Compact hotel formats may be increasingly viable in cities such as Edinburgh, Dublin and Belfast, which are ranked as the three most attractive locations for hotel development and investment according to new research from Lambert Smith Hampton (LSH).
LSH’s new report, Do Disturb: Disruption & Innovation in the Hotel Market, finds that the compact hotel room concept, which typically prioritises location, design quality and hi-tech features over room size, is gaining traction in major UK cities. This trend comes as hotel brands seek to offer new experiences to visitors and differentiate themselves from their competitors.
Northern Ireland’s tourism industry has grown rapidly over the last decade, but hotel development activity has only recently gathered momentum. The mismatch between demand and supply has driven RevPAR growth of more than 25% in Belfast over the last three years and 7.7% for the 12 months to July. Although there has been a spike in new hotel openings in 2018, the development pipeline for the next two years is comparatively modest.
Compact sized hotels are set to account for approximately 18% of all room openings in 2018 in the UK, a record market share. Despite the significant volume of hotel developments in Belfast in 2018, only 6% of new rooms delivered this year will be compact. The new 81 room easyHotel which opened in August is the sole contributor to this supply. This opened despite many of the rooms being below regulation size. LSH do not foresee the issues experienced by easyHotel being a deterrent to future compact hotel development in the city.
Before 2018 and the opening of the easyHotel, the only facility in Belfast offering such accommodation was the Beannchor Group’s popular Bullitt Hotel. It was constructed in 2016 and extended in 2017.
The report states that across the UK more than 4,000 rooms were delivered in new compact hotels during 2017-18, while there are a further 5,000 compact hotel rooms in the development pipeline, indicating the growing significance of the sector. In contrast, there are currently no live plans for any further compact hotels in Belfast.
Overall, there has been a 95% increase in the number of compact sized hotel rooms delivered annually since 2016 – a figure that underlines the relatively recent emergence of the compact format.
Commenting Darren Fitzsimons, director of hotels at Lambert Smith Hampton, said: “The hotel market is currently in a period of exciting change and we have seen a number of hotel groups turn conventional wisdom on its head and successfully operate hotels with compact sized bedrooms.
“Hotel operators are exploring new ideas in order to set themselves apart from competing brands and alternative accommodation types, with innovative technologies and novel room formats being adopted to offer new experiences to hotel visitors.
“Belfast experienced the second highest REVPAR growth rate of all UK and Irish cities for the 12 months to July 2018. Affordability could therefore become a constraint to further growth. The compact hotel provides an opportunity for hoteliers to develop affordable bedrooms in a high value market. The model has proven successful across the UK. Belfast appears to be behind the curve in terms of existing supply and pipeline but we expect compact hotels to become a more dominant feature of the market in the coming years.”
The report highlights how compact room layouts are used by a wide range of hotel operators, including Premier Inn through its offshoot brand, hub by Premier Inn. This currently has 10 UK properties with typical rooms measuring 11.4 sq m, approximately 45% smaller than a standard Premier Inn room.
Other brands in the compact sector include “super budget” easyHotels and YotelAir, while more luxurious offerings include the Z Hotels brand, which incorporates high quality design and innovative technological features in rooms sized from just 8 sq m. Point A, which entered the market last year, now has seven hotels in London and Glasgow, and has rooms typically in the 8 to 12 sq m range. Several international brands operating with small room footprints have also entered the UK market, including Germany’s Motel One and the Netherlands’ citizenM.
Underpinning the growth of the compact hotel segment is the recognition that some hotel users, particularly young people and business travellers, require little more than a comfortable, affordable and well-located room for the night. Compact hotels are primarily targeted at single travellers and couples on overnight or short stays, particularly in city centre locations.
While central London has been the main focus for compact hotel openings over recent years, the development pipeline includes a greater proportion of rooms in regional cities, according to the report.
For hotel operators, compact room formats have the potential to maximise the number of rooms that can be offered in tight city centre locations. Smaller rooms provide greater flexibility and may unlock awkwardly sized or shaped sites to hotel development.
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