How strong is London’s recovery?

In recent weeks, many companies have begun to talk increasingly positively about results and performance. Many in city centres are starting to claim that they are now back to 2019 levels which is encouraging. However, there will still be a long road to travel. Although many are talking with increased confidence, the facts do still point to a difficult journey back.

The Bloomberg Pret Index has become a key benchmark for many and recently, the index has indicated that:
• London is slowly recovering. Pret has opened up 50% capacity of its seating areas
• Pret’s performance in suburban areas has held up well which seems to indicate that the hybrid form of working is not declining and maybe here to stay?
• Unsurprisingly, airport performance has been gradually picking up

The above would fall in line with the facts on employee and commuter numbers being seen. The interesting contradiction is that the consumer does seem to be happy to still go out in the evenings and on weekends to restaurants, bars, stadiums, cultural and heritage sites, and parks but less inclined to return full time to the office. This naturally results in 30% less density in the week and of course, international business has yet to return and this accounted for between 30-40% of high level hospitality spend.

Data is suggesting a gradual return to strength:
• Interestingly many offices are reporting that employees are spending longer periods on site and spending more which is seeing many B&I operations feel more confident.
• In February, STR noted that London’s hotel industry reported month-over-month performance improvement which indicated occupancy at 58.8%, and an Average daily rate (ADR) of GBP130.79. The occupancy level was the highest in the market since November 2021 but still 25% below the pre-pandemic comparable from 2019.
• In April, Knight Frank noted that UK Hotel transaction volumes exceeded £1.5 billion for the first four months of the year, with the strong spell of investment activity that occurred during the final quarter of 2021 continuing into 2022.Total investment volume for the first four months of 2022 is already some 40% ahead of the first half of the fiscal year in 2021. Transactional activity has been relatively evenly split, with London securing approximately £750 million of investment, whilst regional UK achieved over £800m of hotel transactions.
• In the restaurants and bars sector, London is lagging in 10th place against other major cities in its recovery with Glasgow, Birmingham and Manchester leading the way in recovery.

So what does the data tell us?
The recovery and rebuild is happening but will take time. There is still a long road to go and maybe the landscape has changed forever in terms of commuting and employees. Once the international business traveller does return in 2023/24, then this will bring back much needed revenues.

Indications though are still that:
• The real investment and growth in London’s hotel sector is within the luxury market. This is expected to recover strongest
• The hotel sector will split into more distinct markets
• The restaurant and bars sector has continued its strong relationship with customers
• The B&I Food service faces a potential period of change. Some forecast a return to greater investment from companies. Others note that delivered in options will become increasingly popular.
• The culture, arts, sports and heritage markets are all showing strength.

It is a better picture than many forecast in 2021 as the consumer has remained loyal to the sector and has savings to spend. However, will this change as energy and fuel increases begin to bite? Will this impact on the return to work one way or another?