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Economic uncertainty and Olympics create mixed results for London hotels

06 August 2012 by
Economic uncertainty and Olympics create mixed results for London hotels

The uncertain economic outlook combined with the impact of the Olympics have created a mixed set of results for London hotels for the six months to June, according to accountancy firm PwC.

While average rooms rates increased by 1.8% to £154, compared with the same period last year, occupancy fell by 1.2% giving only a marginal gain in revenue per available room (revpar) for the six months. This is in stark contrast to the 12.7% increase in revpar at the same point in 2011.

The data from STR Global shows that June was a particularly disappointing month for London, albeit against record comparables in 2011, with occupancy falling by 8.4% to 82%, against an average of 90% in June 2011.

Liz Hall, head of hospitality and leisure research at PwC, highlighted the possible reasons behind the drop in hotel performance: the deteriorating economic situation, a pre-Olympics dip, an extensive new supply of hotels in the capital, the Jubilee holiday which saw corporate travel disrupted by the two bank holidays, and an earlier start to Ramadan compared to 2011.

Looking ahead to the second half of the year, she said: "Just how the second half of 2012 turns out will depend on how London fares during the Games and of course the economic outlook. We can only hope there will be some pent up demand post Olympics as the many business travellers and visitors who had avoided the city return.

"PwC has consistently warned against the inflated expectations of some hoteliers for a London Games bonanza, but the dawning reality after this first week's events is that London has been much quieter than even we expected.

"While we still expect to see some occupancy growth, overall performance in the third quarter will be dictated by the extent to which hoteliers are able to hold on to their planned rate increases during the Games."

Hall said that looking beyond 2012, she expect there will also be a powerful tourism legacy from the Olympics - with the opening of a number of new high quality hotels.

"The challenge for London's hoteliers after the Games will be how to differentiate themselves in such a competitive market, off the back of the feel good factor.

"Will we see a post-Games dip or will the media spotlight stimulate new visitors to the capital? In the short term, supply issues could impact trading and the East of London particularly could experience a difficult period."

Olympics give hospitality chance to create a legacy >>

Investment in London hotels will leave a ‘powerful legacy' >>

By Janet Harmer

E-mail your comments to Janet Harmer here.

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