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Tough year ahead for regional hotels

06 December 2011 by

London hotels may ride out the gloomy economic forecast, but 2012 is forecast to be another tough year for many properties outside the capital, according to accountancy firm Pricewaterhouse Coopers (PwC).

"The regions have traditionally been more sensitive to changes in the UK economy than London, which is influenced more by international factors," said Robert Milburn, hospitality and leisure leader at PwC. "With the Office for Budget Responsibility now forecasting economic growth in 2012 only half that envisaged earlier this year, we expect significantly lower revpar revenue per available room] growth as a result."

PwC predicts that for every one percentage point fall in Gross Domestic Product (GDP), regional occupancy rates could also fall by about 1%, which will have a knock-on effect on room rates and overall revenues.

However, next year's Olympic Games, the Diamond Jubilee and the Farnborough International Air Show should counterbalance some of this negative impact, especially for locations close to these events. This is likely to mean some growth for those in the right place at the right time, as well as for enterprising hoteliers.

Milburn said that London will not be immune from the tougher forecasts. "With negative revpar growth forecast in all but Q3 2012 and a post Olympics hangover on the cards for 2013, it may be time to implement plan B in preparation for a prolonged period of generally low, slow and erratic demand."

With less than four weeks to the end of the year, PwC's September forecast for 2011 hotel performance looks like being achieved or slightly exceeded in London, although with a sharply slowing demand in the final quarter after six strong months.

For the regions, the continued poor performance of UK GDP has slowed demand. Revpar growth looks likely to be below previously forecast levels, with average rates declining marginally and occupancies seeing only sluggish growth.

London hotels set for strong 2012 >>

European hotels are holding up well but processed with caution >>

London Olympics to slow rate of UK hotel recovery >>

By Janet Harmer

E-mail your comments to Janet Harmer here.

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