek out a new experience.
Demand will definitely grow. Finding a hotel will be difficult initially but once a disabled person finds it and has an enjoyable experience I am sure they would go back time and time again. Confidence is all important in this market I deal with a small B&B in Shropshire which has made its facilities more accessible and the owner cannot believe how much repeat business he is getting. There is more repeat business than with non-disabled travellers. A lot of work has been done in Liverpool by the Liverpool Merseyside Partnership to try to educate operators and carry out free audits
53
Springer, S. O'C., The Promise of "Tomorrow' s Tourism", January 2006
50
Although interviewees believe that there are many more disabled people who would want to stay in a hotel in London if they knew where to go. The confidence of many of these potential customers needs to be won over.
All too often I have heard of people who have booked an accessible room and asked all the right questions only to arrive and find that some aspect of the experience is not truly accessible Sometimes the roomis accessible, but the restaurant isnt or even no-one helps with the luggage We were marketing the Copthorne Tara in our brochure. This is the only hotel in London where I would actually send customers, I wouldnt want to place them anywhere else. I think that there is a general lack of demand for hotels in London due to a lack of trust that customers' needs will be met.
6.5 London as a destination for disabled people

London is not currently seen as a destination for disabled people on holiday and their families. In a study conducted by VisitBritain in 2003 into the needs, expectations and experiences of disabled people and their carers54, London was not highlighted as a chosen destination. Issues with accommodation have been discussed above. However our interviewees agreed that a lack of accessible accommodation in London only accounts for part of the reason that people with some form of disability have a tendency to avoid the Capital. Other reasons given included: Difficulty in using the public transport system. The only real way for disabled people to move around the Capital is by taxi or by bus. The London bus fleet has been transformed and now provides step-free access, however, taxis can be too expensive for disabled people to use as their routine mode of transportation. Access to the London Underground is restricted with only a limited number of stations offering stair-free access to platforms; The fast pace of traffic and pedestrians, the design of the public realm (including a lack of seating, difficulty in using pedestrian crossings and uneven pavements) and a general lack of regard/consideration for disabled people; Lack of accessible toilets (which also impact on parents with young children in pushchairs from participating in London life); Lack of accessible restaurants and cafes with accessible toilets. Poor lighting, acoustics and small print menus can make eating out difficult for people with a sight or hearing impediment. Visitor attractions can be inaccessible to deaf and hard of hearing people55 Awareness of the needs of deaf and hard of hearing people more generally is a significant issue. Positive steps include the introduction of hearing loops, specialised guides and greater information (for instance through www.magicdeaf.org.uk).
54 55
VisitBritain, April 2003, Holiday Taking and Planning Amongst Disabled People. Shoregate Consulting Ltd and London Development Agency, Improving Accessibility for London's Visitor Economy, second edition, April 2004.
51
Certain other European cities are considered to be easier destinations for disabled people and with improved accessibility of air travel could potentially attract disabled people in preference to London:
Amsterdam is very good. It is very compact which gives it an advantage over London. It also has a much higher level of pedestrianisation than London (also an advantage for a City visit with young children) Barcelona is a city which has done a lot to improve its infrastructure for disabled people. Most buses in Barcelona are nowwheelchair accessible The access created in Athens for the Olympic Games was amazing. They really did an exemplary job with the tram and metro systems. That said, they didnt do as well with accessible rooms in hotels .
A number of destinations are marketing themselves as suitable for disabled travellers. If London is not perceived as accessible, then the potential for greater demand by disabled travellers as well as latent demand, will be filled by alternative destinations. Box 6.1 below outlines results of studies conducted by Open Doors Organisation in the United States. The studies outline the considerable spending power of the disabled market in the US as well as some of the barriers to spending being realised.
52
Box 6.1: Travel by disabled US Citizens The Open Doors Organisation (ODO) in cooperation with the Travel Industry Association of America (TIA) has commissioned a number of studies into the disabled travel and service markets in the US. Findings include: o more than 21 million disabled adults travelled for pleasure and/or business in 2003 and 2004. This was up 50% from 2002. a 2002 study found that disabled people spend approximately $13.6 billion annually on travel. The study suggested that revenues from this market could easily double if certain needs were met and obstacles removed. Needs include a "meet and greet" at airports and preferred seating as top issues for the airlines while lodging issues include the need for rooms close to amenities and staff members that go out of their way to accommodate disabled guests. Among those disabled people who have travelled by air, 84% said they encountered obstacles when interfacing with airline personnel and 82% said they encountered obstacles at airports. 60% of disabled travellers who have stayed overnight in paid accommodations said they had problems at these properties, either physical barriers (48%), problems with customer service (45%) or communication barriers (15%). 20% of disabled travellers rented a car for travel in 2003 and 2004. 50% said they would be more inclined to rent a car if it were delivered to and picked up from them, and 36% said they would be willing to pay more for this service.
According to ODO, there are currently 30 million people over the age of eighteen with disabilities living in the United States. Assuming that incidence rates by age remain the same, by the year 2030 the total number of disabled people will increase by 30.9 million and the number of severely disabled people will increase by 21 million, when compared to 1997. This is due to an aging of the population: the 55-64 age group will swell from roughly 23 million in 2000 to 42 million in 2020. By then, 1 in 6 Americans will be age 65 and older.
6.6 Looking forward

As noted above, there is currently a very limited supply of accessible accommodation for disabled people and there are a number of issues regarding its provision (including staff training, non-accommodation barriers, cost and confidence in facilities). This study has found evidence suggesting that these issues are limiting demand. However, this is difficult to test in detail. There is also a lack of information on occupancy rates for these rooms (although they are thought by industry to be high, but are less than 100%56.) Further work must be done to test the extent of latent demand for accessible rooms. Nevertheless, there are currently an estimated 100 million people in the EU alone with a propensity to travel more, if hotels, attractions and other tourism facilities were more accessible.57 Furthermore, the Department of Works and Pensions (DWP) has estimated that the spending power of disabled people in 2003-04 was over 80 billion.58
56 57
Discussions with Tourism for All, The Landmark, John Groom Holidays. Shoregate Consulting Ltd and London Development Agency, Improving Accessibility for London's Visitor Economy, second edition, April 2004. 58 DWP, Press Release, 9 February 2006.
53
Looking forward, it is expected that demand for accessible accommodation across the world will increase. The key factors influencing this are likely to be: an ageing of the population; an increase in spending power of the aging population; and a potential increased propensity to travel for the over 65s. The ageing of the population across the western world is well documented and is due to demographic change and increasing life expectancy. The ageing of the 'baby boomers' is likely to have implications for the number of disabled travellers and therefore the need for accessible accommodation in London: As baby boomers age, they are likely to develop disabilities; they currently travel and are likely to want to continue to travel; and since they have been in the workforce for most of their life, they are likely to have more disposable income than disabled travellers may have previously had in the past. Below we consider population and disability trends for the UK population. These trends are mirrored in other developed countries including Europe and the United States. Data from the 2001 Health Survey for England undertaken by the NHS shows a clear correlation between disability and age. This is illustrated in Figure 6.1 below.
Figure 6.1: Prevalence of disability by age
Prevalence of disability (%)
40 35 30 25 20 15 10 5 0 16-24 25-34 35-44 45-54 55-64 65-74 75-84 85+
Moderate Disability
Serious Disability
Source: NHS: Health Survey for England 2001
54
Like many developed countries, the average age of the UK population is expected to increase over time. In particular, the number of people aged over 65 is expected to increase from 16% of the population in 2004, to 21% in 2026, and to 25% in 2044. This is illustrated in Figure 6.2 below.
Figure 6.2: Demographic change and long term population projections
Proportion of the total population 35% 30% 25% 20% 15% Under 25 10% 5% 0% 2004 2008 2012 2016 2020 2024 2028 2032 2036 2040 2044 25-45 45-65 Over 65
Source: Government Actuary Department: Population projections 2005
Combining this information, it is possible to estimate the potential implications of demographic change on the number of disabled people. As can be seen in Table 6.2 below, the estimated number of people with moderate or serious disabilities is expected to grow by 27% over the period from 8.6m to 10.9m. This is three times faster than growth in the total population. The proportion of people with a disability (based on the definition used in the NHS Health Survey for England) is expected to rise from 14% in 2006 to 17%. (The DWP has put this figure even higher with latest estimates suggesting 9.5m adults in the UK with a disability).59
Table 6.2: Key population and disability statistics % change 2006 to 2026
2006
2026
UK population projections ('000) Total population over 65 ('000) % population over 65 Estimate of population with disability ('000) - Moderate disability ('000) - Serious disability ('000) Proportion of population with a disability
60,533 9,708 16% 8,595 6,033 2,562 14%
66,002 13,922 21% 10,905 7,503 3,402 17%
9% 43% 27% 24% 33%
S o u rce : E stim a te s b a se d o n G o ve rn m e n t A ctu a ry D e p a rtm e n t: P o p u la tio n p ro je ctio n s 2 0 0 5 , N H S : Health Survey for England 2001.
59
DWP, Press Release, 9 February 2006
55
The implication of this trend is that the number of disabled people will increase over time consistent with the ageing of the population. In addition changes in work patterns and retirement provisions suggest that today's baby boomers will have greater spending power in retirement than in the past. They are also likely to travel more as a result of this rise in wealth, and also due to the general rise in the propensity to travel at all ages. Baby boomers who are currently travelling extensively may seek to continue to travel in the future. In 2004, 23% of all UK residents visiting London were aged 55 or over (UKTS). In 2002 (the latest year for which data is available), 15% of all overseas residents visiting London were 55 years of age or over (IPS). According to VisitBritain, this over 55 segment is already the UK's fastest growing overseas market.60 Thus, there is likely to be a rise in travel amongst over 65s, by those with and without disabilities, and has the potential to substantially change the need for accessible accommodation. Nevertheless, London will not gain from demand in this market if accessible accommodation, attractions and transport are not provided, or if information on facilities is not readily available. As we have seen previously, less UK residents are visiting London, and the UK is slipping in its market share of all international destinations.
6.7 Next steps

There would be considerable benefit from further research into the accessible accommodation offering and a survey of disabled people who are potential visitors to London. While the market is clearly growing, further information on future demand and key issues for disabled visitors would help accommodation providers to plan changes to their accommodation offering in the future. Key elements of the research would include reviewing current travel patterns of disabled people to London, the likely future demand (including latent demand) for travel to London and trends in the supply of accessible accommodation. Appendix 3 provides a more detailed discussion of the broad objectives that this study would cover.
60
Bill Ishmael, V isitBritain, Case Study: Leading ALL the World to Britain presented at One-Stop-Shop for Accessible Tourism in Europe (OSSATE) 2nd International Workshop, Athens 8 - 9 September 2005
56
7 Forecasting hotel demand
Key points
An econometric analysis has been used to identify the key drivers of London visitor nights. Key variables included in the model include world GDP, exchange rates, and adjustments for the Millennium effect and events of September 11 2001. Demand from international visitors is expected to drive demand for serviced accommodation in London with more modest increases in demand expected from domestic visitors in line with recent performance. Research shows that the Olympic Games will have a long term impact on demand, including through post-Olympics conference demand.
7.1 Overview
This section sets out our projection of London hotel demand needs to 2026: The major determinant of hotel rooms is the number of London visitor nights, which has been estimated using a combination of econometric and spreadsheet analysis. The trend growth in the number of nights spent in London by international and domestic visitors is postulated to be dependent on macro economic factors, particularly UK and World GDP. This is a so-called exogenous growth model approach. The underlying logic is that higher GDP (income) will increase marginal propensity to consume which will then increase hotel demand in London. Nights spent in London by domestic and international visitors are translated into a hotel bedroom requirement based on assumptions on the future path of occupancy levels, hotel room rates, and the degree to which people stay in hotels as opposed to friends and relatives or other forms of accommodation. Different scenarios have been developed to show the range of likely demand under a variety of different probabilities, given that any 20 year long-term forecast is subject to a wide range of uncertainty.
7.2 Forecasting visitor nights

The starting point for an assessment of future hotel demand is a forecast of the number of visitor nights in London to 2026. To forecast visitor nights, we have used the statistical and econometric technique of regression analysis. This allows us to estimate the
57
relationship between the variable of interest, in this case visitor nights spent in London, and a series of explanatory variables such as exchange rates, hotel rooms rates and economic factors such as GDP, consumer expenditure and other economic variables. Different exogenous growth scenarios have been developed to show future requirements under a variety of different probabilities. These scenarios take into account strategic risks which may affect the London visitor market by presenting the outputs in terms of different scenarios. In addition, whilst the regression analysis has identified the underlying trend in the data, the relationships are likely to change significantly over the next 20 years. These changes are captured by three different scenarios (low, central and high), with the central scenario defined as the most realistic scenario.
International visitor nights

Our econometric analysis suggests that every 1% increase in the GDP per capita of the origin country of visitors (US, France, Germany etc) produces a 0.96% increase in the number of nights spent in London by visitors from that origin country. A more detailed discussion of the econometrics undertaken to arrive at this estimate is given in the Appendix 1. Our central assumption is that GDP per capita increases by 3.2% each year over the 20072026 period61. This increase is the average of all countries across the world weighted by the size of each countries GDP. The central assumption therefore already captures the effect that visitor numbers from emerging economies such as China and India are expected to increase faster than average because their economies are also growing above the global average. In contrast, slower growth in visitor numbers from France or Germany will be taken into account as these economies are growing below the global trend. Under this central assumption, the number of international visitor nights is forecast to increase to around 155 million by 2026. This growth represents a 2.4% per annum increase in the number of nights demand over the 2007 to 2026. Average annual growth is estimated to be faster over the initial 2007-16 period at 3.2% per annum but then declines as the market reaches maturity to 1.7% per annum over the 2017-2026 period. The key assumption for this decline in growth rate is that we assume that the GDP per capita elasticity declines by one-half over the 2016-2026 period. This reflects the consideration that as the market matures, the income elasticity of demand declines. It is very unlikely that growth will continue at the same pace in perpetuity, as there will not be enough other physical infrastructure to sustain such a continued increase. The impact of this assumption is that the growth in international visitor nights is moderated from 2016 onwards. This assumption follows the work undertaken by the Department of the Environment, Transport and the Regions in their forecasts of air passenger traffic at UK airports62.
"A key issue in long term air traffic forecasts is the degree to which a particular market is mature, that is whether or not there will be a significant fall in annual growth rates overtime. The growth in demand for products and services can be characterised into three lifecycle phases: low growth following its initial introduction with limited consumer awareness and supply; followed by rapid growth as the product achieves greater market awareness and supply expands to fill the new
61
Figures for 2005-2010 taken from IMF Economic Review 2005; Panel 3 (World Real per Capita GDP). This growth rate is then assumed to continue at the same rate over the 2011-2026 period. 62 The Department of the Environment, Transport and the Regions, A ir Traffic Forecasts for the United Kingdom 2000, June 2000
58
market; finally slower growth once the product has become established and the market approaches saturation. In the longer term, time constraints are also expected to limit demand for air travel, particularly for leisure purposes. Market maturity implies declining income elasticities over time".63
As well as the central scenario, we also present two further scenarios: a high growth scenario where GDP per capita growth is assumed to accelerate to 4.0% per annum, and no decline in GDP elasticity is assumed after 2016. These factors reflect the possibility that tourist numbers from emerging markets such as China and India could grow at faster rates than would be explained by increases in their countries GDP; and a lower scenario where GDP per capita growth is assumed to fall to 2.5% per annum and a faster decline in income elasticity is observed, with the coefficient declining to one-third its value over the 2016-2026 period. Under these alternative low and high assumptions, the number of international visitor nights is estimated to increase to between 130 million and 200 million by 2026. This is a wide margin reflecting the uncertainties involved in forecasting the future over a 20 year period. The scenarios (low, central and high) are shown in the diagram below. The step change in the growth rate in 2012 reflects the impact of the Olympics, which is discussed in the next Section.
Figure 7.1: Projections of the number of nights spent in London by non-UK residents
Nights spent in London (million) by international visitors

'
180 160 140 120 100 80 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 60
Low scenario
High scenario
Central scenario
Domestic visitor nights

The domestic market is a less significant driver of the London hotel market than the international market. In 2004, only around 29.7 million nights were spent in London by UK residents compared to 90.2 million nights spent in London by non-UK residents. Nevertheless, this it is still a sizeable component of the market, accounting for onequarter of London visitor nights. We have therefore undertaken the same forecasting approach for this segment, namely quantitative econometric analysis of the impact that
63
The Department of the Environment, Transport and the Regions, A ir Traffic Forecasts for the United Kingdom 2000, June 2000
59
GDP, GDP per capita and other economic variables has on the number of visitor nights spent in London by UK residents. Using econometric techniques, our central estimate of the underlying trend growth in the domestic market is around 2.3% per annum. This is based on is annual visitor nights spent in London by UK residents over the 1985-2004 period, controlling for factors such as the change in the survey methodology and the Millennium Effect . The growth assumptions for the low and high scenarios are for annual increases in visitor nights spent in London by domestic visitors of 0.9% and 2.7% per annum respectively. The low scenario is based on a simple linear trend fit of the data over the entire 19852004 period, whereas the high scenario is based on a liner fit over the 1990-2004 period (ie excluding the 1985-1989 period when a different survey methodology was used). Under these alternative assumptions, we estimate that the number of domestic visitor nights is estimated to increase to around 57 million by 2026 under the central scenario, with a range of 40 to 70 million under the low and high scenarios respectively.
Figure 7.2 : Projections of the number of nights spent in London by UK residents
Nights spent in London (million) by domestic visitors
60 50 40 30 20 10 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 0
Low scenario
High scenario
Central scenario
60
7.3 Additional Olympic visitors

The above forecasts include estimates of the impact of the Olympics. The decision by the International Olympic Committee (IOC) to hold the 2012 Olympic Games in London is expected to benefit every part of the UK, with each region likely to receive additional leisure and business visitors in the years before, during and after the Games.
Estimate of impact for London of 2012 Olympic Games

With estimates of up to an extra 0.5 million visitors to London in 2012 and possibly for four/five years thereafter, the capital s accommodation supply and demand equation is naturally crucial. Whilst accommodating extra visitors to the Olympic and Paralympic Games over such a short period should not govern overall planning for the period to 2016, it has been important to establish whether there is sufficient accommodation supply to cater for these two events within the immediate city hinterland. The percentage increase in tourism arrivals expected due to 'legacy effects' from the Olympic games has been estimated as follows and incorporated into our forecasting models64. These estimates take into account displacement effects, which are often ignored in Economic Impact assessments of Olympics, e.g. tourists who would normally arrive during games period are discouraged from visiting due to perception of high prices, congestion and residents are encouraged to leave host city for duration of games. A lesson learnt from previous games is that forecast visitor expenditure is often overestimated. In Los Angles, 25% of tickets were not sold and International visitors to games was therefore overestimated65.
Table 7.1: Increase in visitors as a result of Olympics (%) Area UK Level London Level Source: Blake Year 2006 -2011 2012-2016 2006 - 2011 2012 - 2016 Low 0 -4 1 -2.5 Medium 1 1.5 2 3 High 2 7 3 8.5
The table below shows the estimated (central estimate) number of visitors and days spent at the Olympic Games. Ticket allocations from 2012 ticket allocation model suggests 9.8 million tickets will be available with 82% expecting to be sold, 15% of which are expected to be to overseas visitors with 80% going to domestic visitors. It is likely that only the 'rest of UK' (i.e. excludes Londoners) and Foreign visitors will require hotels/accommodation during their stay therefore from the table above, this suggest 1.4m visitors spending 8.2m days (an average of 5.7 days per Foreign/'Rest of UK Visitor') visiting the Olympics and likely to require accommodation.
64 65
Blake A., The Economic Impact of the London 2012 Olympics, 2005 Blake A., The Economic Impact of the London 2012 Olympics, 2005
61
Table 7.2: Estimated Visitors to the Olympics Year (before/after Olympic year) London Residents RUK & tourists Foreign Tourists All athletes London officials RUK & Foreign Officials London Media RUK & Foreign Media London Volunteers RUK Volunteers Foreign & RUK Sponsor visitors London Sponsors Olympic family Foreign & RUK Total Source: Blake, Grant Thornton Visitors ('000) 4,983 1,101 275 15 2 9 1 19 45 2 7 7 6,466
Days('000)
4,983 3,320 3,051 461 44 244 20 613 987 52 214 7 201 14,197
Impact of past Olympic Games on visitor numbers

As a consequence of the 1998 Seoul Olympics, there was a 78% increase in international visitors to Korea from 1986 - 1990. (By 2002, up 222% on 1986 levels to 5.3m). The 2000 Sydney Olympics saw a 16% increase in international visitors to Australia from 1998 to 2002 and the 1996 Olympics in Atlanta saw a 4% in international visitors to the US between 1994 and 1998. More specific effects were available to us for the 1992 Games in Barcelona as follows (with Spain as a whole seeing an increase of 27% in international visits between 1990 and 1994)66.
Table 7.3: Olympic impact on visitors and visitor nights Year (before/after Olympic year) -2 -1 0 +1 +2 Nights % increase in nights 3,796,000 4,090,000 4,333,000 4,257,000 4,705,000 7.7 5.9 -1.8 10.5 Visits % increase in visits 1,733,000 1,728,000 1,875,000 2,455,000 2,664,000 -0.3 8.5 30.9 8.5
Source: Barcelona Tourism Statistics, Deloitte & Touche LLP
It can be seen from the varying impacts of previous Games that it is hard to predict with any certainty the impact on visitor numbers the London Games will have.
Impact of Olympics on conferences

Whilst business travel is likely to decline during the Olympic period in 2012, it is likely that London can benefit from increased exposure to international markets as a World Renowned city for holding conferences/ exhibitions.
66
Barcelona: Barcelona Tourism Statistics, 1997; Deloitte & Touche LLP, Tourism, Hospitality and Leisure Executive Report, 2005
62
Barcelona has recovered much of its declining hotel occupancy after the Olympics, where supply significantly outstripped demand, by promoting itself as a venue for international conferences. It is estimated the number of delegates increased on average at a compound growth rate of 21% a year with a 64% annual increase in convention and incentive business since 1996. The Sydney Convention and Visitors Bureau believes that being chosen for the 2000 games in 1993, it has gained on average 34% more events each year. It is hoped that London can benefit from similar growth in conferences. The possibility of opening an International Conference Centre post the Games would support London in being a premier destination for hosting conferences. Winning the Olympic Games bid gives international planners the confidence of London's ability to host large scale events. Additionally conference activity increases a city's profile amongst people who would otherwise not visit and influence first time visits, thus increasing the potential number of extended stays and return visits to London (and the UK) . Given also the expected growth of the business market, the resilience of the sector, the increase in conferencing that past Olympic cities have seen and the potential of emerging markets such as China (China's economic reforms are creating an increasing affluent middles class with outbound tourism growing rapidly), the London ICC presents itself as a huge opportunity for London.
7.4 Review of other forecasts

Worldwide
Strong level of growth is expected in international tourism attributable to pent up demand after years of restrictions and difficulties, an improved international political situation and a stronger world economy. Leisure travel has been growing at a superior rate to that of business, but this sector is expected to become more competitive once again. After a global shift towards intra-regional short-haul travel, necessitated by economic difficulties and security fears, the long-haul market is expected to display the highest rates of expansion in the coming decade67. The assumptions made under the World Tourism Organisation's long term forecast to 2020 made in 2000 are still believed to hold where in the short term periods of fast grow alternate with slow growth. The actual pace of growth reached in 2005 has actually exceeded the 2020 vision, but it is expected the current slowdown will be compensated in mid- to long term. Under this forecast, International arrivals expected to reach > 1.56bn by 2020, with 1.18bn of these being intraregional and 377m long haulers68. Asia Pacific, the Middle east and Africa are forecast to grow rapidly over 5% per annum compared to a world average of 4.1% growth in arrivals. The more mature regions of Europe and America are forecast to have slower than average growth and Europe, although having highest share of arrivals still will decline from a 60% to 46% share in 2020. Long haul travel is predicted to grow faster at 5.4% pa. on average shifting the ratio between intra regional and long haul from 82:18 in 1995 to 76:24 in 202069.
67 68
WTO, World Tourism Highlights 2005 WTO, World Tourism Highlights 2005 69 World Tourism Organisation (WTO), Tourism 2020 Vision, 2001
63
UK forecasts
Overseas visits to London are forecast to continue growing strongly, expected to reach 14.9m in 2006 (growth of 4%), however the domestic market is expected to continue to decline (decreasing 2.1% to 11.75m visits in 2006). Overall, visits are expected to grow by 1.2% to 26.6m in 2006. The fastest growing markets in arrivals to London are expected to be Eastern Europe, and Asia with strong economic growth prospects and increasing availability of air travel to the UK underpinning this70. London visitor spending is forecast to increase at a higher growth rate than arrival number, with growth of 2.7% overall (to 9.8bn) by 2006. This comprises a growth of4.5% to 7.2bn from overseas tourists compared to a decrease in domestic visitor spending of 1.9% to 2.6bn71. In the seminal work on air traffic forecasts undertaken by DETR (2000), domestic and international air traffic is forecast to grow by 3.5% and 4.6% per annum respectively over the 1998-2020 period72. These are unconstrained forecasts in the sense that it is assumed that there are no supply side limitations. In particular, new runways and terminals are assumed to be built at various airports to meet new demand as and when necessary. Clearly, the public scrutiny required for such large infrastructure project together with the long timescales involved in planning (eg Terminal 5) will mean that it is likely that actual (constrained) growth will much lower than the above figures. Indeed, the historical growth rate in the number of international visitors to the UK (by all modes: air, sea and land) is only around 3.2% per annum over the 1979-2004. International visitors to the UK have increased from 12.5 million in 1979 to 27.8 million in 2004, a total increase over the period of 122%. Both the DETR's air traffic forecasts and the historical growth in international visitors are significantly higher than our forecasts of growth in international visitor nights of 3.1% over the 2004-16 and 1.7% per annum thereafter. The reason for this discrepancy is that visitor nights has been growing significantly less than visitor numbers, as shown in the figure below. Since 1979, visitor nights spent in the UK by non-UK residents has increased by just 1.6% per annum compared to the average annual increase of 3.2% in international visitors. In 1979, non-UK residents spent on average 12.4 nights per trip, whereas by 2004 this had decreased to only 8.2 nights per trip.
70 71
Visit London, Visit London: Prospects 2006, 2006 Visit London, Visit London: Prospects 2006, 2006 72 The Department of the Environment, Transport and the Regions, A ir Traffic Forecasts for the United Kingdom 2000, June 2000
64
Figure 7.3: Visitors and visitor nights in the UK by non-UK residents (1979-2004)
240 220 200 180 160 140 120 100 80 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Index (1979 = 100) Non-UK residents visits to the UK visitor nights in the UK by non-UK residents
Source: IPS, UKTS, Grant Thornton
7.5 Summary
The total number of visitor nights spent in London by UK and non-UK residents is expected to grow by 69% over the 2004-2026 period, from around 120 million in 2004 to just over 200 million by 2026.
65
8 Conclusions on the supply benchmark
Key points
We estimate that an average of 2,000 net extra hotel rooms would be required in London each year over the next two decades if no additional constraints are put on the hotel industry. We also explored what the hotel rooms requirement would be if there were policy or planning constraints that meant that the growth in hotel rooms was in some way restricted. This constraints were represented by changes in occupancy rates, room rates and visit per guests.
8.1 Translating visitor nights demand into hotel rooms

Visitor nights are translated into hotel bedroom demand taking into account occupancy levels, the proportion of visitors who stay in hotels and guests per room: the number of guests per room. Another factor which affects the number of rooms required, is the average number of people who stay per room. This is not a widely reported statistic. Given that statistics are reported on the number of visitor nights, the proportion of people who stay in hotels and the occupancy rate, we can calculate an implied average number of guests per room, which is given in Table 7.6 below, and ranges from 1.45 to 1.5673. the proportion of visitors who stay in hotels and serviced accommodation. In 2004, 30.5% of international visitor nights in London were spent in hotels (where hotels are defined as hotels, guest houses or B&Bs) while 49% of nights were spent with family and friends (defined as own home or other). the occupancy rates of hotels. Over the past six years, occupancy has varied between 60 and 90%, averaging just under 80%. Occupancy rates has been steadily improving since 2001 and reached 77% in 2004. Our assumptions and projections for each of these variables are discussed below.
Number of guests per room

A summary of these variables over the past five years is given in the table below. As we know the number of visitor nights, occupancy levels, the proportion of people who stay in hotels, and occupancy levels, we can estimate the average number of guests per room. Over the 2007-2026 period, we assume that the number of guests per room remains the same.
73
This is similar to the figure provided in the PwC report of 1.5 which is based on industry intelligence.
66
Table 8.1: Key Estimates of implied guests per room Source 2001 Visitor nights - international IPS 76.1 Visitor nights domestic UKTS 39.8 % Stay in Hotels (international nights) IPS 32.6% % Stay in Hotels (domestic visits) UKTS 34.0% Hotels visitor nights (million) Calculation 38.3 Hotels visitor nights per day(000s) Calculation 105,045 Supply Number of rooms VL 91,270 indicators Occupancy level of rooms PKF 72.9% Total rooms occupied Calculation 66,536 Implied guests per room Calculation 1.56 Source: Tourism Trends, Star UK; Note: 1 Assuming 365 days per year Demand indicators 2002 2003 2004 75.4 78.9 90.2 35.4 32 .8 29.7 33.5% 32.0% 30.5% 40.0% 44.0% 42.0% 39.4 39.7 40.0 108,028 108,857 109,617 93,284 96,294 98,421 74.2% 73.6% 77.0% 69,217 70,872 75,784 1.56 1.55 1.44
Note: Percentage stay in hotels and serviced accommodation for international visitors is based on the proportion of nights spent in hotels fromthe IPS (where hotels are defined as hotels, guest houses or B&Bs). Percentage stay in hotels for domestic visitors is based on the proportion of visits spent in hotels and serviced accommodation using the UKTS (where hotels are defined as hotel, motel, guesthouse and B&Bs).
Percentage stay in hotels

The number of international visitors who stay in hotels has been declining as a proportion of the total over the past decade. In 1995, international visitors nights spent in hotels accounted for 39.8% of the total, but by 2004 this had declined to 30.5%. The main reasons for the decline is likely to have been the growth in the visit friends and relatives (VFR) market. In the UK, in 1984 VFR accounted for 19.2% of the market but by 2004, this had increased to 28.3% We have assumed that the trend in the proportion of people who stay in hotels continues to decline in a logarithmic manner. This specification is used as it not only provides a good fit of the data but is also a relatively simple functional form. It also means that the rate of decline gets less and less. If a liner specification is used instead, then the rate of will continue to decline at the same rate and the proportion of people who stay in hotels will eventually decline to zero - which is clearly not logical. Under the logarithmic specification, the percentage of people who stay in hotels under the central scenario falls from 30.5% in 2004 to 29% by 2016 and 27% by 2026 (see figure overleaf).
67
Figure 8.1: Projections of the percentage of people who stay in hotels (1995-2016)
45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 y = -0.04Ln(x) + 0.41 R2 = 0.93
% say in hotels by non-Uk residents vistits to London
Occupancy rates
Demand levels have been steadily improving since 2001 which has led to occupancy rates to rise from an near record low in 2001 of 72.9% to 77% in 2004. 2001 saw an all-time low as the London was tourism was affected by the Foot and Mouth disease outbreak, the economic slowdown in the United States and the terrorist attacks of 11 September. But the occupancy levels are still a significant way off the 83%-84% reached in the mid90s. We expect the occupancy levels to continue and in our central scenario have factored in a slow increase in occupancy from 77% in 2004 to 80% by 2012 as tourism continues to strengthen.
8.2 Forecasts of hotel rooms required

To meet the increased domestic and international tourist demand we estimate 40,000 extra (or net) hotel rooms might be required over the 2007-2026 period (medium level scenario): On an annual basis, this equates to 2,000 net extra hotel rooms per annum over the period to 2007-2026. In the first decade to 2016, 2,300 net extra hotel rooms per annum will be required. But as the market matures, growth is expect to slow, with only 1,700 net extra rooms required over the 2017-2026 period. Given the likely uncertainties involved in such a long term forecast, we estimate hotel rooms needed is likely to range from 20,000 net extra hotel rooms to 82,000 net extra hotel rooms, as shown below.
68
Figure 8.2 : London hotel rooms required by low medium and high scenarios
180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 0
High scenario
Low scenario
Central scenario
To meet the benchmark of an increase in the stock of hotels by 2,000 each year, more hotels than this will need to be built as stock losses are running at approximately 500 per year. Taking into account these losses then a total of around 2,500 new hotel rooms will be required each year. Our interviews with relevant planning departments suggests that these losses are typically from the lower quality stock such as B&Bs. It is clearly debatable whether the trend in the loss in hotel stock will continue. It could be argued that there is a finite set of stock which could be lost and over time loss could be expected to decline to zero. On the other hand, investors and developers may continue to close hotel rooms in one area - which may have become relatively less fashionable or profitable - and open up in other areas. On balance, as this so-called 'churn' is a common feature of many different markets we conclude it is unlikely to disappear from the hotel market. As a result, we have assumed that the loss of hotel stock in the whole of London remains the same at 500 per annum (ie the same as the average annual loss over the past 10 years), equating to a churn rate of 0.5% of total room stock in London in 2006. This declines to a churn rate of 0.3% by 2026 as the total London loss is assumed to remain the same in absolute terms but the total London stock of rooms is expected to increase.
69
Figure 8.3 : Gross new hotel rooms required by low medium and high scenarios
100 Gross hotel rooms required in London (000s) 90 80 70 60 50 40 30 20 10 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 0
30,000 'gross' rooms 50,000 'gross' rooms 92,000 'gross' rooms
High scenario
Low scenario
Central scenario
70
8.3 Forecasts of hotel rooms required by sub-region and borough

Forecasting trends into the future at sub-region and borough level is difficult. There is often 'noise' in the borough data which means that quantitative techniques are often not as robust. Purely quantitative approaches to forecasting based on past growth trends will also not be able to pick up faster growth (or step changes in growth) in boroughs which experience, say, improved transport connections, new tourist attractions or large scale regeneration. The approach we use is therefore a mixture of quantitative and qualitative analysis. The starting point (step 1) is the planning pipeline reported in the London Hotel Development Monitor produced by Visit London, which reports future expected future hotel developments in London by borough over the 2006-2010 period. Quantitative techniques are then used in step 2 to forecast the hotel room requirement over the 2011-2026 period, first at the sub-regional level and then secondly at the borough level: we forecast the 2011-2026 period at the sub-regional level based on past trends over the 1996-2010 period (ie using both actual data from 1996-2005 with the pipeline forecast data to extrapolate trends). The sub-regions where there are already significant numbers of hotels (eg Central and West which account for 85% of the total in London) are examined individually. The remaining 15% (eg East North and South ) are forecasted as one group to eliminate some of the noise in data and then apportioned to each individual sub-region based on our estimates of where growth is likely to be in the next 2 decades. The forecast totals for the sub-regions are then constrained to match the pre-determined overall London forecast. within each sub-region we then forecast each of the boroughs individually based on past trends. As before, the total of the borough level separate forecasts are constrained to match the sub-regional totals which in turn are constrained to match the overall London total. The final stage (step 3) in the process involves making small adjustments to the borough level forecasts to take into account future developments in the key drivers of hotel development, such as: Transport links to central London and connections to airports Proximity of tourist attractions/business location (for instance attractions in central London and businesses at Canary Warf), cafes and restaurants in the area, night time economy, cultural facilities and attractions Regeneration initiatives that release land and bring new services and regenerate communities and build new businesses. The development of these services and facilities provide an ideal opportunity to develop accommodation in new areas. Site availability These factors are taken into account by consideration of whether the forecast arrived at in a quantitative manner need to be adjusted upwards or downwards. For example, there has been almost no growth in the number of hotels in Lewisham over the past 10 years. A purely quantitative model based on past trends will predict no growth in the future.
71
However, new connections and regeneration of the area as part of the Lewisham Gateway project is likely to mean that there will indeed be new hotels built in the future. Our final forecast has been increased marginally to take into account this impact, although it should be acknowledged that there is a great deal of uncertainty about the actual impact of these sort of improvements. Our estimates as a result should be viewed as no more than a general indication of the rough order of magnitude. In contrast to the Lewisham example, the pipeline data shows that the number of hotel rooms in Lambeth is estimated to grow from 1,400 in 2005 to 3,100 by 2010. Extrapolating this growth at the same rate over the 2011-2026 period would produce a forecast of hotels in Lambeth of nearly 9,000, a six-fold increase. This is clearly unrealistic and the growth forecast has been reduced accordingly to a more realistic figure which is closer to, but still above, predicted growth in comparative boroughs (eg Southwark and Wandsworth). Once all of these qualitative changes are made the borough level forecasts are again constrained to match the sub-regional totals which in turn are constrained to match the pre-determined London total forecast. Forecasts by sub-region The growth in the number of hotel rooms is expected to be proportionately higher outside the central area as shown in the figure below. Although the stock of hotels in the central area is likely to grow by 15,000 rooms over the 2007-2026 period, this growth is quite low at 1.0% reflecting the finding that the central area is already close to saturation point in terms of the available space to build new hotels and new hotel rooms. Growth in areas outside the central London boroughs is expected to be much higher. Dispersal is therefore set to continue with total stock in central London falling to 60% by 2026. Central and West London are predicted to require the largest number of new hotel rooms of 750 and 500 per annum respectively and at 1.0% and 2.7% per annum. The East and South region experience the greatest proportionate increases in hotels at 3.2% and 3.8% per annum respectively, although these sub-regions are starting from a relatively low base in terms of the number of hotel rooms.
72
Figure 8.4 : Hotel stock (%) required by sub-region
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 North South East West Central
The table below provides a geographic indication of future requirements at the borough level. This draws on historical trends in hotel development and an analysis of regeneration and transport initiatives likely to take place in the future. Key growth areas are those with good public transport access to central London and international access such as Hounslow. Demand by tourists for locations outside the central London area is also likely to increase significantly, with the trend towards visiting friends and relatives one factor in pushing up demand for hotels as an option of staying close to, but not with, friends and relatives. Areas where there are lower growth are the boroughs on the extremities of London and those where existing concentrations are high. The borough level numbers should be treated with caution. In particular, they will need to be tested on the ground in the light of local circumstances in each of the individual boroughs. Moreover, developers will have their own views on where there are significant gaps in the market and what are likely to be the most profitable areas for developments. There are also considerable uncertainties involved in forecast at such a high degree of granularity, firstly, because the local level data has a considerable amount of noise in it and, secondly, because the forecast horizon is 20 years. The likely range in the figures could be around +/- 250 for smaller boroughs and up to +/- 1,000 for larger boroughs.
73
Table 8.2: "Indicative" estimate of the approximate total extra rooms required over 2007-2026 period, by borough Approximate figures 2007-2026 Gross new Possible loss of Net extra rooms required rooms rooms required CENTRAL Camden Islington Kensington & Chelsea Lambeth Southwark Wandsworth Westminster Total Central EAST Barking & Dagenham Bexley City Greenwich Hackney Havering Lewisham Newham Redbridge Tower Hamlets Total East NORTH Barnet Enfield Haringey Waltham Forest Total North SOUTH Bromley Croydon Kingston Merton Richmond Sutton Total South WEST Brent Ealing Hammersmith & Fulham Harrow Hillingdon Hounslow Total West Grand Total Source: Grant Thornton estimates 3,750 1,800 1,250 2,750 2,800 2,250 6,000 20,600 300 300 1,900 1,950 600 300 550 1,500 300 2,800 10,500 600 550 275 275 1,700 550 950 1,100 550 1,150 800 5,100 2,900 1,200 1,350 650 3,800 2,200 12,100 50,000 1,250 300 750 250 300 250 2,500 5,600 50 50 400 200 100 50 50 250 50 300 1,500 100 50 25 25 200 50 200 100 50 150 50 600 400 200 350 150 800 200 2,100 10,000 2,500 1,500 500 2,500 2,500 2,000 3,500 15,000 250 250 1,500 1,750 500 250 500 1,250 250 2,500 9,000 500 500 250 250 1,500 500 750 1,000 500 1,000 750 4,500 2,500 1,000 1,000 500 3,000 2,000 10,000 40,000
74
8.4 Alternative ways of meeting demand

A number of sensitivity tests have been undertaken to examine the impact of changes in the assumptions on the hotel room requirement. These sensitivity tests could be viewed as alternative methods of meeting the increase in tourism demand. If the Mayor's policy to accommodate new demand was changed into a policy where new hotel provision was constrained, then the demand and supply response in the industry is likely to be increased occupancy, higher numbers of guests staying in each room and/or higher room rates. The sensitivity tests which we have examined include: further changes in occupancy levels to absorb the increase in demand. changes in the average number of guests per room. an increased propensity to stay with friends and relatives The table below shows the results from this analysis. Specifically, variations in the assumptions can lead to quite large changes in the room benchmark figure. For example, a larger increase in the occupancy than forecasted under the central scenario, with levels rising to 84% by 2012 reduces the rooms required by one-quarter. Similarly, if the numbers of guests per room increases from 1.5 to 1.6 then this also has a reduction on the rooms required benchmark.
Table 8.3: Sensitivity tests
No 1 2 3 4
Description Base case Occupancy levels return to high of (84%) by 2012 Average guest per room increases from 1.45 to 1.6 by 2012 Additional 5% of international visitors stay with friends & family by 2012
Estimates of Net new hotel rooms "required" 2,000 1,650 1,350 1,750
Another likely industry response to the restriction in supply would be increased room rates. In economic terms, an increase in demand for a good will generally increase the price of that good if there is not a corresponding increase in supply. This is indeed what has happened in the past. Analysis of room rates and visitor numbers shows that periods of high demand (eg 2000, the Summer peak) are also periods when room rates are higher than average74.
8.5 Homeless accommodation

Looking forward, it is likely that the supply of bed and breakfast accommodation may be reduced in response to policy changes. Demand for bed and breakfast accommodation in many Boroughs has fallen due to changes in government policies regarding appropriate housing for the homeless. The Homelessness (Suitability of Accommodation) (England) Order 2003, which came into force on 1 April 2004, prohibits the use of B&B for families with children for longer than six weeks. And immediately prior to the Order in 2004
74
The correlation coefficient between nights spent in London and revenue per room is 0.6 suggesting a strong correlation between room rates and tourism demand.
75
there had been a Government target to cut the number of families in B&B, limiting the length of stay to 6 weeks, which all London Boroughs had met. As a result, the number of homeless families staying in B&B accommodation has been falling (although there was still 2,359 single homeless people placed in B&Bs at the end of December, compared with only 272 families). The total use of B&Bs by homeless people has fallen from 7,699 in 2002 to 2,832 homeless people in B&Bs in 2005. The impact of the reduction in use of B&B accommodation by the homeless is uncertain. As most accommodation has no private ensuite facilities, it is likely to be only suitable for the hostel/backpacker market. Also, some properties were specifically created as B&Bs for homeless persons placed by local authorities and so were never part of the general B&B tourist accommodation. Concurrently, some Boroughs have been allowing smaller accommodation establishments to convert to residential use (and some had only temporary planning permission and were previously residential accommodation), likely to lead to a reduction in the overall stock of B&B accommodation. The change of use of B&B accommodation that is being approved by Boroughs may continue in line with the reduced use of B&B accommodation by homeless families. Overall there is likely to be little impact on London's tourist offering.
8.6 Summary
Visitor nights have been estimated using econometric analysis and then translated into hotel bedroom demand through assumptions about occupancy levels, the proportion of visitors who stay in hotels and guests per room. We estimate that around 2,000 extra rooms will be required per annum. This includes the loss of an estimated 500 rooms per annum, with 2,500 new rooms per annum required over the period to 2026.
76
Appendix 1: Econometric analysis and scenarios

A1.1 Overview
The purpose of the econometrics is to estimate the underlying long-term upward trend in visitor nights, controlling for exogenous shocks, rather than to create a fully specified explanatory model that passes all statistical tests. Such a model will almost certainly fail the most basic logic tests as it would need to forecast forward 20 years into the future using only 12 years of historical data. In any case, once the forecast of visitor nights are made there are a number of further uncertainties around translating nights to hotel demand. For example, does the proportion of people who stay in hotels change in the future? or does the average guest rate per room change? While some annual data for recent years exists on the proportion of people who stay in hotels, there is no long historical trend data and, moreover, no historical trend data for guest rate per room. This means that a scenario approach has to be used for how these variables are likely to change in the future, based on analysis of the data we do have, industry knowledge and estimates of likely sensitivities using spreadsheet modelling. Such data constraints mean that there is no real benefit in creating a complicated econometric model of visitor nights as there will always be uncertainties in how visitor nights translate into hotel room demand. Instead, it is necessary to undertake a more practical approach, keeping the relationships as simple as possible. This enables the demand model to be flexible and responsive which is essential for any long-term forecast. It also reflects the fact that we are forecasting 20 years into the future which is subject to wide uncertainty. To reflect this uncertainty we have placed more emphasis on scenario analysis and sensitivities rather than the results of detailed econometric models, which could easily be dismissed as spurious.
A1.2 Econometric analysis of the international visitor market

The first stage of the econometric analysis is to identify those factors which may theoretically affect the number of visitor nights and then run a number of regressions in order to identify whether these factors (and/or combinations of these factors) are statistically significant. If they are statistically significant then the variables should be included in the model. Some of the variables which we have tested include: GDP per capita. The underlying logic is that higher GDP per head (ie income or wages per head) will increase marginal propensity to consume which will probably increase hotel demand in London. The impact of economic growth on the tourism (the so-called income elasticity of demand) and passenger travel has been well researched75. Real Room rates and revenue per room. The higher the room rate (and revenue per room) the lower the quantity of rooms demanded. Effective Exchange rates. The higher the exchange rate of in relation to other currencies, the lower the numbers of hotel rooms demanded. In other words if a is
75
See for example: The Department of the Environment, Transport and the Regions, A ir Traffic Forecasts for the United Kingdom 2000, June 2000; Department for Transport, National Transport Model - Working Paper 3
77
more expensive to buy then less tourists will be willing to spend their money in the UK. The preferred equation is shown in Box A.1, namely the trend in the number of international nights spent in the London is estimated using GDP per capita as a measure of the increasing propensity to travel. The exchange rate is also included as a driver of demand. Box A.1: Econometric analysis of international visitor nights spent in London The data The estimation is based on a panel of data (ie time series and cross sectional data) drawn from the International Passenger Survey. In particular, the number of nights spent in London by international visitors from 26 countries over the 1993 - 2004 period. In total, we have over 300 data points in which to undertake the analysis. The GDP per capita data is at constant prices is obtained from the International Monetary Fund, World Economic Outlook Database, September 2005. Estimation equation The equation is expressed in logarithmic form with the data in levels, with the trend in the number of international nights spent in the London using GDP as a measure of the increasing propensity to travel. Ordinary least squares (OLS) regression is conducted with cross-equation restrictions across both country and time. Ln (Visitor nights)it = c + b Ln (GDP)it + b Ln (E)it + di + ft Ln (Visitor nights)it-1 Where: Visitor nights GDP it E it c di ft
= visitor nights spent in London by non-UK residents = GDP per capita for country (i) at time (t) = exchange rate for country (i) at time (t) = the overall constant in the model = cross-equation restrictions for country (i) = cross-equation restrictions for year (t)
The cross-equation country restriction can be thought of as dummy variable for factors such as the different economic characteristics of each origin country. Whereas the crossequation restriction for time captures the peculiar characteristics of any one year (eg the Millennium effect in 2000). We experimented with various functional forms. Model formulations where tried in differences and second differences in order to eliminate non-stationarity (or the trend) in the data - the presence of a trend weakens the results from OLS estimation. However, under these 'differenced' specifications it was not possible to identify statistical significance in the key drivers. The regression model equations were therefore estimated in levels.
78
Box A.1 (cont.) Results The results from our econometric analysis suggests that the coefficient on the GDP per capita variable is 0.96. The estimation was conduction in natural logarithmic so this coefficients can be interpreted as an elasticity. In particular, the coefficient of 0.96 on GDP per capita means that every 1% increase in GDP per capita produces a 0.96% increase in international tourists. The full regression results are shown in the table overleaf.
Variable Constant GDP Exchange rate Visitor nights (lagged) Adjusted R-squared (Panel data model) Elasticity T-stat (5.20) (1.60) 0.96 3.20 (0.18) (1.20) 0.40 6.70 0.94
The inclusion of the lagged dependent variable is a common method to eliminate serial correlation in the residuals. Without the inclusion of this lagged variable there were indications that serial correlation is present in the residuals which can make the coefficients biased and inconsistent The t-statistic on the exchange rate variables is less than 2 and therefore is not statistically significant at the 95% level. However, the estimation does suggest a negative relationship between visitor nights and the exchange rate as would be expected.
As well as this preferred specification, we have undertaken a number of sensitivity tests using different formulations (eg time series data instead of panel data) and different datasets/time periods (eg UK annual and quarterly London data instead). In particular, we have undertaken analysis using the following datasets: Annual data over the 1984 to 2004 period for the total number of visitor nights spent by international visitors to the UK (20 observations in total); and Quarterly data over the 1993 to 2004 period for the total number of visitor nights spent by international visitors to London (60 observations in total). The regression results with the least econometric problems from these two datasets are shown in the table below, and suggest an income elasticity of demand ranging from 0.62 to 0.87. These results are slightly lower than the 0.96 calculated in the preferred panel data model (discussed above) for the following reasons. Firstly, a different measure of GDP is used in equation 2 and 3 compared to equation 1. In equations 2 and 3, global GDP is used as a key driver of demand whereas in equation 1, the variable is GDP per capita and is specific to the origin country (eg US GDP per capita for international visitors who originate from the US). The weighted average GDP per capita growth of these origin countries has grown slower than the
79
global average not only because many international visitors to London originate from countries such as the US and Europe (whose economies are growing at a slower rate than developing countries such as China and India) but also because GDP per capita has been growing at a slower rate than total GDP. Secondly, different datasets are used in the estimation so one would expect the results to be different. The time period will also have an impact on the relationship. The dataset starting in 1993 will overestimate the relationship with GDP compared to the dataset starting in 1984, as the economic cycle runs from a trough in 1993 (the depths of the early 90s recession) to 2004, arguably the peak of the consumer boom. The range of results from this additional econometric analysis illustrates that the need to treat the econometrics with caution. To take into account this uncertainty we have used high and low scenarios around a basic central or most realistic scenario.
Table A1.1: Regression results - international visitor nights to London Variable Equation 1 (Panel data model) Elasticity T-stat -5.20 -1.6 0.96 3.2 -0.18 -1.2 0.40 6.7 94.1% Equation 2 (Quarterly model) Elasticity T-stat 3.77 2.5 0.87 4.5 -0.37 -7.0 -0.20 -3.8 -0.19 -1.8 -0.35 -1.0 56.1% Equation 3 (Annual data model) Elasticity T-stat 3.46 3.75 0.62 7.82
Constant GDP Q1 Dummy Q2 Dummy Sept 11 Dummy Exchange rate Visitor nights (lagged) Adjusted R-squared Source: Grant Thornton
-0.27 -0.14 83.1%
-3.39 -1.68
By way of further explanation of these results: In equation 2 and 3, a dummy variable has been included for the post-tourism September 2001 market. The variable has a value of 1 for post 11/9/2001 era and zero otherwise attempts to assess the effect that a specific event can have on hotel demand and tourism in general. If the dummy is statistically significant then it means that the specific event we examine had an effect on the variable we are trying to predict. Whether it has a positive or a negative effect this depends on the sign of the coefficient. We also employed a Chow test for this reason and shows that there is no change in demand before and after the event in question. Q4 Dummy for seasonal variation. Other dummies were tried for Q1, Q2 and Q3 and found not to be statistically significant. In the second and third equation, the exchange rate is correctly signed but not significant. The residuals are normally distributed although signs of serial correlation are present in equation 2 and 3. The r-squared value shows a measure of the fit of the data or how well the equations explain the data.
80
Our central assumption is that GDP per capita increases by around 3.1% to 3.2% per annum (see Table A.2). Note that this figure is GDP per capita which is slightly less than global GDP growth which is currently growing at around 4%. We use GDP per capita as this is the indicator we used in the econometric analysis.
Table A1.2: GDP forecasts Scenario GDP per capita forecasts 2005 3.15 2006 3.15 2007 3.26 2008 3.22 2009 3.13 2010 3.13 2011-2026 3.20 Source: IMF Economic Review 2005; Panel 3 (World Real per Capita GDP) for 2005-2010. Grant Thornton projections for 2011-2026
A1.3 Domestic visitor market

A similar approach was used for the domestic market. The number of domestic nights are regressed against GDP, consumer spending and a whole host of other variables. The key difference is that we test the correlation between UK GDP growth and visitor nights instead of global (visitor night weighted) GDP. The data sample is annual visitor nights spent in London by UK residents over the 19852004 period. The econometric results over this sample period show a relatively weak correlation between UK GDP and the number of visitor nights. This is because the number of visitors nights spent in London fell significantly in 1989. The explanation for this fall is most likely due to a change in the survey methodology in 1989, when the United Kingdom Tourism Survey (UKTS) replaced the previous domestic tourism survey, the British Tourism Survey Monthly undertaken by the British Tourist Authority. There was also a change in the UKTS methodology in 2000. Over the 1989-1999 period the UKTS was based on a face-to-face in home interviews using the electoral registers, with around 70,000 people interviewed each year. From 2000-2004 the approach moved to telephone sampling, based on 50,000 interviews per annum. This latest methodology has significantly higher estimates of domestic visitor nights, as described below.
"An important feature of the new methodology is that it allows a longer time to make contact with consumers who are not available when the initial attempt to contact the person is made. This greater ability to re-contact consumers over a longer time period is particularly relevant for more frequent tourists who are more difficult to contact because of their more frequent absence from home. Therefore the new survey is better able to represent the more frequent tourists, and this results in higher estimates of the volume and value of tourism than in the old survey methodology"76.
Given these changes in survey methodology, it is not surprising that it has not been possible to find a strong relationship between GDP and visitor nights. So, instead of
76
Description of UKTS from 'www.staruk.org.uk//default.asp?ID=111&parentid=504'
81
forecasting visitor nights in line with the growth in UK GDP, we have simply estimated the underlying growth rates in the number of nights spent in London by UK residents. A range of growth rates (high, medium and low) have been estimated by calculating the underlying growth rate using different time periods of data as follows: central forecast of an annual average growth of 2.3% per annum over the 2007-2026 period. A linear trend is used in the extrapolation which has the properties of a declining growth rate - ie falling from annual growth of 3.2% in 2004 to growth of 1.9% by 2026 (with an overall average of 2.3% over the 2007-2026 period). The estimate is based on data from the 1990-2004 period (ie only the results from the UKTS) controlling for the change in survey methodology in 2000 and for the Millennium effect in 2000. the high estimate of an annual average growth of 2.7% over the 2007-2026 period is based on a simple extrapolation of trends over the 1990-2004 with no account taken of the different survey methodologies. the low estimate of annual average annual growth of 0.9% per annum is based on data over the 1985-2004 period. Although domestic nights have risen on average by 3.2% per annum over the 1990-2004 period, the number of domestic nights fell significantly from 1985 to 1989 from 37 million in 1985 to 31 million in 1989 which partially offsets the growth experienced over the 1990-2004 period. Note the actual numbers from these two surveys are not directly comparable77. We have controlled for the differences in methodology through the use of dummy variables. The approach and results from this trend growth analysis are summarised below.
Table A1.3: Trend growth rates - domestic visitor nights to London Scenario Low Central Period 1985-2004 Method Linear trend controlling for differences in survey Linear trend controlling for differences in survey Linear trend with no control factors Forecasted average annual growth (2007-2026) 0.9% 2.3% 2.7%
1990-2004 (ie UKTS only) High 1990-2004 (ie UKTS only) Source: Grant Thornton
As well as these different growth rates over the long-term we have also made further assumptions about the expected growth rate in 2005 and 2006. Although the above analysis suggests that the long-term growth rate is upwards, the number of domestic visitor nights spent in London has been falling since 2000, from 42.4 million in 2000 to 39.8 million in 2001 to 29.7 million in 2004. In the low scenario we assume that this negative trend continues into 2005 with a domestic visitor nights falling to around 26 million. Growth is forecast to resume from 2006. In the central scenario, we assume that 2005 is the same as 2004, and in the high scenario we assume that the negative trend stops in 2004. These assumptions are illustrated below.
77
The 1985-1989 survey carried out by the British Tourist A uthority was based on telephone sampling techniques, whereas the 1990-2000 survey carried out by UK used face-to-face interviews.
82
Figure A.1: Domestic visitor projections for 2005 onwards (low, medium and high scenarios)
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Low scenario
High scenario
Central scenario
2010
45 43 41 39 37 35 33 31 29 27 25
Nights spent in London (million) by domestic visitors
83
Appendix 2: Sub-regional analysis

The Mayor is currently considering whether to revise London's sub-regional boundaries for the new London Plan. The proposed new areas are based on a radial rather than a concentric structure as shown in the diagram below. The radial structure is considered more appropriate basis for coordinating and implementation of strategic policy and delivery of key services.
These new geographical areas will be tested as part of the London Plan review process. We have therefore provided estimates of hotel stock and forecasts of the hotel room benchmark under this new definition.
84
Table A2.1: Hotel Stock under the proposed new sub-regional definitions Estimated Stock 2005 NORTH Barnet Camden Enfield Hackney Haringey Islington Westminster Total NORTH EAST Barking & Dagenham City Havering Newham Redbridge Tower Hamlets Waltham Forest Total SOUTH EAST Bexley Bromley Greenwich Lewisham Southwark Total SOUTH WEST Croydon Kingston Lambeth Merton Richmond Sutton Wandsworth Total NORTH WEST Brent Ealing Hammersmith & Fulham Harrow Hillingdon Hounslow Kensington & Chelsea Total 1,081 13,875 265 563 150 1,788 38,785 56,506 219 2,592 335 2,022 544 2,209 368 8,289 294 333 1,118 287 1,414 3,446 1,637 345 1,277 402 1,119 264 302 5,346 747 1,444 3,467 507 7,358 968 12,043 26,534 % Total Supply 1.1% 13.9% 0.3% 0.6% 0.1% 1.8% 38.7% 56.4% 0.2% 2.6% 0.3% 2.0% 0.5% 2.2% 0.4% 8.3% 0.3% 0.3% 1.1% 0.3% 1.4% 3.4% 1.6% 0.3% 1.3% 0.4% 1.1% 0.3% 0.3% 5.3% 0.7% 1.4% 3.5% 0.5% 7.3% 1.0% 12.0% 26.5% 100.0%
Total 100,122 Source: Visit London, London Hotel Development Monitor Note: Sub regions are based on the new London Plan proposed sub-regions.
85
Table A2.2: "Indicative" estimate of the approximate net and gross hotel rooms required over 20072026 period under the proposed new sub-regional definitions Approximate figures 2007-2026 Possible loss of Net extra rooms rooms required 100 1,250 50 100 25 300 2,500 4,325 50 400 50 250 50 300 25 1,125 50 50 200 50 300 650 200 100 250 50 150 50 250 1,050 400 200 350 150 800 200 750 2,850 500 2,500 500 500 250 1,500 3,500 9,250 250 1,500 250 1,250 250 2,500 250 6,250 250 500 1,750 500 2,500 5,500 750 1,000 2,500 500 1,000 750 2,000 8,500 2,500 1,000 1,000 500 3,000 2,000 500 10,500 40,000
Gross new rooms required North Barnet Camden Enfield Hackney Haringey Islington Westminster Total North East Barking & Dagenham City Havering Newham Redbridge Tower Hamlets Waltham Forest Total South East Bexley Bromley Greenwich Lewisham Southwark Total South West Croydon Kingston Lambeth Merton Richmond Sutton Wandsworth Total North West Brent Ealing Hammersmith & Fulham Harrow Hillingdon Hounslow Kensington & Chelsea Total
600 3,750 550 600 275 1,800 6,000 13,575 300 1,900 300 1,500 300 2,800 275 7,375 300 550 1,950 550 2,800 6,150 950 1,100 2,750 550 1,150 800 2,250 9,550 2,900 1,200 1,350 650 3,800 2,200 1,250 13,350
Grand Total 50,000 10,000 Source: Grant Thornton estimates. Note: Sub regions are based on the new London Plan proposed sub-regions.
86
Appendix 3: Future work on accessible accommodation

This appendix sets out the broad objectives of future work around improving accessibility for disabled visitors, led by the LDA Tourism Vision & Action Plan 2006-2016.
A3.1 Introduction
The Mayor has demonstrated his commitment to rejuvenating London as an international and domestic visitor destination that is open and accessible to all. A key part of this ambition is catering for the needs of disabled visitors to the capital. The London 2012 Olympic and Paralympic Games will provide an opportunity to showcase London as a city for all. A key challenge is estimating the likely demand for accessible accommodation going forward. The London Games will require a stock of accessible accommodation for visitors to the city. Therefore it will be important to assess the likely need and ensure that London's stock of accessible accommodation is expanded and upgraded accordingly. Demographic changes also suggest an increase in demand for accessible accommodation going forward. There have been a number of policy changes that have driven forward the provision of accessible accommodation in London. Key changes include the Disability Discrimination Act 1995 and the Building Act 2000. As hotels provide a service to the public they are obliged by the DDA not to discriminate against disabled people and in October 2004 the provisions of the DDA were extended to include making reasonable adjustments to the physical features of a building which make using the service impossible or unreasonably difficult for disabled people. Many hotels should therefore be undertaking access audits and identifying and implementing physical alterations to ensure that disabled people can use the services they offer without unreasonable difficulty. The Building Regulations were changed in 2004 so that alterations that need consent under the Building Act would be required to meet Part M of the Building Regulations i.e. that reasonable provision is made for disabled people to access and use the development. Part M includes advice on how to provide a wheelchair accessible hotel bedroom and requires that 1 in 20 hotel bedrooms meet these provisions. Newly constructed hotels have been required to meet this standard since Part M was first introduced in 1987. This Study has examined the issues relating to accessible accommodation in London. The findings on accommodation for disabled people are set out in Section 6, and summarised below: The provision of accessible accommodation for disabled people is very limited in London and there is a lack of information on facilities (there are only 23 rooms that have been assessed as accessible for wheelchair users, and around 165 rooms in total assessed to have enhanced facilities for disabled people with either mobility or sensory disabilities). There is evidence of latent demand for accommodation and key barriers to unlocking this demand include information on accommodation, training of hotel staff.
87
New accessibility gradings offer the prospect of certainty for consumers, but take up will need to be improved to maximise benefits. Improving information on the stock of accessible accommodation and its dissemination is key to encouraging visitors to London. Public sector intervention would improve the dissemination of information on the accessible accommodation stock. There are a number of non-accommodation related barriers to tourism in London including accessible toilets, cafes and restaurants, and transport, uneven pavements, lack of accessible crossings, lack of seats, lack of blue badge parking. Staff awareness and understanding of disability issues is also a major barrier. Demand is likely to increase in the future and ensuring that London is equipped to provide an "Olympics for All" provides an opportunity to improve London's accommodation offering for disabled people. There is limited information on the stock of accessible accommodation in London.
A3.1 Objectives for future action

The LDA Tourism Vision 2006-2016 sets out as one of its objectives to Provide an inclusive city that is more accessible and develops its tourism product in an economically, socially and environmentally sustainable way . The associated LDA Tourism Action Plan 2006-2009 sets out key actions to deliver this objective, and which are of relevance to hotel development, as follows: 1. Undertake research to understand barriers to visiting London to identify the social, physical and cultural issues (Action Reference 3.1.2) 2. Investigate reasons for low uptake of National Accessibility scheme by London s tourism businesses (Action Reference 3.3.1) 3. Investigate and implement accessibility business support to enable London to become more accessible to those with physical and sensory disabilities (Action Reference 3.3.2) 4. Encourage accommodation providers to increase the number of accessible rooms through a programme of business support and advice (Action Reference 3.3.3) 5. Encourage more comprehensive and accessible visitor information through a range of channels e.g. visitlondon.com, TICs (N.B. to be determined within Visitor Information Framework) (Action Reference 3.3.4) 6. Use findings from review of provision of accessible accommodation (part of 2006 Hotel Demand Study) to shape future actions. (Action Reference 3.3.7)
88
Based on the findings set out in Section 6 of this Study, it is recommended that the following additional actions are delivered: Recommendation 1 Develop a forecast of supply of accessible rooms, by identifying historical trends in development, and current stock of accessible accommodation, as a result of the implementation of the Disability Discrimination Act 1995. Use the findings to assess whether planning and building regulations have been adhered to, and identify further actions if necessary. Recommendation 2 Forecast the likely demand for accessible accommodation, taking into account the impact of the 2012 Olympic and Paralympic Games. Whilst the timing of this report is too late for these recommendations to be included in the London Tourism Vision 2006-2016 and London Tourism Action Plan 2006-2009, the London Development Agency can commit to delivering these recommendations as addenda to the London Tourism Action Plan 2006-2009.
89
Appendix 4: National Accessible Scheme

A4.1 National Accessible Scheme Ratings
The categories for the new National Accessible Scheme ratings are outlined below.
Mobility Level 1: Typically suitable for a person with sufficient mobility to climb a flight of steps but would benefit from fixtures and fittings to aid balance. Mobility Level 2: Typically suitable for a person with restricted walking ability and for those that may need to use a wheelchair some of the time and can negotiate a maximum of three steps. Mobility Level 3 Independent: Typically suitable for a person who depends on the use of a wheelchair and transfers unaided to and from the wheelchair in a seated position. This person may be an independent traveller. Access Exceptional: Attained by providing for all levels of mobility impairment listed above with reference to the British Standards BS 8300:2001. This is awarded to businesses that achieve the standards above for either independent wheelchair users or assisted wheelchair users and fulfil additional, more demanding requirements. Mobility Level 3 Assisted: Typically suitable for a person who depends on the use of a wheelchair in a seated position. They also require personal/mechanical assistance to aid transfer (e.g. carer/hoist). Visual 1 (V1): Typically provides key additional services and facilities to meet the needs of visually impaired guests. Visual 2 (V2): Typically provides a higher level of services and facilities to meet the needs of visually impaired guests. Hearing 1 (H1): Typically provides key additional services and facilities to meet the needs of guests with a hearing impairment. Hearing 2 (H2): Typically provides a higher level of additional services and facilities to meet the needs of guests with a hearing impairment.
90
Appendix 5: Sources
Barcelona: Barcelona Tourism Statistics, 1997; Blake A., The Economic Impact of the London 2012 Olympics, 2005 British Association of Conference Destinations, British Conference Venues Survey 2004, 2004 British Association of Conference Destinations, British Conference Market Trends Survey, 2003 Crouch, G., Forrester, W. & McGauchey, D., Access in London: Essential for anyone who has difficulty getting around, 4th Edition, 2003. Deloitte & Touche LLP, Hotel Benchmark Survey, Various Deloitte & Touche LLP, Tourism, Hospitality and Leisure Executive Report, 2005 The Department of the Environment, Transport and the Regions, Air Traffic Forecasts for the United Kingdom 2000, June 2000 DWP, Press Release, 9 February 2006. EIBTM, 2005 Industry Trends and Market Share, 2005 European Cities Tourism, The European Tourism Cities Report, 2nd Edition, 2005-06, 2005 Greater London Authority/PwC, Demand and Capacity for Hotels and Conference Centres in London, August 2002. IPS, Travel Trends 2004, 2005 Ishmael Bill, VisitBritain, Case Study: Leading ALL the World to Britain presented at One-Stop-Shop for Accessible Tourism in Europe (OSSATE) 2nd International Workshop, Athens 8 - 9 September 2005 Office of National Statistics, International Passenger Survey (IPS), 2005 Office of National Statistics, IPS 2005 Office of National Statistics, IPS March 2006 PFK Hotel Consultancy Services, Hotel Trends Survey, Various PricewaterhouseCoopers, Demand and Capacity for Hotels and Conference Centres in London: SDS Technical Report Thirteen, August 2001 Shoregate Consulting Ltd and London Development Agency, Improving Accessibility for London's Visitor Economy, second edition, April 2004. Springer, S. O'C., The Promise of "Tomorrow' s Tourism", January 2006 Tourism for All, London, 2005 TRI Hospitality Consulting, HotStats, various, 1993-2005 UK Tourism Survey (UKTS), England 2003, 2004 UKTS 2004, 2005 UKTS, England 2004, 2005
91
UKTS, London 2000-2003, 2004 UKTS, London 2004, 2005 UKTS, Time series data, 1990 to 2005 Visit London, London Development Hotel Monitor December/ January 2006. Visit London, London Visitor Statistics, 2004/2005, 2005 Visit London, Visit London: Prospects for 2006, 2006 VisitBritain, Holiday Taking and Planning Amongst Disabled People, April 2003. Westminster City Council, Annual Monitoring Report 2004-05, December 2005 World Tourism Organisation (WTO), Tourism 2020 Vision, 2001 World Tourism Organisation, Tourism Market Trends, 2005 Edition - Annex, 2005 WTO, World Tourism Highlights 2005, 2005
Other formats and languages For a large print, Braille, disc, sign language video or audio-tape version of this document, please contact us at the address below: Public Liaison Unit Greater London Authority City Hall The Queens Walk More London London SE1 2AA Telephone 020 7983 4100 Minicom 020 7983 4458 www.london.gov.uk
You will need to supply your name, your postal address and state the format and title of the publication you require. If you would like a summary of this document in your language, please phone the number or contact us at the address above. Chinese Hindi
Vietnamese
Bengali
Greek
Urdu
Turkish
Arabic
Punjabi
Gujarati
City Hall The Queens Walk London SE1 2AA
www.london.gov.uk Enquiries 020 7983 4100 Minicom 020 7983 4458

Hotel Demand Studyaa

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Hotel Demand Studyaa

Uploaded by

Copyright:

Available Formats

Hotel Demand Study

Hotel Demand Study

Greater London Authority Hotel Demand Study

1.2 London's tourist market

1.3 Characteristics of the London hotel market

1.4 Forward trends

1.5 Future hotel room requirements

Figure 1: Projections of total hotel rooms in London

Scenario Central High Low

Gross new rooms required 50,000 92,000 30,000

1.6 Future hotel room requirements by region

2 Introduction and background

2.2 Previous studies

2.3 Key issues for London

2.4 Report structure

3 The London tourism market

3.1 London Tourism Vision to 2016

IPS, Travel Trends 2004, 2005

3.2 International visitors market

Table 3.1: Major city destinations share of international arrivals 1990-2004

1990 0.2 1.8 0.6 2.2

1995 0.4 0.3 1.3 0.6 2.3

2000 0.5 0.5 1.3 1.0 0.4 1.3 0.6 1.9

2001 0.5 0.5 1.35 0.8 0.4 1.3 0.6 1.7

2002 0.5 0.5 1.3 0.7 0.35 1.3 0.5 1.65

2003 0.5 0.5 1.0 0.7 0.4 1.2 0.5 1.7

2004 0.5 0.5 1.25 0.7 1.1 1.75

Source: UNWTO, Tourist Offices, European Cities Tourism

Intl Visitor Nights (LHS) Intl Visitor Trips (RHS)

Source: IPS 2005

0.42 0.40 0.38 0.36 0.34 0.32

Source: IPS 2005

2004 28% 33% 27% 12% 100%

3.3 Domestic visitors to London

In terms of the key characteristics of domestic visitors to London:

3.4 Total visitors to London

140 120 100 80 60 40 20 0

3.5 Business and conferences

UKTS, London 2004, 2005 UKTS, time series data

3.6 Demand for serviced accommodation by visitors

0% Holiday Business Visiting Relatives or Friends Study Other Total

Source: International Passenger Survey

IPS, Time series data, Various 1995 to 2004

Figure 3.7: UK visitor resident visitors to London

0% 2001 2002 2003 2004

4 Trends in London hotel supply

4.1 The number of existing hotel rooms in London

4.2 Type of hotels and accommodation

Table 4.4: Accommodation by type in London, 2004 Number Bedspaces

4.3 Completions over 2003-2005 period

4.4 Loss to hotel stock

4.5 Development pipeline - estimates of future completions

Table 4.7: Development pipeline

Visit London 1,610 3,143 2,501 1,866 1,750 2,427

4.6 Trends in geography

West South North East Central

Source: Visit London, London Hotel Development Monitor

Figure 4.3: Changes in hotel stock by region

Change 2001 to 2005 Change 2006 to 2010

Source: Visit London, London Hotel Development Monitor

14% 2% 12% 1% 1% 0% 39% 69% 0% 0% 3% 1% 1% 0% 0% 2% 1% 2% 10% 1% 0% 0% 0% 2% 0% 2% 0% 0% 1% 0% 4% 1% 1% 3% 1% 7% 1% 14%

New Stock 2000 to 2005 New Stock 2006 to 2010

Source: Visit London, Visit London Development Monitor

5 Hotel market characteristics