Increased supply of London hotels will lead to occupancy fall

01 March 2013 by
Increased supply of London hotels will lead to occupancy fall

New hotel openings in London are set to have a negative impact on occupancies during the year ahead, according to the latest 2013 forecast from accountancy firm PwC.

The 6.5% (7,700 bedrooms) increase in hotel rooms last year, with a further 4,600 rooms set to open in 2013, could result in occupancy rates in the capital falling two percentage points to 79% this year. It will be the third year in a row that occupancies have declined.

PwC's hotel forecast is underpinned by weaker GDP growth, which is set to result in a 2% decline in revenue per available room (revpar) across the UK, to just under £60. While occupancy is expected to fall by only 0.7% to average around 72%, it is believed average daily rate (ADR) could fall by 1.2% to just under £82. The average figure hides strong performances in London and a more lacklustre performance across the regions.

Robert Milburn, hospitality and leisure leader at PwC, said: "This updated UK hotel forecast reflects our latest thinking on hotel performance in 2013, with the forecast impacted by weaker UK economic prospects but also supported by a weaker pound.

"While we still anticipate overall trading declines in 2013, these falls are less sharp for London but more unfavourable for the regions than we expected in November 2012."

In London, the ADR decline of 1.2% will take the rate down to almost £137. Liz Hall, head of hospitality and leisure research at PwC, said: "For travellers, a more affordable London is good news and will help the city capitalise on the positive media spotlight that shone in 2012.

For hoteliers, revpar is expected to end the year at £108, 3.2% below 2012 levels but still 18% higher than in 2009.

"The year hasn't kicked off well and STR Global data for January shows a particularly weak performance in London, " Hall added.

Regional UK hotels saw a strong finish to 2012, which boosted overall annual ADR growth of almost 1%. But, despite hopes that the regions might have turned a corner on rates in 2012, PwC can't see this pace of growth continuing this year, mainly because outside London demand is tied more closely to UK economic growth, and weaker UK GDP growth expectations are likely to dampen performance.

"2012's robust finish means we are starting our forecast from a stronger Q4 2012," Hall said. "So while the percentage declines are higher than previously predicted, the absolute numbers for 2013 are actually a little stronger than in our last forecast.

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TagsTrends and Hotels
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