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Cautious optimism for hotel performance as nearly 200 properties set to open

10 September 2013
Cautious optimism for hotel performance as nearly 200 properties set to open

Despite the opening of almost 200 new hotels in the UK during the rest of 2013 and 2014, the market is set to achieve stronger room rates and occupancies in next year as the country climbs further out of recession and shakes off its tough comparisons this year with the 2012 Olympic Games.

In its UK hotels forecast for 2014, PwC said that it expects to see record revenue per available room (revpar) in London, alongside the best average daily rate (ADR) growth in the regions since 2008.

Following a disappointing start to 2013, the capital has bounced back with occupancy and ADR in June both achieving growth for the first time since October 2012. Occupancy currently stands at around 81% and is predicted to grow to 82% in 2014, while ADR is expected to increase next year by 1.5% to £138.19 (£1 below 2012's record level in nominal terms and £6 behind in real terms).

PwC anticipates revpar growing by 2.4% to £112.80, a record in nominal terms.

Liz Hall, head of hospitality and leisure research at PwC, and author of forecast, said: "A return to some kind of ‘normal' in 2014 will be welcomed after 2013's post-Olympic correction. London has struggled this year but stronger pricing in 2014 and record revpar are expected.

"It looks like occupancy, ADR and revpar are heading in one direction, with the right kind growth to put London back on its upward trajectory."

Meanwhile, business in the regions show signs of stabilising with ADR reaching almost £60, which would be the best result since 2009, and revpar growing 1.8% to £42.44 - the highest since 2008.

Hall said improvements in business are likely to be slow, with particular pressure on room rates.

"This is unlikely to change as consumers push back, book late in the hope of a bargain and use the pricing transparency of the internet to help them make a choice," she said. "Short lead times, a push for added value and the attitude that a better deal is to be had through booking late looks likely to continue."

The 200 hotels which are set to open comprise nearly 20,000 bedrooms, according to data from AM:PM Hotels Database. This follows on from the 18,000 new rooms that opened across the country last year.

Over half of the new hotels will be in the budget sector, a quarter will be four-star and most will be branded.

"While limited service and budget hotels are helping consumers who don't want to pay the price of full service hotels, hoteliers in the mid-market especially are finding a more crowded and competitive environment," said the report. "New, modern, strongly branded properties, often technology friendly, are giving consumers what they value and will make the going harder for more ‘tired' products, clearly in need of investment."

Hot spots for hotel openings in the regions include Birmingham, Manchester, Glasgow and then Edinburgh, while the trend in London is for more launches in the east of the capital with the City of London, Tower Hamlets and Hackney seeing an additional 2,000 rooms. A total of 1,500 rooms are set to open this year in the capital and a further 5,540 in 2014.

Hotel occupancy in London in 2013 will hit lowest level since 2005 says PwC >>

Increased supply of London hotels will lead to occupancy fall >>

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