Building Or Buying A Manchester Hotel? Two Monster Issues Are Heading Your Way
If you made it to the bottom of page 23 (of 25) in one of nine tourism economy reports to Manchester City Council’s rarely thrilling Economic Scrutiny Committee then you will already know about the two massive issues heading toward the city’s booming hotel sector.
The most significant of the reports, presented to a meeting on 10 October, can be found here.
If you are pressed for time, here’s the quick version: there will be a new visitor levy on hotel operators, and Manchester’s overnight tourist sector has to grow at eye-popping rates over the next (Brexit-troubled, economically uncertain) five years to maintain current occupancy levels.
1. Overnight Stays Not Growing Fast Enough
The Manchester hotel sector has grown fast, very fast. Marketing Manchester forecasts an additional 4,762 rooms will be available per night in the city by the end of 2021, a 53% increase from December 2016. That means Manchester must achieve growth in the overnight visitor market higher than the recent UK average.
The number of city centre hotel beds is expected to reach 13,718 by the end of 2021, up 33% from December 2018. Demand is not growing anything like as fast. The annual demand rate grew by 5.8% between 2017 and 2018. Analysis of H1 2019 figures suggested this rate of growth has slowed a little (to 5.1%), but even if it had been maintained it would have been nowhere near enough to meet the predicted new supply, according to the council report.
“We will need to generate 11.2%-12.3% increase in room nights sold year-on-year between 2018 and 2021,” the report said. If overnight demand does not grow, occupancy rates will decline sharply from 79% today to 69% by 2021.
This is a difficult time to be driving visitor numbers, as the report conceded. European visitors account for 59% of all international visitors and 42%of the spending. European Union citizens are also significant in the Manchester hospitality sector.
“Large numbers of EU are employed in the city’s hospitality sector and businesses are already reporting that many EU nationals are leaving, resulting in staff shortages,” the report said.
Brexit risk is already threatening the lucrative convention business. Marketing Manchester currently has 36 conference bids which are pending decisions and of these, 13 are for European conferences which are reluctant to decide until there is greater clarity on Brexit. If they are lost the cumulative loss to the economy is estimated by the report at £39M.
2. Hotel Levy
It is not yet clear how a new levy on hotel accommodation will work, but buried in paperwork submitted to a city council overview and scrutiny committee is a hint that work on a levy structure is already advanced. It will take the form of an Accommodation Business Improvement District.
“Recognising the need for more resources to drive more overnight visitors into Manchester, Marketing Manchester has been working with Manchester City Council, CityCo and Manchester Hoteliers Association on a proposal to introduce a visitor levy via a Business Improvement District mechanism for accommodation operators in Central Manchester,” the report said.
This proposal seems not to be aimed at tourists themselves, unlike Edinburgh’s proposed levy. In Edinburgh the Transient Visitor Levy would be a flat £2 per night room charge, regardless of the cost of the hotel room. The fee would be capped after seven consecutive nights at a maximum charge of £14 per trip. Instead, the levy would follow that of normal business improvement districts, where the payment is made by occupiers based on their rateable value. The ABID framework depends on a referendum vote in favour by the businesses covered.
