City’s hotel market judged unattractive to investors

BIRMINGHAM’S hotel sector is unattractive for a city of its size, with its location and temporary oversupply blamed for its poor showing.

Analysis of 36 locations across the UK by property firm Colliers International ranks halfway down the list, in 17th place, of hotspots for hotel investment.

The £50m Park Regis hotel opened in the city centre last month , while easyGroup has plans for a hotel on John Bright Street.

The research took into account a basket of nine factors measuring the attractiveness of the location – using indicators such as land site prices and market appetite – and the performance of the hotel sector, though weighted criteria including room occupancy rates and average daily rates (ADR).

While Birmingham’s ADR was slightly above the UK average in 2015, £81 rather than £78, its occupancy levels were two percentage points below average at 73%.

Jonathan Wren, director in Colliers International’s Midlands hotels team, described Birmingham’s overall ranking as “unexpected” given the size of its population.

“This disparity could be attributed to its central location, which for many other sectors is seen as one of the city’s most desirable attributes,” he said.

“For the hotels market however, it could be having a detrimental impact, as its easily accessible central location means visitors can arguably arrive and return home from almost anywhere in the country without the need for an overnight stay.

“In addition, the city’s leisure market is not as well developed as some other provincial cities, so perhaps does not provide the same draw for visitors.

“Another factor for Birmingham not featuring as high as one might expect in the ranking could be down to the Business Premises Renovation Allowance (BPRA) scheme, which saw a large increase in supply for Birmingham, as many empty offices were converted to hotels – this has caused a temporary imbalance in the market which as a result could have caused an over-supply.”

Cardiff led the table of hotspots, buoyed by its low active pipeline and strong performance, with Manchester second and Leeds third.

The 36 locations analysed total a current supply of 286,966 hotel rooms. London accounted for 47% of those rooms with Manchester and Edinburgh next, each with 5% of the market.