Forecast of record-breaking occupancy rates in the UK provinces in PwC's hotel forecast for 2017 are tempered by a warning that economic uncertainty following the referendum vote to leave the EU is "dangerous" for the sector.
In the Facing the Future
Meanwhile, security concerns following terrorist attacks in Europe and a glut of new hotel rooms have already negatively affected London hotel performance, while there is concern that the effect of Brexit on inward migration from EU countries could "affect the sector's ability to recruit and retain skilled staff".
Commenting on the forecast, Liz Hall, head of hospitality and leisure research at PwC, described the uncertainty and lower confidence surrounding the referendum as "dangerous". Hoteliers, she said, will need to make up for the decline in business travellers by attracting more leisure guests.
"A slow absorption of new rooms in London and some regional cities may put pressure on trading," explained Hall. "Add to this mix the brisk growth in serviced apartments and Airbnb listings and it's a case of weaker demand chasing more rooms."
Key highlights from PwC's 2017 forecast include:
- A forecast for 77% occupancy rates this year and in 2017 (up 1% and 0.5% respectively) in the provinces would be the highest on record.
- The occupancy forecast for London is more cautious, with a year-on-year decline of 1.8% this year and a further 0.8% decrease in 2017 to 81% and 80% respectively.
- Average room rate in the provinces is predicted to increase by 2.4% to £68 in 2016 and 1.8% to £70 next year, while revenue per available room (revpar) is expected to grow by 3.4% to £53 and 2.3% to £54 in subsequent years.
- In London average room rate is forecast to fall by 2.4% to £143 this year and by 1.8% to £141 in 2017. Revpar is expected to decrease by 2.8% to £114 this year, while remaining static next year.
- Investment levels at around £2.1b in the seven months to end July 2016 were almost 70% down on the figures for the same period in 2015, primarily because of the uncertainty surrounding the EU referendum.
- Significant deals which kicked off the at the end of last year and earlier this year, but have still not completed, include Grosvenor House hotel, Rosewood London, M by Montcalm, Birmingham Hilton Metropole hotel and the Hotel Collection portfolio. Other rumoured transactions include the Grove portfolio of 99 Travelodge freeholds, Doubletree Hilton Tower of London, Stoke Park and some regional Marriott and Principal Hayley hotels.
- The current supply of 140,000 bedrooms in London are expected to be boosted by a further 6,000 rooms this year and 7,000 in 2017. Expansion in the provinces is also expected to pick up pace with growth forecast of 1.7% and 2.4% in 2016 and 2017 respectively, which is above the past 20-year average of 1.5% between 1995 and 2015.
- New future London openings include the Ned, Nobu Shoreditch, Park Plaza at Waterloo, Dorsett at Aldgate, Ampersand City of London at Mansion House, Park Regis Shoreditch and several developments at Leicester Square.
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