close

Hotel trading growth flattens but London braces for more room growth

london-transactions

Hotel trading growth is set to flatten in the year ahead due to economic uncertainty, weak business travel demand and an influx of new rooms scheduled to open across the country.

The analysis, from PwC’s Hotels Forecast 2019, found that the outlook for London has levelled out with year-on-year occupancy growth of only 0.1% and a marginal fall of -0.5% forecast for 2019, which will see occupancy levels drop one percentage point to 81% in 2019.

Average Daily Rate (ADR) is forecast to see a marginal uplift over the next year with 0.2% growth for 2018 taking ADR up £1 to 149 and 0.8% for 2019 taking the average rate up another £1 to £150.  Revenue per available room (RevPAR) growth will remain static with 0.3% forecast for both 2018 and 2019, a big contrast to the 4.6% growth in 2017. Overall, RevPAR is expected to remain at £122 for 2018 and 2019.

Story continues below
Advertisement

However, according to research from the global hotels data company STR, a potential 5,000 new rooms could open in London in 2018 with a further 4,300 in 2019. This is on top of the 38,000 rooms added in the previous five years.

Commenting on the latest forecast, Liz Hall, head of hospitality and leisure research at PwC, said:

“2017 was a hard act to follow for hotel trading, in terms of growth and 2018 has been held back by uncertainty, slower economic growth, significant supply additions and reported stuttering business travel. This is despite the weak pound buoying leisure travel, the Royal Wedding and the International Farnborough Air Show effect. However, trading in absolute terms remains extremely high by historic and global standards for London and by 2019 we forecast both ADR and RevPAR to reach new records in nominal terms.

“For a sector heavily reliant on people to deliver its products and services, the shortfall in availability of EU nationals remains a concern for hotels and the weak pound has pushed up the costs of retaining staff and importing goods within the sector.

“Following a number of years of strong revenue growth when there was not the imperative to focus on costs, prudent operators and owners need to adopt a stringent approach to operating costs growth in 2019 to preserve profitability.”

Occupancy levels in the regions have been averaging 76% since 2015 and are forecast to remain around this level for the next year but to see a -0.3% decline in 2018 and no growth forecast for 2019.

ADR growth is forecast to slow compared to 2017, with an anticipated 1.3% increase for 2018 taking ADR to £72 and a further 1.2% in 2019 lifting rates to £73.  RevPAR is forecast to see a 1% uplift and a further 1.2% in 2019 taking it to £55, up from £54 in 2017.

Total deal volume for 2017 reached £4.9bn, up 34% on the year prior, driven by a series of large portfolio deals. In the first half of 2018 the UK has already seen £3.8bn worth of deal activity, an 80% rise on the first half of 2017. We forecast total deal volume to reach c£6.8bn by the end of the year, a 40% increase on last year and the second highest volume of hotel investment in the UK after record levels of £9.3bn in 2015.

For 2019 deal activity is forecast to slow down with activity to fall by around 34% from 2018 to c£4.5bn.

Tags : tourism
Zoe Monk

The author Zoe Monk

Leave a Response

Protected with IP Blacklist CloudIP Blacklist Cloud