Tourism, how does it affect the property market? 07/06/22

The UK relies heavily on tourism to support its economy, especially the short-term lettings and serviced accommodation industries.

Before Covid, the tourism sector provided around £106 billion to the British economy (GDP) and supported 2.6 million jobs. In 2019, British residents spent £19.5 billion on 99.1 million domestic overnight trips in England, whilst international visitors spent £24.8 billion in 2019, making 36.1 million trips.

In addition, figures from Visit Britain estimate that in 2019, there were 33,374 serviced accommodation businesses (e.g. bed and breakfasts, guest houses and hotels) with 786,775 bedrooms and 1,768,795 bed spaces. Adding to this figure are a further 31,845 non-serviced accommodation businesses (e.g. holiday homes, camping and caravan parks) offering 1,401,716 bed spaces.

Short Term Lettings and Serviced Accommodation are big business for property investors, and the industries are growing significantly with the end of lockdown and the easing of international travel restrictions.

When measured over 12 months, an average serviced accommodation room occupancy rate is around 71%. With landlords able to demand higher than usual rental fees for short-term stays, the profits are significant.

The global tourism sector has faced real challenges in recent years, with COVID creating some of the most challenging economic conditions possible. Much of the world’s tourists have had little choice but to resign themselves to living and working from home, with the luxury of travel seeming an unlikely option through often changing and convoluted testing and restrictions.

During the lockdown periods of 2020 & 2021, many more opted for a staycation (a holiday within your own country) as the ever-changing landscape of COVID restrictions made any form of overseas travel a bit of a gamble. This trend has helped bolster the sector, breathing life back into many businesses that have had to survive through government support and furloughed staff programs.

Despite the number of international tourists dropping dramatically, demand from people within the UK has been significant, leading to a growing demand for UK hotels and B&B’s. The property sector has always had a close connection with tourism. Many of the UK’s coastal towns have seen a massive demand for property, not just for accommodation but for people looking for a second home. Prices in Devon and Cornwall have grown by as much as 35% during COVID. Many in the city are now yearning for a nice piece of outside space following years of tight restrictions.

This demand puts increasing pressure on developers to build new homes and more rental property for tourists across the country. Short-term lettings have been growing in popularity following the launch of online services such as Airbnb. These disrupters to the sector have changed people’s perceptions, creating a whole host of new suppliers looking to rent out a spare apartment, house or single room.

Landlords today are seeing the strong potential of short-term lets, with properties that would typically offer around 7% per annum boosting their return to almost 20%. With the impact of COVID now starting to settle, it’s clear tourism is on the rise, making the development of new property a genuine growing concern.

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