More than 36 million overseas visits to Britain are forecast this year, an increase of 3.8% on 2015. This is set to result in around £22.9 billion in visitor spending, an increase of 4.2% on 2015 (Visit Britain).Putting the potential of Brexit aside, what does this substantial growth mean for the hospitality sector? Is the hotel development pipeline keeping pace? And what does this mean for the sharing economy, such as Airbnb?
Established in San Francisco in 2008, Airbnb has seen rapid expansion. It now boasts rooms in more than 34,000 cities in 191 countries. From castles to houseboats, Airbnb listings come in a range of types. In London Airbnb offers accommodation in the iconic buildings of St Pancras Clock Tower and the Barbican.“Book homes from local hosts in 191+ countries and experience a place like you live there” is how Airbnb promotes its platform to guests. To hosts, it describes its platform as “the easiest way for people to monetise their extra space”. The barriers to entry are very low; anyone with an internet connection and a spare room can quickly create a profile and start making some income.Until recently, planning permission for a change of use was required to provide residential premises for temporary sleeping accommodation for less than 90 consecutive nights in London, under the Greater London Council (General Powers) Act 1973. This changed with the Deregulation Act (2015), which enabled Londoners to participate in the sharing economy by allowing short-term lets for a maximum of 90 days per year without having to apply for a change of use. This, coupled with the tax breaks for letting spare rooms announced in the recent budget could boost further Airbnb expansion in London.Geographically, Airbnbs are spread throughout London, with a higher concentration in residential areas. Compared to hotels, establishment of an Airbnb is not constrained by planning tests that promote the location of hotels (and other ‘main town centre uses’ – as defined by the NPPF) in town centre locations.
Within Central London, the spatial distribution of Airbnb listings are markedly different from hotel rooms, being concentrated in the boroughs of Hackney, Tower Hamlets and Newham:
An advantage of Airbnb is the ability for supply to rapidly increase to cater for demand. Whilst ‘live’ Airbnb data is unavailable, we would expect substantial increases in Airbnb’s around key events such as the Rugby World Cup and Wimbledon, as did occur during the 2012 London Olympics. This ability to soak up peak demand supports increased visitor numbers to the benefit of cities and town centres.So how is the growth of Airbnb affecting hotel bedroom provision?
As Airbnb has seen huge grown in recent year, so have hotels. It is forecast that 16,000 new hotel rooms will open across the UK in 2016, while 38,000 rooms have opened or are in the pipeline for 2015 and 2017 (PwC UK Hotels Forcast 2016).London received more international visitors than any other city in the world in 2015 and is currently undergoing what The Economist has described as an “almost unprecedented hotel building boom”. The number of hotel rooms in London rose from 129,000 in 2013 to 149,000 in 2016, and according to PwC may reach as many as 180,000 by 2018. These are concentrated close to the city’s tourist attractions and business hubs, in the central boroughs of Westminster, Camden and Kensington and Chelsea.When we think of hotels we think of a place to spend the night, be it for a business trip, family holiday or overnight stay. However, hotels are one of the most diverse planning uses, catering for a wider range of clientele. As the sharing economy diversifies visitor accommodation, we have seen similar trends in the hotels’ sector. Increasingly, hoteliers are diversifying their offer to incorporate ancillary and complementary services such as coffee shops, restaurants and gyms.Whilst some hotels are bringing in third parties through partnership or landlord/tenant arrangements, others are diversifying their own brands and concepts with the aim of encourage guests to stay at the hotel. Village Hotels, for example, now have an in-house Starbucks at 27 of their hotels around the UK. The boutique Soho House & Co has teamed up with Hubbard & Bell and Chicken Shop in London, branching out into the restaurant sector.
This diversification differentiates hotels from Airbnbs, strengthening and adding value to the hotel experience. Whilst both Airbnb and hotels are seeing rapid growth (and undoubtedly some competition) there is a case to be made that the two are complementary rather than competing.The evidence in central London, at least, is that the huge growth in the hospitality market over the last decade has spawned an ever widening range of product, such that there has been growth of both hotel rooms and formats, and Airbnbs. Growth and diversification are likely to continue while London continues to grow and prosper.Further analysis of these trends is outlined in our Infographic. For more information on our hotels’ experience and services, please see our Hotels Brochure.