Upscale London hotels risk losing their image of exclusivity if they continue to maintain occupancy levels at the expense of daily rate, warns property agent Christie + Co in its latest city review.
STR Global's latest figures suggest that the capital's upscale hotels (those with an average room rate in excess of £200) are sacrificing room rate and revenue per available room (revpar) in order to keep occupancy stable by offering discounts and deals.
In the first five months of the year, the sector has seen average room rate fall by 7.4%, with revpar figures falling below both 2008 and 2007 levels.
The trend worsened in June when, despite stable occupancy levels, average room rate fell by 9.4% and revpar declined by 9.7% in the steepest fall of the year since January.
In contrast, London's top-tier hotels achieved a 5% rise in average room rate in 2008 and a stable revpar despite a 3.4 percentage point drop in occupancy.
"The second half of 2009 will continue to feel the effects of the current economic climate, with continued pressure on occupancy and, more so, rates," warned Andreas Scriven, head of consultancy at Christie + Co. "The longer trading performance remains depressed the more likely a reversion to the average rate ‘dumping' witnessed in previous recessions becomes."
"This might potentially put at risk the image of exclusivity that many of the assets in this market segment enjoy."
Scriven does not expect any ‘meaningful recovery' to emerge until 2010. Even then, he warns that it will be ‘moderate' and, for the upscale sector, dependent on the corporate sector and high-spending international leisure guests.
By Angela Frewin
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