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London forecast to achieve Europe's highest hotel occupancies in 2016

07 March 2016 by
London forecast to achieve Europe's highest hotel occupancies in 2016

London is expected to maintain the highest hotel occupancy rates among 19 leading European cities during 2016, according to a new report from PwC.

The capital is forecast - with an expected rate of 82.9% - to be one of three cities that will achieve occupancies of above 80% in the coming year, alongside Dublin (82.3%) and Edinburgh (81.8%). Last year London achieved an occupancy rate of 82.1% and next year it is predicted to reach 83.5%.

When it comes to average daily rates (ADR), the Staying power: European cities hotel forecast for 2016 and 2017 report puts London in fourth place with a predicted figure of €202.20 (£156.81), up from €194.4 (£150.76) last year, with the figure for 2017 forecast to remain flat.

Paris is expected to take over from Geneva as having the highest average room rates in Europe this year, with a figure of €252.50 (£195.82). Geneva is expected to fall into second place, with Zurich third.

In 2016 Paris is forecast to keep its top position in the revenue per available room (revpar) table, despite only marginal ADR and occupancy gains. In second place is Geneva (€169.80/£131.68) followed by London (€167.50/£129.90). In 2017, London is expected to jump into second position with a rate of €168.70 (£130.83).

Despite the terrorist attacks in Paris in 2015, PwC describes the city as having "a relatively stable tourism sector" and expects it will return to average trends by 2017.

Meanwhile, in its latest forecast for the UK regions for 2016 and 2017, PwC is predicting strong growth, albeit weaker than in 2014. It suggests that given the 76% occupancy level achieved in 2015, it will further increase to 77% in 2016 and 78% in 2017.

ADR growth of 3% in 2016 to £69 is expected to moderate to 1.4% in 2017 to £70. At the same time, revpar is forecast to increase by 4.2% this year to £53 and by 3.2% to £55 in 2017.

There is not expected to be any slowdown in the number of new hotel openings, with 16,000 rooms forecast to be launched this year, up from 10,000 in 2015. Of these, 7,000 will open in London - more than double the figure added in 2015. In the regions, hotel capacity in 2016 could expand by 9,000 new rooms (2%), just ahead of last year's figures.

Liz Hall, head of hospitality and leisure research at PwC, described the high level of new supply in the capital as "a headache" for hoteliers. "London seems to soak up new supply but competition is very much a local issue," she said.

"The budget boom continues with around 3,000 new rooms in the budget category (on top of the 3,700 new budget rooms that opened in 2014 and 2015) and budget rooms comprise about 20% of all rooms in London and 33% of the rooms in the active pipeline. That's a lot of budget rooms to fill."

PwC releases 2015 hotel market forecast >>
Slower rate of growth predicted for hotels in 2016 >>

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