CONTENT FOR MORE INFORMATION: UK Overview UK Hotels Performance. UK Hotel Development Trends. Top 5 Predictions

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1 UK Hotels Market Assessment 2015

2 CONTENT FOR MORE INFORMATION: UK Overview 2015 UK Hotels Performance UK Hotel Development Trends Top 5 Predictions

3 UK Overview Economy In 2015, the UK economy slowed down after experiencing FOR MORE record INFORMATION: growth rates in The IMF estimates GDP growth to be 2.2%. Domestic demand, however, remained strong helped by higher household disposable income, thanks to lower oil prices, strong employment growth and lower inflation and mortgage rates. The outlook for the UK economy remains positive, and is expected to continue growing at a similar rate over the coming years according to the IMF. Nevertheless, the slowdown in China and recessions in other emerging economies, as well as the uncertainties in Europe and the risk of a Brexit may impact on any potential performance. CPI inflation remained close to zero during the last quarter of 2015, closing the year at 0.2%, thanks to low energy, food and goods prices. Forecasters believe it could rise back towards its 2% target during The current account deficit stood at - 4.7% of GDP, showing a modest improvement against last year and making Britain less dependent on foreign capital. Tourism International visitor numbers continued growing for the sixth consecutive year in 2015 reaching recordbreaking figures. Provisional ONS data shows that the number of visits to the UK by overseas residents reached 35.8m, 4% higher than a year earlier. Trips for visiting friends or family (VFF) experienced the highest increase (up by 6.2% to 29.1% of the total) and holiday-maker numbers were down by 0.5%. However, this segment continued to account for almost 40% of total visitor numbers. VisitBritain estimates that overseas visitors will reach 36.7m in 2016 and 22.9bn expenditure. Visits from EU15 markets during 2015 were 19.89m, 2% higher than 2014 and the best rolling twelve month period ever recorded. Visits from other EU markets showed a strong year, with growth up 15%, marking another record with 4.12m visitors. Europe continues to be the main inbound market for the UK, accounting for about three-quarters of the total. North America visits for 2015 were up 8% to 3.9m. The segment has recovered its pace of growth mainly due to the strength of the dollar. Good economic performance and events such as the Rugby World Cup drove an increase in domestic visitor expenditure for the year to date to October 2015 by 8.7% to 21.3bn, mirroring the increase in visitor numbers (up 8.3% to 104.7m). After a cold 2014, with domestic visitor numbers and spending down, 2015 showed record breaking figures in both domestic and inbound visitors and increased spending as a result. However, expenditure was lower than in previous years and inbound visitor spend was only up 0.3% to 21.8bn, affected by the weakness of the euro.

4 2015 UK Hotels Performance In 2015, daily rooms yield for the UK rose by 5.7% to 75.08, breaking the 2014 barrier and setting another year of record growth, with the highest average room rate over FOR the MORE last INFORMATION: four years. The strong growth experienced by hotels in the UK was the result of a robust growth of 4.6% in AARR to 95.80, as well as a modest 1.0% increase in occupancy. Summary of performance UK hotels ( ) London hotels performance remained relatively flat during Occupancy was up 0.2% to 82.8%, returning to 2013 levels. AARR continued to grow at a similar rate to 2014 with an increase of 0.9% to , resulting in a rooms yield of , up 1.1%. Despite the modest figures, London hotels have fully recovered their pre-recession performance and again demonstrated their resilience. The continued increase in supply in the Capital makes it difficult for hotels to produce the more marked growth provincial hotels have experienced recently. Summary of performance UK hotels ( ) Regional hotels continued to experience strong growth in 2015 although at a slower pace compared to 2014 s stellar results with occupancy up by 1.1% to 75.9% setting a new record in occupancy levels. However, AARR was the main driver for regional hotels. Average room rate was up 4.0% to As a result of the increases in occupancy and AARR, regional UK hotels rooms yield grew by 5.1% to in Regional hotels have experienced the fifth consecutive year of rooms yield increase and high rates of growth overall since 2013.

5 UK Hotels Development Trends There are currently over 24,000 rooms in the UK s active hotel pipeline expected to be opened during 2016 and Branded hotels have a strong prevalence FOR MORE in the INFORMATION: UK hotel market as well as the budget segment. Top 5 UK hotel companies by rooms number UK supply has experienced significant changes over the past decade and a continuing rise in preference for branded hotels against independent properties has been observed. Certainly the larger and recognised hotel brands have more ability to respond to the current trends in the hotel industry such as the emergence of home sharing sites or the rise of OTAs. Midscale hotels have particularly suffered from the emergence of home sharing options. The table shows the top five UK hotel groups by number of rooms in 2014 and Whitbread, owner of the Premier Inn brand, remains the top group by room count in the UK, with IHG and Travelodge in second and third place, respectively. The table shows how the budget segment is still prevalent in the UK. It also shows, when compared with 2014, the significant movements for the top five hotel companies in the UK during Whitbread, which experienced the highest increase in rooms above all other main companies, saw its rooms count increase by 15.5%, surpassing the 60,000 mark. UK rooms supply and active pipeline by brand type The figure shows the breakdown of branded and independent bedroom supply and active pipeline in the UK. The dominance of the budget segment in the UK is notable with Whitbread and Travelodge accounting for almost 100,000 rooms and this is likely to increase as 84% of the active pipeline is to be branded hotels. Only 37% of current rooms in the UK are independent and their active pipeline only accounts for 16% of the total.

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7 This publication FOR has MORE been INFORMATION: carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO LLP to discuss these matters in the context of your particular circumstances. BDO LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it. BDO LLP, a UK limited liability partnership registered in England and Wales under number OC305127, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. A list of members' names is open to inspection at our registered office, 55 Baker Street, London W1U 7EU. BDO LLP is authorised and regulated by the Financial Conduct Authority to conduct investment business. BDO is the brand name of the BDO network and for each of the BDO Member Firms. BDO Northern Ireland, a partnership formed in and under the laws of Northern Ireland, is licensed to operate within the international BDO network of independent member firms BDO LLP. All rights reserved.