Mixed used development where hotels are built alongside a project that incorporates offices, retail or residential, will be the dominant model for hotel building over the next few years, according to the majority of respondents to a survey by TRI Hospitality Consulting.

The analysis, conducted among executives in the hospitality industry as part of a quarterly survey, found that 73 per cent of respondents agreed or strongly agreed that mixed use was likely to dominate in the future. Little more than a fifth, 21.6 per cent, disagreed.

Overall, however, there appeared little appetite for building rather than buying hotels. When given the statement "It currently makes more sense to build hotels rather than acquire them" more than half (51.3 per cent) disagreed or strongly disagreed. Just 10.8 per cent agreed.

This does not mean that executives believe that the construction of standalone, full-service hotels is no longer viable: just 16.2 per cent agreed or strongly agreed while 75.7 per cent disagreed or strongly disagreed.

"There is a clear preference for acquiring existing stock where possible but new-builds are not ruled out," said Jonathan Langston, managing director of TRI Hospitality Consulting.

Uncertainty over buy-to-let rooms

The concept of selling individual hotel rooms to investors in a similar style to buy-to-let evoked a mixed response. Two out of five respondents (40.5 per cent) believed it was an exciting new source of funds for the hotel sector but 32.4 per cent disagreed or strongly disagreed. Nearly as many, 27.0 per cent, said they were unsure.

Similarly, the new apart-hotel concept of selling-off rooms to individual investors was seen by a minority (35.1 per cent of respondents) as a short-term gimmick and likely to result in a series of legal conflicts.  While 27.0 per cent disagreed, the largest proportion, 37.8 per cent, said they didn't know.

"Buy-to-let hotel rooms are a very recent innovation and still attract considerable concern among some in the industry. They will need to be proved through at least one business cycle before the approach is welcomed in all quarters," said Langston.

Bricks and brains split to drive investment

The split between management and brands on one hand and property on the other will lead to an increased level of investment in hotel property believed three quarters of (75.0 per cent) of respondents. Just 16.7 per cent disagreed.

But opinion was split evenly as to whether companies that both own and operate hotels were best placed to exploit opportunities in the hospitality sector going forward. While 45.9 per cent agreed or strongly agreed the same percentage disagreed or strongly disagreed.

The most important factor shaping the development of hotels within the UK in the future will be divestment within the UK industry itself. This was ranked as the number one option by nearly half of respondents (46.6 per cent). The next most important factor was the dynamic growth of the budget hotel sector (28.4 per cent). The Olympics, despite the huge hype, was ranked third by just 11.4 per cent.

Business confidence strong

Survey respondents are feeling optimistic about current business performance and environment. Nearly four in five (79.0 per cent) said they were pleased or very pleased and just 15.8 per cent said they were disappointed.

Just over a quarter (27.8 per cent) said sales were better than they had forecast three months previously. But a third (33.3 per cent) said sales were worse.

Looking ahead, almost three quarters of respondents (74.2 per cent) said they were optimistic or very optimistic about the last three months of this year in terms of business relating to their hotel group. Just 5.3 per cent were pessimistic.

The confidence was less certain when looking ahead for six months, with 10.5 per cent being pessimistic. But only a slightly smaller proportion, 73.7 per cent, was either optimistic or very optimistic.

UK consumer spending trends was ranked as the most important external factor affecting demand for hotel business by 35 per cent of respondents, making it the top choice.

Improving prospects for global economic indicators was ranked number one by 31 per cent. Just two per cent ranked recent acts of terrorism as the number one factor.

"The industry remains in a buoyant mood and it is significant how lowly that terrorism is now ranked as a determinant of future business demand," said Langston.

For more information contact Jonathan Langston on 020 7486 5191 or email jonathan.langston@trihc.com.