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Hotel revpar forecast to plummet by 19% in 2009

09 March 2009 by
Hotel revpar forecast to plummet by 19% in 2009

Hotels across the UK are set to suffer on an ever larger scale than was expected this year, with revenue per available room (revpar) set to plummet by nearly 19%, experts predicted today.

A report by consultancy PricewaterhouseCoopers (PwC) forecasts an overall drop overall drop in revpar of 18.9% - twice the rate expected as recently as last November.

London hotels are expected to suffer particularly badly with a 14.2% decline in room rates (to £100.31), and a 13.3% drop in occupancy, to around 69%, driving a massive 25.6% revpar fall - a slide never seen before in the capital.

In addition, the provinces are predicted to suffer more severely than anticipated late last year, with revpar forecast to fall by 11.6% cent this year, having already seen three quarters of revpar decline in 2008.

Robert Milburn, hospitality & leisure leader at PwC, said: "In Q4 of 2008 corporate Britain sat up, and realised just how bad things were going to get. Given that hotels normally lag the cycle by two quarters, we are likely to be on the cusp of the worst few months of the year for hotels.

"London in particular is likely to suffer at the hands of the increasingly cost-conscious corporate market, which is now demanding even lower rates, or cancelling altogether," he added.

Milburn warned hotel operators that aggressive discounting is unlikely to entice people and will only translate into less revenue from those rooms occupied.

"Knocking £1 off the price of a room knocks £1 off your profits, and it took the industry six years to recover from the blood bath of indiscriminate discounting that took place in the early 90s," he said.

"While tactical and targeted offers are imperative to stimulate those with a need to travel and to retain loyalty in the years to come, the hope is that this won't trigger the domino effect of discounting, which we have seen in previous downturns."

UK hotels face most challenging period for 17 years >>

Hotel transactions bomb in 2008 with little sign of imminent recovery >>

Hotel insolvencies double; worse to come >>

Hotel deals will continue to slump, warns Jones Lang LaSalle >>

London hotel market worst in 15 years, says report >>

By Daniel Thomas

E-mail your comments to Daniel Thomas here.

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