Hotel occupancy to fall in 2013 as demand rises more slowly than supply

Hotel occupancy is set to fall in London and across the regions in 2013, as supply outstrips demand.

Hotel industry market data provider STR Global said supply in London would see supply increase 3.5% over the next 12 months, with demand growing by 2.9%, which would result in a decline in occupancy of 0.5% over the year. Meanwhile revenue per available room (RevPAR) was expected to drop by 1.6%, primarily as a result of a 1.1% fall in the average daily rate (ADR) of £139.13.

"RevPAR is predicted to increase in June and July, driven by a surge in occupancy from the return of the regular summer guests", said Elizabeth Randall Winkle, managing director of STR Global.

"However, this will be offset by a drastic decline in ADR the following month, resulting from the 2012 Olympic Games being hosted in London during August of last year. Unfortunately, the continuing economic uncertainty across Europe makes forecasting a challenging task and subject to change."

In London, across the hotel class segments, upper midscale hotels are the only segment likely to see an increase in occupancy and RevPAR. The 0.4-percent increase in RevPAR is because the upper midscale segment is the only segment where demand is forecasted to outpace supply. It is also the only segment in which occupancy is expected to exceed 80%, according to forecasts.

Meanwhile, in the regions, supply is forecast to grow 1.4%, exceeding demand growth of 0.6% and leading to an occupancy decrease of 0.8%.

Despite the decline in occupancy, there will be a 1.7% increase in ADR, resulting in a 0.9% increase in RevPAR to £41.54.

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