London hotels set for strong 2012

28 September 2011 by
London hotels set for strong 2012

London hotels are set to have another good year in 2012, although everything rides on the third quarter and the Olympics, according to the UK Hotels Forecast from accountancy firm Pricewaterhouse Coopers (PwC).

Looking ahead to next year, the report suggests that the Olympics, the Farnborough International Air show and the Diamond Jubilee could break occupancy records in Q3 2012. PwC anticipate 32.3% average daily rate growth (ADR) at £182.58, with occupancy at almost 92%. Revenue per available room (revpar) is set to soar to 40.3%, taking it to an average of £167.86.

Meanwhile, London hoteliers could see 2011 end with an ADR £11 higher than 2010.

The analysis by PwC shows that hotels in the capital have enjoyed another bumper summer, with occupancy reaching 92% in July, only a marginal decline on the record level seen in 2010, according to data from STR Global.

Liz Hall, head of hospitality and leisure research at PwC, said: "Looking to the end of the year, we expect London will see further rate growth in Q4 2011 compared to the same period in 2010, but we anticipate that the rate of growth will be lower than that seen in Q2 and Q3. This is due to the high comparatives in 2010 and also the slowdown in demand and new supply additions. If achieved, ADR growth of 8.9% in 2011 will pip 2010's robust performance and take rates to almost £134.50."

London has seen extensive new upscale and luxury supply openings recently and although the luxury sector enjoyed over 14% ADR growth in the first half of this year, taking rates to £271, the average occupancy was recorded at just below 74%, only 0.6% gain on 2010.

However trading conditions in the regions remain tough. "It's a very mixed bag and some cities like Brighton and Plymouth have enjoyed better than average trading to date," said Hall.

"Overall we expect regional occupancy growth to approach 3% and ADR will manage marginal growth this year - together they could drive 3% revpar growth. 2012 should, however, be a better year outside London and there should be some Olympic uplift, albeit less than in London."

For 2012 PwC expects, in the best case scenario, ADR gains in London of 5.7% and a revpar increase of 8.3%. In the regions, it forecasts 2012 will see a 2.4% rate gain and with occupancy pushed up by around 1.5%, revpar could see 4.2% growth.

In the run-up to the Olympics, a large amount of additional supply is coming on line in the capital, bringing new names and brands to the scene. For the remainder of 2011 and in 2012 around 6,000 rooms are expected to open in London. Hall concluded: "London needed an injection of stylish new products and this has strengthened the capital's appeal, putting parts of East London on the hotel map for the first time."

London Olympics to slow rate of UK hotel recovery >>

Growth in London and provincial hotels stronger than expected >>

Hotel rooms priced at double for Olympics >>

By Janet Harmer

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