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									                HOTEL FUTURES

        A Review of Growth and Potential in
             Liverpool’s Hotel Sector

               Executive Summary

                         Prepared by

                   Tourism Solutions
            ACK Tourism Development Services

                           March 2001

                                         RESEARCH &
     A Review of the Growth and Potential in Liverpool's Hotel Sector - Executive Summary

                                EXECUTIVE SUMMARY

       Trends in the UK Hotel Market

            Hotel performance nationally has improved steadily since the
             recession of the early 1990s, both in terms of occupancy and
             achieved room rates.

            UK hotel occupancies and achieved room rates are currently at
             record levels: occupancies have been stable at 73% since 1996, and
             achieved room rates have climbed consistently.

            Hotel performance varies by location according to the nature of the
             market, the mix of business, and the level of new hotel development.

            There is evidence to suggest that the UK hotel market is levelling off,
             and that the current cyclical peak has passed. A ‘soft landing’ is
             predicted, however, rather than a dramatic drop in performance.
             Growth and fall-back in the provinces may lag behind national trends.

            The business market is the main driver of hotel demand. The state of
             the economy and business tourism are thus key factors in current
             and future demand. Leisure demand is also important to achieve a
             balanced business for the hotel sector.

            The past 10 years have seen the rapid growth of the budget hotel
             sector, with significant further growth projected over the next 5 years.

            3 and 4 star hotel development has been more limited, and focussed
             primarily on strategic sites and major cities.

            Recent years have seen the emergence of new niche hotel products
             such as signature, boutique and town house hotels, and more
             recently the development of extended stay or aparthotel products.

            Market segmentation, branding and consolidation have been key
             features of the UK hotel industry over the past 5 years, and are likely
             to continue over the next 5 years.

       Current Hotel Supply and Demand in Liverpool

            Liverpool city centre has seen significant growth in its 4 star and
             budget hotel supply over the past 4 years, although a reduction in its
             3 star stock.

Tourism Solutions/ACK                         1                                   March 2001
     A Review of the Growth and Potential in Liverpool's Hotel Sector - Executive Summary

            A number of the city’s established hotels have refurbished in
             response to the threat of new hotels coming into the city. The quality
             of Liverpool’s city centre hotel stock has improved significantly with
             the opening of the new hotels, and the refurbishment of existing

            4 star and budget hotel occupancies are currently high, and have
             grown significantly in the past two years, despite the increase in

            Rates achieved by the city’s 4 star hotels are increasing, but are still
             below the national average, and significantly lower than rates
             achieved in Manchester, Leeds and Glasgow.

            4 star hotels in the city are currently declining some midweek
             business. Levels of declined business are not significant, however,
             and business is usually displaced to 3 star hotels in the city, or on the
             edge of the city centre. 4 star hotels do not appear to be declining
             much business at weekends.

            The city may be losing some large top end conferences because of
             the lack of a sufficiently large and well-equipped high quality hotel

            The city’s budget hotels are declining significant business at
             weekends, but not much business during the week.

            The city centre hotel market appears to be very self-contained with
             little movement between city centre hotels and hotels outside the city
             centre. City centre demand is rarely displaced much beyond edge of
             city centre locations. Hotels elsewhere on Merseyside do not attract
             much city centre-related business from Liverpool.

       Prospects for Growth in Liverpool’s Hotel Market

            Business and conference demand look set to grow as the city’s
             economy develops.

            Growth in the conference market would be significantly stimulated by
             the development of a conference centre in the city.

            Leisure break business should increase as the city is further
             developed and promoted as a leisure tourism destination.

            Football-related demand is unlikely to grow unless new larger stadia
             are developed by Liverpool and Everton.

Tourism Solutions/ACK                         2                                   March 2001
     A Review of the Growth and Potential in Liverpool's Hotel Sector - Executive Summary

            The clubbers market is currently frustrated and could grow, given
             further city centre budget hotel provision. Expansion of this market
             needs to be carefully managed, however, to ensure a balanced mix
             of weekend business for the city.

            The development of an arena in the city could attract additional hotel
             business related to concerts and events it would stage.

       Liverpool as a Hotel Development Location

       Liverpool has a number of advantages and disadvantages as a hotel
       development location:

      Advantages:
      It is a large city, in terms of population criteria and level of associated
       economic activity
      Its status as an important regional centre puts it high up the target list for
       companies seeking strategic coverage
      Occupancies now exceed national provincial averages, and achieved
       room rates are climbing
      New development has boosted confidence in the city, and rate
      The city has a strong profile with overseas visitors
      A balanced business, with the mix of business and leisure use producing 7
       day, year-round trade
      It is perceived as a character, friendly city
      The availability of sites
      The cost of land (compared to competitors)
      The ‘enabling’ public sector framework, in terms of planning and
      Grant availability
      Level of investment proposed in the city over the next 7-8 years.

      Disadvantages:
      A first division location rather than premier league – in the shadow of
       Manchester, Leeds, Birmingham
      Historical perceptions of poor quality hotels and low achieved room rates
      Not as accessible as some of its competitors, by road, rail or air
      Corporate sector business not as strong as some regional cities
      Image, though improving, still has some way to go (though those that
       really know the city seem to love it)
      Parking availability and to some extent security
      Costs in terms of developing non-standard sites, particularly conversions
      The general level of affluence in the city.

Tourism Solutions/ACK                         3                                   March 2001
     A Review of the Growth and Potential in Liverpool's Hotel Sector - Executive Summary

       There is currently significant interest in hotel development in Liverpool
       across all standards of hotel. The city has a lot going for it in terms of its
       desirability for hotel investment, so it should be no surprise that there is
       such a significant level of current interest in the city. Clearly, there is an
       opportunity to try to ‘manage’ this to best effect and to bring maximum
       sustainable benefit to the city.

       Potential for Further Hotel Development in Liverpool

       Our research and analysis suggests that there is potential for the following
       types of hotel development in Liverpool over the next 5 years:
       -      A further internationally branded 4 star hotel

       -       A further upper end budget hotel

       -       Possible mid-market budget boutique and town house hotel

       -       Limited provision of mid-market serviced apartments

       The current performance of the city’s existing 4 star hotels, coupled with
       the projected growth in Liverpool’s economy suggest a need for a further 4
       star hotel in the city centre. An internationally branded hotel would, we
       suggest, be most beneficial for the city in terms of raising achieved room
       rates, attracting new business, and achieving the vision of a World-class
       city centre.

       There is some evidence to suggest a need for a larger 4 star hotel with
       say 200-250 bedrooms and extensive conference facilities. The city
       appears to losing some larger conferences at the top end of the market
       because of a sufficiently large and well-equipped 4 star venue. Combining
       a large international 4 star hotel with proposals for a conference centre for
       the city could be one way forward.

       The Express by Holiday Inn is currently declining significant levels of
       business, both during the week and at weekends, clearly demonstrating a
       strong demand for this type and price of hotel in the city.

       We think it unlikely that high rate business will grow sufficiently in
       Liverpool over the next 5 years to support 5 star hotel development, other
       than possibly a small luxury operation to rival the Trials Hotel.

       Our research suggests no real need for further 3 star hotels, provided that
       the Gladstone and Adelphi refurbish to a good 3 star standard. There
       could be a danger of the 4 star market overheating if either or both of

Tourism Solutions/ACK                         4                                   March 2001
     A Review of the Growth and Potential in Liverpool's Hotel Sector - Executive Summary

       these hotels, together with the Devonshire House upgrade to 4 star. This
       would also leave a gap in the 3 star market.

       Our research suggests that some of the potential for 3 star and upper end
       budget hotels could be met through mid-market or budget boutique or
       town house hotel development. Such hotel products could be beneficial in
       terms of broadening Liverpool’s hotel offer, through the product
       differentiation that these more individual types of hotel would bring. We do
       not believe, however, that the rates that could be achieved by a 4 star
       boutique or town house hotel in Liverpool are yet sufficient to support
       development at this end of the market.

       Our projections for budget hotel demand in Liverpool suggest no real need
       for further budget hotel development in the city centre; other than to soak
       up currently frustrated weekend demand at this end of the market. New
       budget hotels in the city will merely serve to further dilute the budget
       market, and depress occupancy levels.

       Policy Implications

       Market forces will ultimately dictate which new hotels will be developed in
       Liverpool over the next 5 years. While there is currently considerable hotel
       developer interest in the city, and many speculative proposals for hotels,
       in practice much of this interest will wane as new hotels begin

       There may, therefore, be a case for the City Council to seek to influence
       hotel development in the city by proactively targeting hotel development
       that will contribute most to Liverpool’s hotel offer and to the vision for the
       city centre, as identified above.

       There may also be case for the City Council to seek to influence the
       refurbishment and development plans for 3 star City centre hotels in line
       with the findings of our study. This may be difficult to achieve, however, as
       neither the Gladstone or the Adelphi appear interested in entering into any
       sort of dialogue at the present time.

       In such a buoyant hotel market we find it difficult to see how the use of
       Objective 1, or other public funding to support new hotel development of
       hotel refurbishment can be justified. Indeed, there is an argument to
       suggest that grant aiding hotel development could be counter-productive,
       as it could distort the market and allow new hotels to open at reduced
       rates, thus driving down achieved rates in the city. The only exceptions
       would be where conversion to hotel use provides a new use for a
       strategically important or historic building in the city, or where the

Tourism Solutions/ACK                         5                                   March 2001
     A Review of the Growth and Potential in Liverpool's Hotel Sector - Executive Summary

       development of a statement building is seen as desirable to act as a focus
       for regenerating a key site.

       There may be more of a case to use the funding available to more broadly
       assist the city’s hotel industry and to meet policy objectives in relation to
       developing ICT provision, environmental good practice, and improving
       access for disabled people.

Tourism Solutions/ACK                         6                                   March 2001

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