LEEDS, England—An influx of investment into Leeds could help reverse the city’s hotel development fortunes.
The city’s room count, according to STR Global, sister company of Hotel News Now, for November year to date was 5,885, up from 5,235 in January 2008.
Jennifer Young, associate director of visitor economy at Leeds and Partners, said overall hotel occupancy in the city is healthy, but supply could be added.
For year-to-date November, occupancy stood at 78.7%, up 2.4%, according to STR Global.
Young tallied the city’s room stock as 1,800 4-star keys, 866 3-star keys and 1,200 2-star keys. Some new supply is on the way, aided in part by infrastructure and other investment.
New blood
One new hotel development is the £34-million ($53-million), 206-room Hilton Leeds Arena that will open in a franchise agreement with operator Redefine|BDL next door to Leeds Metropolitan University’s Rose Bowl conference center and close to First Direct Arena. Another property in the pipeline is the 90-room boutique property Dakota Leeds.
Brandon Riley, director of hotels and leisure at the GB Group, which owns that Hilton, said Leeds had been of interest to his company for the last eight years.
Riley said GB Group secured £4.8 million ($7.3 million) in funding from the Growing Places Fund, a £500-million ($785-million) U.K. government scheme, whose website said the money was “to enable the development of local funds to address infrastructure constraints.”
“Leeds has a good business and leisure mix, with the new arena reinforcing this,” Riley said, adding that Leeds also has a “gap for a good-quality, upscale hotel.”
“Leeds and Partners have undoubtedly helped to promote inward investment into Leeds, and (for us), the new arena which opened last year was a key factor,” Riley said.
Riley expects his hotel’s occupancy in its first year will be approximately 70%, although GB Group has still not decided the average daily rate to be charged.
The city’s hotel-industry metrics support Riley’s optimism.
For year-to-date November, average daily rate was up 10% to £61.10 ($92.36). Revenue per available room increased by 12.7% to £48.07 ($72.66).
“Revenue per available room year to date has seen double-digit growth, and gross operating performance per available room is increasing at the fastest rate in the U.K., (so) it comes as great surprise that only two properties are in the development pipeline. It looks like developers have really been caught snoozing on this one,” said Joe Stather, information and intelligence manager, Europe, Middle East and Africa, CBRE Hotels Limited.
“Hotel transaction volumes remain low but not for want of investor appetite. Little hotel stock has come to the market recently … (but) commercial real estate investment is up 13% in year to date and 27% in the last quarter, showing that demand is gathering momentum. Sentiment would suggest that the buyer pool for Leeds is deepening, which will, in turn, buoy values and sharpen yields as we head into 2015,” Stather added.
Investment emphasis
Leeds has the third largest population in the United Kingdom, but in terms of national recognition of U.K. cities it trails behind smaller destinations such as Manchester, Liverpool and Newcastle.
Leeds’ previous fall in the public eye has been exacerbated by the city not having a top-level soccer team or hosting a major cultural or sporting event, according to Stather.
Spearheading the investment campaign is Leeds City Region Enterprise Partnership, boosted by an injection of £573 million ($896 million) from the U.K. government’s Local Growth Fund. The partnership calculated that, when leveraged, the fund would result in a total investment package of £913 million ($1.4 billion).
Additionally, the 13,500-seat Leeds’ First Direct Arena, which opened in September 2013, is widely credited as being the city’s new catalyst. Leeds Bradford International Airport, which finished an £11-million ($17-million) refurbishment and development in 2012 also is going from strength to strength, resulting in such airlines as Aer Lingus coming back to the airport. On 23 October, the Irish national carrier reinitiated service from and to Dublin, with two flights in both directions daily and with onward service to North America.
Citywide boost
The city also is seeing some growth due to its increase of citywide conventions stemming from growing healthcare, manufacturing, financial and digital industries. In addition, the Trinity Leeds shopping complex has helped, which, according to owner Land Securities’ website, was the “only major shopping, dining and leisure destination to open in the U.K. in 2013.”
Leeds also saw interest when it staged the Grand Départ in 2014, the opening day of the Tour de France cycling race.
“Throughout the last decade, old office blocks have paved way for retail and restaurants, displacing insurance companies of old to new, modern business parks on the periphery. The majority of companies now jostling for city-center office space make up the largest financial and legal center outside of London, looking for a home amongst the hotels, bars and high-spec residential,” Stather said.
In addition, Leeds’ star has appeared more bright since the city was announced as the most northerly (so far) stop of the U.K.’s new high-speed train system, known as HS2, which will be fully operational by 2033 and cut travel time between London and the city from 120 minutes to 57 minutes.