In our first hotel update for the year, we are pleased to report that the UK hotel market remains highly active and resilient, despite the recent political uncertainty and continued challenges ahead. While it may be some time before we can assess the full impact of the UK's departure from the European Union, the LSH Hotels team has seen increased activity amongst both buyers and sellers in the past quarter.
There now appears to be some certainty for domestic and overseas investors and we believe the hotel sector will directly benefit from this, with buyers remaining keen to invest and compete for the right opportunities. In fact, we are seeing owners reviewing their future plans, so again we anticipate a wider availability of businesses being introduced to the market, as owners have tended to sit tight in recent years.
Trading performance is also buoyant, with occupancy and ADR in the main continuing to improve in most regions resulting in profitable trading results, although operating costs are beginning to impact margins. In our opinion, the outlook is encouraging in this context of low interest rates and cost of debt; property will continue to offer better returns compared with other assets, despite the fact that prime yields are at record low and have even fallen below 3% in some core markets.
The development of new hotels by global brands continues to impact the sector, particularly affecting mid-market unbranded hotels. LSH Hotels continued to see the number of new rooms increase in major cities and tourist destinations. Some 35,000 rooms are currently under construction in the UK, expected to open by 2023. Of the 2019 development pipeline, London accounts for 38%, equating to some 4,000 new rooms.
Confidence in the UK hotel sector remains strong, driven by a combination of robust trading performance, a greater understanding of the UK hotel sector and scarcity of assets for sale; these compelling reasons have helped fuel strong interest in hotel development. While the limited service/budget sector is expected to rise by a further 5,000 rooms in 2020, representing an annual growth of 5%, the share of new hotel openings in this bracket is steadily declining although lifestyle hotels, in both the four-star and three-star sectors, will witness strong growth.
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