Deloitte warns of uncertainty in 2008 for hotels' performance

It will be a brave man that predicts a 2008 as strong for hotels as last year given the ongoing credit crunch, according to a leading consultancy.

Roger Bootle, economic advisor at Deloitte, has predicted that 2008 will be a challenging year for businesses reliant on consumer spending from London.

Deloitte predicts consumer spending growth will slow from a growth rate of 3% to 2% this year.

"This will have a direct knock-on effect on the businesses that rely on the City for their trade, including hotels, bars and restaurants," said Bootle.

Last year was a strong year for hotel revenues in London.

Between January and November 2007 revenue per available room (revpar) rose 10.8% in the capital compared with 4.4% in the rest of the country.

Marvin Rust, hospitality managing partner at Deloitte, said: "The question is how much longer double-digit growth can continue. So far, the UK hotel industry appears unscathed by troubles across the Atlantic and at home, but with an increasingly gloomy global outlook it would be a brave man to predict that 2008 will be as good as 2007."

London's 10.8% growth in revpar came on top of growth of 16.8% in 2006. Average revpar has increased from £99 to £110, to reach its highest level since 2000 in the capital.

Rust also predicted the credit situation was unlikely to impact on new hotel developments: "Although the cost of financing new developments may have risen, with land scarce and hotel projects having long build times I expect these to continue largely unaffected.

"New supply will remain subdued and demand is strong with the increasing focus of the world on London as we head for 2012."

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By Christopher Walton

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