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CARDIFF ACCOMMODATION STUDY 2009
Final Report 14 May 2009
CONTENTS
Page
EXECUTIVE SUMMARY
1 Introduction and Study Objectives 1
2 Work Programme and Methodology 2
2.1 Work Programme
2.2 Methodology
2.3 Technical Terms
2.4 Report Structure
3 Current Supply 5
3.1 Study Area and Supply Database
3.2 Supply Segmentation
4 Future Supply 7
4.1 Recent Openings
4.2 Under Construction
4.3 Expected to Proceed
4.4 Potential Developments
5 Current Demand 8
5.1 Demand Analysis
5.2 Demand Segmentation
6 Demand Drivers 11
6.1 Cardiff Investment Project
6.2 Local and Regional Marketing
6.3 Hotel Demand Growth Estimates for Cardiff
7 Future Demand 14
7.1 Opportunities
7.2 Threats
8 Projected Future Demand and Supply Balance 16
8.1 Demand and Supply Balance (Hotel Room Occ.%)
8.2 Implications/Actions
9 Rooms Revenue 18
Appendix
EXECUTIVE SUMMARY
Current Supply
Overall, the supply covers all types of serviced accommodation, including: 4/5
Star hotels, 3 Star hotels, ‘Limited Service’ hotels, amounting to:
Properties 41
Bedrooms 3,850
Supply Segmentation Summary
MPA No. of Rooms Supply Mix by Supply
Grade Properties Location Mix
City 4/5 Star 7 1,053 57% 27%
Centre
3 Star 2 303 16% 8%
Small 5 197 11% 5%
hotels
Ltd 4 306 16% 8%
Service
18 1,859 100% 48%
Cardiff 4/5 Star 1 132 18% 3%
Bay
3 Star 2 297 40% 8%
Ltd 3 321 43% 8%
Service
6 750 100% 19%
Outer 4/5 Star 4 362 29% 9%
Cardiff
3 Star 4 176 25% 8%
Ltd 9 571 46% 15%
Service
17 1,241 100% 32%
Total 41 3,850 - 100%
The table is an aid to potential developers in understanding the existing
supply segmentation. Points to note are:
• Total supply is distributed: City Centre 48%, Cardiff Bay 19%, Outer
Cardiff 32%.
• 4/5 Star supply is distributed: City Centre 68%, Cardiff Bay 9%, Outer
Cardiff 23%.
• Limited Service supply is distributed: City Centre 25%, Cardiff Bay
27%, Outer Cardiff 48%.
• Across the City, supply mix for 4/5 Star is 40% (1,547 rooms), Limited
Service is 31% (1,198 rooms), 3 Star is 24% (908 rooms), and Small
Hotels is 5% (197 rooms).
From the perspective of hotels, Cardiff is a typical city – 4/5 Star dominates
the City Centre and Limited Service Supply is mainly located beyond the City
Centre.
Future Supply
Towards the end of 2008, an additional 219 rooms have opened of which 186
are Budget hotels, a further 215 rooms are expected to come on stream
during 2009 (the 4 Star Radisson Hotel in the City centre) increasing the
2008 supply by a total of 434 rooms (11%).
There are several potential future developments, the two most likely to
proceed (Jury’s Inn and Premier Inn), could add a further 450 rooms to City
centre supply by the end of 2010.
This total new supply of 884 rooms represents a 23% supply increase in a
period just over two years.
Current Demand
Overall room occupancy in the City’s hotels is estimated at 72% for 2008, with
the City centre achieving the highest levels of occupancy. This represents
total rooms sold of 1.01 million, worth an estimated £62 million in
accommodation revenue alone (ie excluding Food, Beverage, other services
and VAT).
60% of room sales come from the business travel and conference sectors.
Sporting and other events in the City are an important generator of room
sales, accounting for 10% of rooms sold.
Future Demand
After allowing for the decline in business currently being experienced by
hotels, total rooms sold are projected to grow from 1.01 million in 2008 to
1.065 million in 2014, a 5.4% increase.
On a more optimistic view of demand growth (50% greater than used in the
main projection), would see rooms sold grow by an additional 62,000 (11.6%)
by 2014.
Supply/Demand Balance
At the projected level of demand growth to 2014 (up 5.4% on 2008), and
adding the confirmed new supply (219 rooms already opened and 215 rooms
in the Radisson), overall room occupancy is projected to be 68% in 2014,
compared to 72% in 2008.
If the Jury’s Inn and Premier Inn hotels enter the supply by the end of 2010, at
the projected level of demand average occupancy in the City is projected to
be 62% in 2014 or, at the optimistic level of demand growth occupancy, is
projected to be 65%.
Implications/Actions
The implications of the above, up to and including year 2014, at the projected
level of demand for the four stakeholders are:
Consumers
They can anticipate little or no difficulty in securing reservations at their first
choice hotel and prices will be competitive.
Cardiff City Council
Cardiff will benefit from being ‘easy to visit’. However, the Council can be
expected to come under pressure from hoteliers to create more events and
economic growth.
Hotels
Hotels will find trading difficult over the projection period. This is likely to lead
to lower prices and profitability. This may, in turn, affect quality standards
and reinvestment programmes.
The major hotel brands’ performances could potentially exceed the projection
if the long running trend in Cardiff for B&B/small hotels exiting the market
continues.
Developers
Hotel developers are unlikely to see the area as an attractive destination over
the projection period for further supply.
1. Introduction and Study Objectives
MPA were appointed to carry out this study in February 2009 following a
proposal submission dated 28 January 2009, responding to a Request for
Quotation issued on 20 December 2008.
These are summarised as:
• The provision of forecasts of hotel supply and demand to 2010 and
extension of the forecast to 2012.
• Provide an estimate of current income from rooms revenue.
• Based on comparative performance data available to Visit Wales,
provide commentary on the relative performance of Cardiff hotels to
three other UK cities to be selected in conjunction with Visit Wales.
• Based on the projected balance between supply and demand, draw
conclusions and implications for various key audiences, including
national and local government, existing hotels and developers.
• Consider the possible impact on hotel performance in the City if a
major conference centre were to be developed.
2. Work Programme and Methodology
2.1 Work Programme
a) In establishing the background to the study, consultants from MPA
have:
• met with Council officers Visit Wales and Capital Region Tourism, to
source data and background information, and discuss key issues.
• reviewed relevant current data.
• established and agreed a database of all known hotel accommodation
within the study area, based on information provided by Cardiff City
Council.
b) In order to assess current supply and demand, we have:
• designed and circulated a performance data and market mix
questionnaire to all hotels on the database provided/agreed.
• purchased benchmark performance data for a cross section of the
supply.
• developed a computer model of current supply and demand for the
area’s serviced accommodation businesses, segmented geographically
and by source of business.
c) In order to establish future relevant serviced accommodation supply
and demand, we have:
• sought information from the Local Authority on active and prospective
hotel development projects.
• obtained economic and tourism growth projections for the area.
• obtained the views of hotel owners/operators on future demand
prospects for their businesses.
2.2 Methodology
The conclusions reached in this report are based on a Supply & Demand
spreadsheet model, covering:
• Supply
Current supply is taken from database information on hotels provided by the
project sponsors and supplemented by MPA research. We also note in the
report the supply of other serviced accommodation, such as B&Bs, guest
houses and small ungraded hotels.
Future known supply is based on planning applications and available
information on active developments.
• Demand
Current demand is based on information gathered by questionnaire,
interviews and purchased benchmark data.
Future demand is based on growth projections of tourism and economic
factors. These are detailed in the appropriate section of the report.
The projected demand data is subjected to a sensitivity analysis to show the
impact of varying growth projections.
• Supply & Demand Balance
Comparison of projected supply and projected demand is used to identify
specific areas of under/over supply of serviced accommodation.
MPA are grateful to those individuals and organisations who have assisted in
this information gathering exercise. In particular our thanks to the significant
number of accommodation owners/operators, who provided detailed
information on their businesses (which remains confidential to MPA).
The conclusions, which have been drawn in the remainder of this document,
rely on the quality of the data, which has been obtained. Whilst we cannot
take responsibility for the accuracy of the data, this has been diligently obtained
and verified wherever possible. We are satisfied that it provides a sound basis
for the projections at the time of writing. The events and economic factors on
which the projections are based will be subject to change over time and
readers of this report must be aware that any changes to these factors could
influence the conclusions drawn.
2.3 Technical Terms
This report uses some hotel industry technical terms. We understand that
some readers of this report will be familiar with terms such as Occ.%
(Occupancy %), but for any reader not familiar with hotel technical terms, we
detail these terms below:
• Bedroom Occupancy % (or Occ.%)
This is the proportion of rooms sold of those available for sale, expressed
as a percentage. It is calculated by dividing the total number of rooms
sold by the total number of rooms available. It can be used to discuss the
proportion of rooms sold on a daily, weekly, monthly or annual basis.
Bedroom Occupancy % is frequently shortened to Room Occupancy %,
Occupancy % or Occ.%.
• Demand
Demand for hotels is normally expressed as rooms (bedrooms) sold per
night, per week, per year, as appropriate. For the majority of this report,
we show demand on a ‘rooms per night’ basis, as we believe it is then
intuitively easier to understand demand in relation to supply.
2.4 Report Structure
The Supply & Demand analysis is covered in the following sections:
• Current Supply
• Future Supply
• Current Demand
• Demand Drivers
• Future Demand
• Future Demand & Supply Balance
• Rooms Revenue
Statistical Comment and Data Sources
All demand information in this report is based on questionnaire, interview and
benchmark data collected from accommodation providers and demand growth
factors projected by MPA. It is important to note that all tables, charts and
comments in this report should be seen as indicative of the measurements
being made rather than facts. We are confident that the analysis is a sound
basis for developing future policy decisions.
Unless otherwise stated, all data is derived from supply information provided by
clients and/or data collected from accommodation providers, and/or estimates
made by MPA.
3. Current Supply
3.1 Study Area and Supply Database
The study area is defined by the boundaries of Cardiff City Council.
The serviced accommodation supply database was provided by Cardiff City
Council and, subsequently, added to by MPA field research. We have also
considered and included references to hotels beyond Cardiff, where appropriate,
because from a consumer perspective, we consider they are part of the relevant
Cardiff marketplace. The full schedule of supply involved in the study, is shown
in the Appendix.
Overall, the supply covers all types of serviced accommodation, including: 4/5
Star hotels, 3 Star hotels, ‘Limited Service’ hotels, amounting to:
Properties 41
Bedrooms 3,850
3.2 Supply Segmentation
The study area covers a range of properties and locations:
• including full service hotels (3, 4/5 Star), Limited Service (eg Premier
Inns) mainly branded, and a few small unbranded hotels.
• including the City Centre, Cardiff Bay and properties located away from
the City Centre.
To understand the supply from the perspective of consumers and potential
developers, we have segmented the supply by property type and location, this
is summarised in the tables that follow.
Property segmentation
4/5 Star AA/Tourist Board graded 4/5 Star hotels or, in MPA’s view,
hotels: equivalent in terms of general quality/price.
3 Star hotels: AA/Tourist Board graded 3 Star hotels or, in MPA’s view,
equivalent in terms of general quality/price.
Limited AA/Tourist Board graded Lodges (eg Premier Inn,
Service hotels: Travelodge) or equivalent.
Small Hotels: Ungraded by the AA with pricing/quality that will generally be
a less expensive alternative to the Lodge sector.
Combining the property type and location provides the following overview of
supply of serviced accommodation in Cardiff.
Supply Segmentation Summary
MPA No. of Rooms Supply Mix by Supply
Grade Properties Location Mix
City 4/5 Star 7 1,053 57% 27%
Centre
3 Star 2 303 16% 8%
Small 5 197 11% 5%
hotels
Ltd 4 306 16% 8%
Service
18 1,859 100% 48%
Cardiff 4/5 Star 1 132 18% 3%
Bay
3 Star 2 297 40% 8%
Ltd 3 321 43% 8%
Service
6 750 100% 19%
Outer 4/5 Star 4 362 29% 9%
Cardiff
3 Star 4 176 25% 8%
Ltd 9 571 46% 15%
Service
17 1,241 100% 32%
Total 41 3,850 - 100%
The table is an aid to potential developers in understanding the existing
supply segmentation. Points to note are:
• Total supply is distributed: City Centre 48%, Cardiff Bay 19%, Outer
Cardiff 32%.
• 4/5 Star supply is distributed: City Centre 68%, Cardiff Bay 9%, Outer
Cardiff 23%.
• Limited Service supply is distributed: City Centre 25%, Cardiff Bay
27%, Outer Cardiff 48%.
• Across the City, supply mix for 4/5 Star is 40% (1,547 rooms), Limited
Service is 31% (1,198 rooms), 3 Star is 24% (908 rooms), and Small
Hotels is 5% (197 rooms).
From the perspective of hotels, Cardiff is a typical city – 4/5 Star dominates
the City Centre and Limited Service Supply is mainly located beyond the City
Centre.
4. Future Supply
In this section we summarise actual and potential new hotel developments as
advised by the Local Authority Planning Department. In subsequent sections
we discuss how these may or may not impact the need for further hotel
development.
4.1 Recent openings
Two hotels opened at the end of 2008
1. Travelodge in the Bay (112 rooms)
2. Sleeperz in the City Centre (74 rooms)
3. Wynford Hotel (33 rooms); although opening in June 2008, we have
counted it as ‘new supply’.
4.2 Under construction
There is only one active new development, the 4 Star Radisson in the City
Centre (215 rooms), expected to open summer 2009.
4.3 Expected to proceed
Two developments seem the most likely to proceed:
1. Jury’s Inn with 250 rooms in the City Centre with a scheduled opening date
of Autumn 2010. Construction has not commenced as of April 2009.
2. Premier Inn with 198 rooms also in the City Centre and scheduled for
Autumn 2010. Planning permission is yet to be finalised. With Premier Inn’s
track record, this would seem likely to go ahead.
4.4 Potential developments
There are a number of unimplemented planning consents. The main ones
are:
1. 250 rooms at Thomson House, Park Street, a central site near the
Millennium Stadium.
2. 154 rooms at the Leckwith Stadium.
3. 500 rooms at the Sports Village (originally linked to the Casino
development).
In addition there are active applications for some significant hotel
developments:
1.159 rooms at the Wood Street County Council Offices. Possibly serviced
apartments.
2. 155 rooms at Cambrian Marina (adjacent to the Sports Village).
3. 202 rooms at Tyndall Street Industrial Estate, close to the Novotel.
At present there is no indication of the unimplemented consents proceeding,
nor the active applications. However, they are indicative of ongoing interest
in further hotel development in the City and could be progressed as soon as
conditions are favourable. In terms of the supply and demand model used in
this study, these hotels are not included as new supply.
5. Current Demand
This section evaluates and analyses the current level of demand (bedrooms
sold) and the corresponding market segmentation (e.g. business travellers,
conferences, short breaks etc) in the serviced accommodation sector in the
study area.
5.1 Demand Analysis
In the hotel industry, demand is represented by the number of bedrooms sold
during the course of a day, week or year. It is common practice in the
industry to divide the number of bedrooms sold by the number of bedrooms
available to calculate room occupancy percentage (Occ.%). If, on average, a
90 room hotel sells 65 rooms per night, its Occ.% would be 72.2% (65÷90).
We have sourced Occ.% for Cardiff hotels with the following methods:
• A questionnaire circulated to 41 hotels (13 replies). We also
interviewed a further 2 hotels – overall 36% response rate covering
34% of supply. This compares to receiving replies in the 2004 Study
covering 89% of the corporately owned bedroom stock and similar
high levels for the 1997 Study. Why response should be much lower
in this study than in the other studies we do not know, possibly hotels
are more reluctant, during these difficult economic times, to provide
commercially sensitive data, or possibly they have survey ‘overload’.
• Purchasing benchmarking occupancy data in four groups covering two
property types, 3/4 Star hotels/Limited Service hotels, and two
locations Cardiff City Centre/Cardiff Bay and Outer Cardiff.
Taken together we have occupancy data covering 80% of the total supply.
Our master Supply & Demand spreadsheet is divided into 10 location/property
type ‘hubs’ covering:
• Locations: City Centre, Cardiff Bay, Outer Cardiff.
• Property type: 4/5 Star, 3 Star, Ungraded hotels, and Limited Service
Our comments and final conclusions are based on working at this level of
‘hub’ detail. However, all data has been collected on a confidential basis and
we are, therefore, only able to publish summary data in a way that maintains
the confidentiality of individual property data.
The table below summarises our estimate of total demand (rooms sold in
2008). It should be noted that + indicates actual figures have not been
included to protect commercially sensitive data.
MPA No. Rooms Total Annual Est
Grade Props Demand Demand Occ.%
Rms p.n Rms p.a
000s
City 4/5 7 1,053 + + +
Centre Star
3 Star 2 303 + + +
Small 5 197 + + +
Ltd 4 306 + + +
Serv
18 1,859 1,393 508.4 74.9%
Cardiff 4 Star 1 132 + + +
Bay
3 Star 2 297 + + +
Ltd 3 321 + + +
Serv
6 750 532 194.2 71.0%
Outer 4 Star 4 362 + + +
Cardiff
3 Star 4 308 + + +
Ltd 9 571 + + +
Serv
17 1,241 845 308.3 68.1%
Total 41 3,850 2,769 1,010.9 71.9%
The following points should be noted.
• Overall City Occ.% for 2008 is 72.0%, with a total of 1,010,900 rooms
sold.
• As would be expected, occupancy varies by location: City Centre
74.9%, Cardiff Bay 71.0% and Outer City 68.1%.
• Our more detailed (and confidential) data shows that differences in
occupancy between full service and limited service hotels are less
marked than previous similar studies have tended to show.
• The data shown represents average performance – individual hotels
can be doing significantly better or worse that these averages.
5.2 Demand Segmentation
The total current demand (2008) for hotel accommodation in Cardiff provides
a necessary basis for forecasting future demand. However, as different types
of demand (eg leisure, conference) may grow at different rates, it is
appropriate to split current demand into separate market segments.
Market segmentation also helps to understand the nature of demand in Cardiff
and, therefore, to some extent the nature of appropriate developments.
In the questionnaire we circulated and in our interviews with management, we
asked businesses to split their demand into the following segments:
On business eg Business travellers, office workers
Conferences in your hotel eg Meetings, conferences
Coach groups
Short Breaks (1-3 nights) eg Couples & families taking a short break
For Social reasons eg Weddings, funerals, visiting family
Because of a local ‘event’ eg Festivals, shows, sporting events in the area
Banqueting in your hotel eg Weddings, Christmas parties etc
Other Please describe what ‘other’ means in your hotel
The response to the questions was insufficient to be used as the only basis
for understanding market segmentation in Cardiff. We have, therefore,
supplemented the collected data with results from the 2003 survey (also
conducted by MPA), national benchmark data and our own extensive
experience in the industry.
Whilst the segmentation data is less robust than the occupancy/demand data,
we are confident that the estimates provide a sound basis for understanding
the local market segmentation for Cardiff.
Our estimates of market segment demand for Cardiff hotels are:
Demand 2008
Rooms 000’s Mix %
On business 503.9 50
Conference 87.6 9
Short Breaks 157.8 16
Social Leisure 82.3 8
Coach 42.0 4
Events 101.1 10
Banqueting 36.2 4
Total 1,010.9 100
We would note:
• On business and Conference segments account for nearly 60% of
demand.
• Short Breaks and Social Leisure account for nearly 25% of demand.
• Events at 10% (or over 100,000 room nights) of total demand continue
to be an important sector for Cardiff.
6. Demand Drivers
In developing forecasts of future demand, we have used our experience to
identify and consider, on a market segment basis, economic and other
demand drivers which we anticipate will impact on the growth of demand for
serviced accommodation in the study area.
All projections represent MPA’s assessment of the degree of influence and
timing each demand driver will have on each market segment. This is a
matter of judgement and, for this reason, we have subsequently undertaken a
sensitivity analysis on overall growth projections for each market segment.
Cardiff has its own economic drivers and is also part of the wider Wales and
UK economy and demand will be subject to the trends in the wider economy.
The main demand drivers we believe to be relevant are:
• Local GVA growth – driver of Corporate market segments.
• Wales GVA growth – driver for Conference, Coach, Social Leisure and
Banqueting markets.
• UK GVA growth – a key driver of Breaks and Events markets.
As far as we are aware, there are no projections for tourism growth, relevant
to hotel demand, made by Visit Wales or Visit Britain that might provide
further insight into the future.
Cardiff City Council has provided us with GVA growth projections through to
2014 (and beyond) as shown below. However, these projections were made in
2006 and make no allowance for the current (April 2009) economic position for
Cardiff, Wales and the UK. We discuss later the 2009 situation as we believe it
could affect hotel demand.
GVA Growth %
2009 2010 2011 2012 2013 2014
Cardiff 2.2% 2.2% 2.1% 2.1% 2.1% 2.1%
Wales 3.2% 2.2% 2.0% 2.0% 2.0% 2.0%
UK 2.6% 2.6% 2.4% 2.4% 2.4% 2.4%
As we understand it, these projections make no allowance for:
• a number of investment projects being considered or undertaken
locally to drive economic growth.
• local marketing initiatives to improve tourism.
The question arises – What impact might these factors have on hotel demand
over and above GVA growths? We consider the question in the subsequent
sections.
6.1 Cardiff Investment
The City has a comprehensive Economic Strategy, ‘Competitive Capital’
covering the period 2007-2012. This incorporates a wide range of initiatives
in support of the economy and the City’s profile.
The most visible development is the construction of St. David’s 2 Shopping
Centre in the centre of the City, which will make Cardiff one of the UK’s
premier retail centres.
It is our general conclusion that many of the developments taking place and
planned for Cardiff are helping towards achieving the area’s GVA economic
growth targets and/or maintaining Cardiff’s market share of serviced
accommodation demand rather than increasing share. We are not aware of
additional economic developments that could be expected to create demand
growth above GVA growth levels.
6.2 Local and Regional Marketing
We have reviewed ‘Capital Gains – The Tourism Strategy for Cardiff 2009-2014’.
It is our view that:
• there is no evidence that major new initiatives or major changes to
existing initiatives are planned which have the potential to create
material new demand for accommodation.
• we can find no targets or changes to marketing expenditure to support
major growth.
We conclude local marketing initiatives will support the achievement of GVA
growth levels and enable the City to maintain its share of tourism growth.
6.3 Hotel Demand Growth Estimates for Cardiff
For this report we take the view that, in normal circumstances, the GVA
projection for Cardiff, Wales and the UK, would form a sound basis for
demand growth projections.
However, circumstances are not normal. The UK is clearly in a very serious
recession. Press releases issued by two companies specialising in collecting
benchmark data for the hotel industry suggest:
• There has been a sharp downturn in UK hotel occupancies from
September 2008.
• Provincial UK hotel occupancies were down in December 2008 and
January 2009 by around, on average, 5%-8% on the previous year.
Provincial Occupancy January-March 2009 down 5.9%. The
averages mask some very weak performances.
One projection for the 2009 outcome is core projection of a 5% volume
decline, with a downside projection 8.5% volume decline.
Clearly, the depth and length of the current recession is unknown. For this report
we have made the following assumptions about growth in hotel demand for Cardiff:
• 2009 - Demand will fall by 6%.
• 2010 - Demand will recover in 2010 but still not achieve 2008 levels.
• 2011 - Demand will follow GVA projections discussed earlier. This
has the effect that 2011 demand is projected to reach 2008
levels.
The specific growth factors for this study are:
Growth Compound
Market Driver 2009 2010 2011 2012 2013 2014 to 2014
GVA
for
% % % % % % %
On Cardiff -6.0 3.0 2.1 2.1 2.1 2.1 5.2
business
Conference Wales -6.0 3.0 2.0 2.0 2.0 2.0 4.8
Coach Wales -6.0 3.0 2.0 2.0 2.0 2.0 4.8
Breaks UK -6.0 3.0 2.4 2.4 2.4 2.4 6.5
Social Wales -6.0 3.0 2.0 2.0 2.0 2.0 4.8
Leisure
Events UK -6.0 3.0 2.4 2.4 2.4 2.4 6.5
Banqueting Wales -6.0 3.0 2.0 2.0 2.0 2.0 4.8
In the circumstances, producing a downside projection on growth does not
seem relevant. However, in our conclusion we outline the potential for new
hotel development, assuming growth is 50% higher than the above table from
2010 onwards (ie ‘on business’ growth of 2.1% in 2011 becomes 3.2% in the
optimistic scenario) – this would represent the most optimistic scenario for
hotel demand in the area for the foreseeable future.
7. Future Demand
In order to reach an estimate for future demand, our spreadsheet model applies
the growth factors discussed earlier to each market segment (eg Corporate,
Leisure) within each supply ‘hub’ (eg City Centre/Limited Service). This
ensures that due consideration is given to the various elements of demand
within Cardiff, as opposed to applying a ‘one size fits all’ approach. We
summarise our projection below.
We have also considered the impact of taking an optimistic view of growth,
which is also summarised in the table below.
Hotel Demand 2008 v. 2014
Est. demand Growth 2008-2014 Proj. demand 2014
2008 Projection Rms sold Rms sold
000s 000s % 000s
Projection
On business 503.9 26.3 5.2% 530.1
Conference 87.6 4.2 4.8% 91.8
Coach 42.0 2.0 4.8% 44.0
Breaks 157.8 10.2 6.5% 168.0
Social Leisure 82.3 4.0 4.8% 86.2
Events 101.1 6.5 6.5% 107.6
Banqueting 36.2 1.7 4.8% 37.9
Total demand 1,010.9 54.9 5.4% 1,065.8
Optimistic projection
Total demand 1,010.9 116.7 11.5% 1,127.6
Optimistic Projection less Projection 61.8
Our projection is based on demand reaching 2008 levels in 2011 – implying
Occupancy at Cardiff Hotels would not return to 2008 levels until 2011,
assuming no increase in supply. In reality, significant supply changes are
expected and the balance of supply and demand is discussed in subsequent
sections.
As can be seen in the table, the optimistic model shows demand would grow
by a further 62,000 room nights per year, which is the equivalent of 242 rooms
at 70% occupancy. (NB. Optimistic model assumes from 2010 onwards that
demand will grow 50% faster than the projection.)
7.1 Opportunities
• Local and national GVA growths are higher than projected. The optimistic
projection shows the impact of growing 50% faster than projected.
• A major new inward investment project is identified and delivered in the
next two years.
• Some of the older, small independent hotels exit the market, creating
opportunities for other hoteliers. This would represent a continuation of
trends since 1997, with older stock (mainly B&B/small ungraded hotels)
exiting the market and being replaced with new stock (mainly Limited
Service).
7.2 Threats
Cardiff’s marketing for economic development and tourism fails to keep pace
with other UK regions and market demand aspirations are not met.
8. Projected Future Demand and Supply Balance
Our projections are made using a Supply and Demand spreadsheet model. The
model links all the factors discussed earlier in this report in a fully integrated
manner so that any change to a factor has a direct impact on the projection – this
allows alternative scenarios to be reviewed.
In previous sections we have reviewed the supply of hotel accommodation and
the demand for hotel accommodation. Hotel development decisions are initially
driven on the balance of supply and demand represented by Occupancy %.
Typically, hotel developers would be unlikely to proceed with a development if
they did not project that their hotel could achieve, within 2-3 years of opening, an
Occupancy of 70% or more.
8.1 Demand and Supply Balance (Hotel Room Occ.%)
The following table shows the projected occupancy based on:
• current 2008 supply of 3,850 rooms.
• known increase in supply of 434 rooms in 4 hotels (three of which opened
during 2008 and the Radisson which will open summer 2009) – a 11%
increase in supply.
• projected and optimistic demand for 2014.
Projection Optimistic Projection
Demand (room nights p.a)
1,065,800 1,127,600
Occupancy
2008 Supply 3,850 rooms 76% 80%
2014 Supply 4,284 rooms * 68% 72%
* accounts for supply increases under construction at Apr 2009
The table shows that, without the additional rooms opening 2009-2010,
occupancy would be projected to rise from 72% in 2008 to 76% in 2014, even
after allowing for the projected impact of the recession. However, the new
capacity already open or expected to open by 2010 (434 rooms or 11%
increase), will reduce projected occupancy to 68% or in the optimistic demand
growth scenario 72%.
In creating long-term city development plans, it is important to also
understand the likely occupancy over the intervening years 2009-2014.
At the projected level of demand and supply changes (open or under
construction at April 2010), occupancy is projected as follows.
Occupancy projections 2009-2014 (based on supply under construction at
April 2009)
Projection 2008 (base 2009 2010 2011 2012 2013 2014
year)
Projection 72% 64% 63% 64% 65% 67% 68%
Optimistic 72% 64% 64% 66% 68% 70% 72%
projection
We would expect the existing hotels to achieve higher occupancies than
shown during the period 2009, 2010, 2011 as the new capacity will still be
developing its market share.
The new capacity is located in the City and Bay areas and it is existing hotels
in these areas who will most notice their arrival, although all hotels will
probably notice some impact.
Hoteliers and investors would generally see these projections as an
unexciting. This could lead to potential developments, referred to in section
4, particularly Jury’s Inn and Premier Inn, being deferred until there is more
certainty regarding the depth of the recession and that the future looks more
predictable.
Under the above projections we can see no need for further supply in the
immediate future but opportunities could exist as soon as there is clarity over
the current recession.
8.1.1 Potential impact of additional room capacity
To assist in development planning, the table below shows the expected
impact on hotel occupancy of further supply. This is based on the 2014
projected demand and adding extra supply to that included in the projections
above.
Year Rooms Projection Optimistic Projection
Supply
Demand 2014 (room nights p.a)
1,065,800 1,127,600
Occupancy at 2008 Supply
2008 3850 76% 80%
Occupancy at 2014 Supply
2014 4284 68% 72%
Impact of extra supply on Occupancy
2014
Extra 100 67% 70%
Supply
200 65% 69%
300 64% 67%
400 62% 66%
448* 62% 65%
*448 equates to Jury’s Inn (250) & Premier Inn (198) opening in 2011
8.1.2 Impact of independent sector changes
As noted elsewhere, occupancy may be higher if the trend for the B&B/small
hotels sector to exit the Cardiff market continues.
It is beyond the scope of this study to establish detailed data on this, but the
following points should be noted.
• MPA’s 2004 report suggested that between 1997 and 2003 Cardiff had
'lost' 427 rooms from the independent sector supply.
• The 2004 report shows supply in the independent sector at 634 rooms
in 2003. As part of this study we were provided with a independent
sector database showing supply in 2008 at 343 rooms - representing
a loss of 291 rooms.
• The 2004 report shows Limited Service supply at 860 rooms, this
report shows 2008 supply at 1,198 rooms, an increase of 338 rooms.
The basis and comparability of the independent sector cannot be taken as
absolutely robust. However, the underlying trend is clear - the independent
sector is in decline and, in essence, it is being replaced by the modern Limited
Service (budget) brands.
It may well be that, on the basis of the above trend, there is scope for a further
100 – 200 Limited Service rooms, with a corresponding decline in the
independent sector. However, this trend cannot continue indefinitely.
8.1.3 Other Development considerations
We would note that not all investment decisions are based on local market
rationale, for instance:
• Brands desperate to expand may develop in areas where they expect
low occupancies, at least in the early years.
• Brands which have already developed at ‘easy’ sites and feel they
must now look at more marginal sites.
• Individuals who are local entrepreneurs who believe they have the
ability to out-perform the average, using local knowledge.
• We also recognise that there is a difference between market need and
commercial opportunity.
• Market need – consumers cannot purchase the product they require.
This can occur because the hotel category they want is not present or
the category is present but demand exceeds supply.
• Commercial opportunity – demand is sufficient that a new hotel can be
built and be commercially viable. This can occur when there is a large
supply and further new supply will not overly dilute the existing supply
and new hotels can be commercially viable.
In addition, emerging trends influence the accommodation sector, for
instance, the development of serviced apartments. We understand these are
already appearing in Cardiff in small numbers but larger operators are
believed to be considering the opportunity in various UK cities, in particular
the IHC brand Staybridge Suites, two of which are already open in Liverpool
and Newcastle. We are not aware of hotels in Cardiff yet being significantly
affected by such developments. However such developments will be aiming
to attract guests currently using hotels for extended stays, though this will not
be their only source of business. A proportion of serviced apartment rooms
would represent an increase to the overall serviced accommodation supply in
the City and, as such, could reduce average hotel occupancy, especially if a
recognized brand in the same ownership as traditional hotels.
8.2 Implications/Actions
The implications of the above up to and including year 2014, at the projected
level of demand for the four stakeholders are:
Consumers
They can anticipate little or no difficulty in securing reservations at their first
choice hotel and prices will be competitive.
Cardiff City Council
Cardiff will benefit from being ‘easy to visit’. However, the Council can be
expected to come under pressure from hoteliers to create more events and
economic growth.
Hotels
Hotels will find trading difficult over the projection period. This is likely to lead
to lower prices and profitability. This may, in turn, affect quality standards
and reinvestment programmes.
The major hotel brands’ performances could potentially exceed the projection
if the long running trend in Cardiff for B&B/small hotels exiting the market
continues.
Developers
Hotel developers are unlikely to see the area as an attractive destination over
the projection period for further supply.
9. Rooms Revenue
Part of the brief for this project included estimating the Rooms Revenue for
the Cardiff hotel supply. Before discussing, we would clarify the definition of
‘Rooms Revenue’ used in the hotel industry.
Hotels sell bedroom accommodation at a range of prices to a variety of
customers. Some prices include breakfast, others include dinner and
breakfast and some, such as conferences, include several elements of hotel
service; most prices (but not all) include VAT.
It is normal practice in hotels to split, or allocate, prices into various
departments such as rooms, food, liquor, and room hire and to extract VAT.
The total monies allocated to rooms divided by the total rooms sold, is termed
as Average Room Rate – often shortened to ARR. In effect, ARR represents
the average price (ex VAT) which a hotel achieves for selling its bedrooms,
excluding any ancillary items such as food.
During our research, we have obtained data on Average Room Rate
achieved, which varies from property style to property style – clearly you pay
more to stay in a 4 Star hotel (eg Marriott) than a Limited Service hotel (eg
Premier Inn).
Based on the demand and Average Room Rate data we have collected, we
estimate annual Room Revenues for Cardiff hotels in 2008 at £62m.
APPENDIX
SERVICED ACCOMMODATION SUPPLY IN CARDIFF
(These properties form the basis for all supply and, indirectly, demand estimates presented in this report)
In the supply listing shown below we use the following codes to segment the properties.
Property segmentation
4/5 Star hotels: AA/Tourist Board graded 4/5 Star hotels or, in MPA’s view,
equivalent in terms of general quality/price.
3 Star hotels: AA/Tourist Board graded 3 Star hotels or, in MPA’s view,
equivalent in terms of general quality/price.
Limited Service AA/Tourist Board graded Lodges (eg Premier Inn, Travelodge) or
hotels: equivalent.
Small Hotels: Ungraded by the AA with pricing/quality that will generally be a less
expensive alternative to the Lodge sector.
Property MPA MPA MPA Rms Add1 Post
Location Prop Grade code
Type
Angel Hotel, City C Hotel 4 102 Castle Street CF10
Barcelo 1SZ
Big Sleep Hotel City C Ltd Ser Ltd Ser 81 Bute Terrace CF10
2FE
Blue Dragon City C Hotel sm 52 179 Newport CF24
Road 1AH
Campanile Outer C Ltd Ser Ltd Ser 47 Caxton Place CF23
8HA
Churchills Hotel City C Hotel sm 35 Cardiff Road CF5
2AD
Copthorne Hotel Outer C Hotel 4 135 Copthorne CF5
Way 6DH
Etap Hotel C Bay Ltd Ser Ltd Ser 157 Tyndall Street CF10
4BE
Express by C Bay Ltd Ser Ltd Ser 87 Langueil CF10
Holiday Inn-Cardiff Close 4EE
Bay
Future Inn Cardiff C Bay Hotel 3 197 Hemingway CF10
Bay Road 4JY
Hilton Cardiff City C Hotel 4 197 Kingsway CF10
2HH
Holiday Inn, City C Hotel 3 157 Castle Street CF10
Cardiff City Centre 1XD
Holland House City C Hotel 4 165 24-26 CF24
/The Mercure Newport 0DD
Road
Ibis Cardiff City City C Ltd Ser Ltd Ser 102 Churchill Way CF10
2HA
Ibis Cardiff Gate Outer C Ltd Ser Ltd Ser 78 Malthouse CF23
Avenue 8RA
Innkeepers Lodge Outer C Ltd Ser Ltd Ser 52 Tyn-y-Parc CF14
Road 6BG
Lincoln House City C Ltd Ser Ltd Ser 23 118-120 CF11
Hotel Cathedral Rd 9LQ
Manor Parc Outer C Hotel 3 21 Thornhill CF14
Road 9UA
Marriott Hotel City C Hotel 4 184 Mill Lane CF10
1EZ
Mercure Lodge C Bay Hotel 3 100 Wharf Road CF10
East 4BB
Miskin Manor Outer C Hotel 4 43 Miskin CF72
8ND
New House Outer C Hotel 3 37 Thornhill CF14
County Hotel Road 9UA
Novotel Cardiff City C Hotel 4 138 Schooner CF10
Centre Way 4RT
Parc Hotel City C Hotel 4 138 Park Place CF10
3UD
Park Inn City C Hotel 3 146 Mary Ann CF10
Street 2JH
Park Inn, Cardiff Outer C Hotel 3 132 Circle Way CF23
North East 9XF
Property MPA MPA MPA Rms Add1 Post
Location Prop Grade code
Type
Park Plaza City C Hotel 4 129 Greyfriars CF10
Road 3AL
Penrhys Hotel City C Hotel sm 18 127 Cathedral CF11
Road 9JB
Premier Inn Outer C Ltd Ser Ltd Ser 49 Newport CF3
Cardiff East Road 2UQ
Premier Inn Outer C Ltd Ser Ltd Ser 39 Port Road, CF5
Cardiff West Nantisaf 6DD
Premier Inn, C Bay Ltd Ser Ltd Ser 77 Keen Road CF24
Cardiff City South 5JT
Premier Inn, Outer C Ltd Ser Ltd Ser 147 Pentwyn CF23
Cardiff North Road 7XH
Premier Inn, Outer C Ltd Ser Ltd Ser 75 Ipswich Road CF23
Cardiff Roath 9AQ
Royal Hotel City C Hotel sm 64 10 St Mary CF10
Street 1DW
Sandringham City C Hotel sm 28 21 St Mary CF10
Hotel Street 1PL
St David's Hotel & C Bay Hotel 4 132 Havannah CF10
Spa Street 5SD
St Mellons Hotel Outer C Hotel 4 41 CF3
2XR
Travelodge Cardiff City C Ltd Ser Ltd Ser 100 Imperial Gate CF10
Central 1FA
Travelodge Cardiff Outer C Ltd Ser Ltd Ser 31 Circle Way CF23
Llanederyn East,/ A48 9PD
Travelodge Cardiff Outer C Ltd Ser Ltd Ser 53 Moto Service CF72
M4 Area 8SA
Vale Hotel Golf & Outer C Hotel 4 143 Hensol Park CF72
Country Club 8JY
Village Hotel Outer C Hotel 3 118 29 Pendwyalt CF14
Road 7EF
