Cushman & Wakefield RETHINKING: The Shape Of Real Estate 2040

Business travel is also evolving. While corporate sustainability policies and the rollout of video calls may have reduced travel as virtual global conference calls and meetings amongst executives have become significantly more common, there has also been a rise in remote and distanced working. The rapid rise in home working has meant that many people are now living in a different city to which they work, deciding to travel in as required and stay in a hotel for one or two nights a week or month. The overall result is that business travel has rebounded faster than expected (albeit in a different form) with an increasing share from remote and distanced workers rather than just executives. Additionally, the rise of Airbnb and other sources of competition to the hotel sector look to have plateaued somewhat. Going forward, additional taxes and planning restrictions are likely to temper further growth in this market. Nonetheless, budget options in hotels are rising, partly due to competition with the Airbnb offer as well as in response to changing consumer preferences. As these smaller rooms grow their share of the market, the average floorspace per key is declining. At the same time, hoteliers are being more efficient with their use of space, resulting in a gradual reduction in the supporting floorspace (lobbies and foyers, for example) per room.

As tourism numbers recover, new opportunities and challenges have emerged. Strong consumer demand underpinned by surplus savings after the pandemic, allowed a robust increase of room rates surpassing the inflation growth in many markets. Increasing labour and energy costs are accelerating investment in technology, automation, sustainability measures and overall rise of new more efficient and less labour intensive hotel concepts. While a weaker pound has wider economic implications, it can also incentivise greater domestic and international tourism as the UK becomes comparatively better value for the consumer than abroad. The global growth outlook is also promising, with a growing international middle class and increasing discretionary incomes expanding the customer pool for UK destinations with a global appeal. While London is overtly dominant in this respect, other cities are raising their offer and tourist numbers including Edinburgh and Manchester, as well as Birmingham and Liverpool. Ageing populations globally mean that there are more retirees, more of whom have savings to support

This means that, while the demand for hotel rooms is going up, the demand for hotels measured through floorspace is more tempered. Taking into consideration these factors, the outlook for the hotels sector is healthy, with the hotel sector projected to see an increase of 30.8% by 2040, as domestic and international tourism as well as business travel all see growth over the next 16 years. This is expected to amount to an increase of approximately 107.7 million sq ft over the period.

an active retirement, including domestic and international travel in many cases.

RETHINKING: THE SHAPE OF REAL ESTATE IN THE UK

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