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Slower rate of growth predicted for hotels in 2016

25 September 2015 by
Slower rate of growth predicted for hotels in 2016

Hotel occupancy in UK provinces is expected to be at an all-time high in 2016, while London's figures will be the highest for a decade.

That is according to PwC, which today published its UK hotels forecast for 2016.

UK hotels are expected to continue to see growth next year but it will be at a slower pace, the report states.

Occupancy for the provinces is predicted to increase by 0.6% to 77%, while London is expected to see occupancy increase by 0.3% to 84%.

The average daily rate (ADR) is expected to increase by 3.5% to £69 for the regions and by 2.2% to £145 for London.

The strongest growth is forecasted for the provinces in terms of revenue per available room (revpar) which is predicted to increase by 4.2% to £53, while London is expected to see a rise of 2.3% to £122.

The report shows that demand is still outpacing supply growth and estimates that around half of all new rooms set to open in 2016 will be branded budget rooms.

London hoteliers saw a record 2014 but so far 2015 has failed to replicate the strong performance according to analysis from PwC. The second half of the year is expected to be better than the first half partly due to the Rugby World Cup.

Overall for 2015, PwC expects London to see occupancy growth of 1% taking occupancy to 84%. Marginal occupancy growth of 0.3% for the capital will see occupancy remain at 84% for 2016.

Liz Hall, head of hospitality and leisure research at PwC, said: "London occupancies have averaged 80% or above since 2006 and our annual forecast for 84% this year and next would be the highest this decade.

"Growth isn't being experienced evenly by all market segments. The recent variable performance in London in the first half of 2015 has shown some polarisation in performance with the middle segments hurting the most. Is the increase in budget rooms upsetting the apple cart in London and creating this middle-market squeeze?"

She added: "Growth is still in the air and there is more to come, but the pace of growth is slowing a bit now in the regions. This is not surprising; we have seen 32 months of occupancy growth. UK occupancy levels are at record highs with ADR heading in the right direction in the regions. It's getting harder, but even slower growth is a good result for hotels."

PwC releases 2015 hotel market forecast >>

2015: The year ahead >>

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