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In light of weaker demand in 2013 further supply growth likely to impact London hotel trading performance

According to Jones Lang LaSalle’s London Hotels Developments report

London, 11th February 2013 - The London hotel market has seen significant development activity in recent years as investors and operators have sought to enter one of Europe’s most robust and best performing hotel markets. Development activity has occurred in all hotel categories although the majority of activity has taken place in the Budget and 4-star segment. This accounted for roughly 71% of new bedroom supply in London between 2005 and 2012 according to Jones Lang LaSalle’s latest London Hotel Developments research report.

Graham Craggs, Managing Director Hotels and Hospitality Jones Lang LaSalle said: “The London hotel market has shown impressive resilience in recent years with occupancy stable at around 80%. Both domestic and  international hotel operators have been expanding their presence in this core market, causing supply to increase substantially. In our analysis, however, we had  found no clear evidence that a strong supply increase in the city has had a materially negative impact on the trading performance of existing hotels. This was even the case in the City of London and Southwark where supply growth has been the highest.”

Hotel supply will continue to grow strongly in London with another 31 hotels with 4,600 bedrooms scheduled to open in 2013, and 26 hotels with 4,200 bedrooms planned to come online in 2014, reflecting a supply growth of 4% in 2013 and 3% in 2014.

The majority of development activity is again expected to occur in the Budget and 4-star segment, accounting for 50% and 31% respectively of total bedrooms in pipeline for 2013 and 2014.  In the Budget segment Premier Inn and Travelodge account for the majority of development activity. In the 4-star segment both independent operators and international hotel groups such as InterContinental, Carlson Rezidor Hotel Group and Morgans Hotel Group are growing their presence in the capital.

Graham Craggs concluded: “With room night demand growth likely to be limited over the next year  we believe that this further growth in hotel supply could result in more challenging market conditions for hoteliers in the short term. With hotel demand slowing in 2013 due to the absence of major events such as the Olympics and a sluggish UK and European economy, in 2013 we believe that additional supply will increase the likelihood of a potential flattening or even a decline in RevPAR”

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Jones Lang LaSalle’s Hotels & Hospitality Group serves as the hospitality industry’s global leader in real estate services for luxury, upscale, select service and budget hotels; timeshare and fractional ownership properties; convention centres; mixed-use developments and other hospitality properties. The firm’s more than 265 dedicated hotel and hospitality experts partner with investors and owner/operators around the globe to support and shape investment strategies that deliver maximum value throughout the entire lifecycle of an asset. In the last five years, the team completed more transactions than any other hotels and hospitality real estate advisor in the world totalling nearly US$25 billion, while also completing approximately 4,000 advisory, valuation and asset management assignments. The group’s hotels and hospitality specialists provide independent and expert advice to clients, backed by industry-leading research.

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